How much is my time worth? It’s a seemingly simple question with a complex answer.
Is the value of your time your hourly wage? A percentage of your annual salary? Or something completely different?
While you might be able to peg a dollar amount to each hour of your workday, that isn’t the only way to value your time. In fact, we’d argue that what’s more important is the opportunity cost of that time.
Every use of your time is a trade-off. What are you willing to give up?
However you choose to spend your day, you’re choosing that instead of all the other available options. And those choices have an outsized impact on your long-term goals and even career prospects.
Think of it like this. An hour a day spent writing can turn into a blog post, novel or even a publishing contract. While an hour spent on Twitter or skimming news sites turns into…
Cocktail party banter?
An hour spent on the right things is worth multiples more in the long-term. Yet, most of us forget this and instead focus on what’s right in front of us.
That’s because our days aren’t so black and white.
Instead of simple questions like “do you want to spend the next hour productively or waste it on social media?” we’re faced with more complex ones, such as should you:
- Focus on chipping away at a complex, long-term project or answer those urgent emails that are piling up?
- Work overtime to get ahead on your task list or give yourself a break and recharge?
- Accept that meeting request or schedule an hour of heads-down time for a meaningful project?
- Turn off Slack to focus or check it every few minutes in case your boss sends you a message?
Each of these scenarios has conflicting trade-offs and consequences (like looking bad in front of your boss!) Without understanding the true value of your time, it’s hard to make confident decisions about how you spend it.
So how do you know what an hour’s really worth? Here’s how you can find out.
How much would you pay for an hour of productive time?
Even though we want to talk about opportunity costs, the simplest way to value your time is still to put a monetary value on it.
As UCLA associate professor Sanford DeVoe explains:
“There’s something very powerful about putting a precise monetary value on time.”
When you know “your number” it lets you make an informed decision about how you want to spend your time. For example, if you make $1000 an hour, it probably makes more sense to work overtime than go for a happy hour.
If you make an hourly wage, “your number” should already be clear to you. However, if you work for a salary or have several sources of income it can be harder to figure out exactly what your time is worth.
In this case, some easy back-of-the-envelope math is to divide your total income by 2,000. This assumes a 40-hour workweek and two weeks of vacation. So, someone making $60,000 a year would value an hour of time at $30.
However, we’re trying to be exact here. And that number is a guess at best.
For example, my RescueTime Report for Q1 of 2019 shows that I spent 544 total hours working. Over the full year, this works out closer to 2176 hours.
Going a step further, author James Clear found that by adding in a few other sources of data to his RescueTime report, he came in at about 2,742 working hours per year.
Using our $60,000/year example, that means our “number” is closer to $21.88/hour. That’s almost $10 an hour less than our stated hourly wage. All of a sudden that extra hour of work instead of a break doesn’t seem as enticing.
But while knowing the dollar value of your time can help you make simple decisions, it doesn’t tell the whole story.
What’s more important than money? Your ROTI—Return on Time Invested
The problem with focusing on the dollar amount of your time is that you get stuck in the short-term.
Knowing an hour is worth $21.88 might make you more inclined to go home early or get easily distracted rather than struggle through complex problems (depending on how much ~$20 matters to you).
But the truth is that the value of your time is much more complex.In the modern workplace, we’re not just judged for showing up and putting in the time. But for the value we create with that time. Click To Tweet
How you spend your hours determines the value you create, which in turn should determine the value you get in the form of salary, benefits, bonuses, etc… (We know this isn’t always the way things work.)
That means if you want to create value, you need to squeeze more value out of your time.
So how do you do that?
The answer comes down to more than just what’s on your task list. It’s all about your ROTI—the Return on your Time Invested. And how you work can drastically change this value.
Let’s look at two examples
Multitasking, poor planning, and getting easily distracted can slash your hourly value by up to 80%
Let’s keep going with our $60,000/year example to keep things simple.
In this scenario, we can assume a productive hour produces somewhere around $21.88 in value. But what happens when your hour is spent in a not-so-productive way?
According to computer scientist and psychologist Gerald Weinberg, taking on additional tasks simultaneously can destroy up to 80% of your productive time. Here’s how this looks in practice:
- Focusing on one task at a time = 100% productivity or $21.88/hour in value
- Juggling two tasks at a time = 40% productivity for each (and 20% lost to context switching). Or, $17.5/hour in value
- Switching between three tasks at a time = 20% productivity for each (and 40% lost to context switching). Or, $13.13/hour in value
Those aren’t great numbers. But just how common are these scenarios?
Our research found that workers spend, on average 40.1% of their day multitasking between email and other tasks alone. While UC Irvine professor Gloria Mark found most people average just 3 minutes on a task before switching to something else.
Our fractured days don’t just make us feel stressed, scattered, and unaccomplished. They actively chip away at the value of our time.
Focused hours can increase your hourly value by up to 500%
On the opposite end of the spectrum, an hour of focus can actually create significantly more value.
This is what’s known as a “multiplier”—a tool or strategy that creates a disproportionate result compared to the investment. In other words, you put in an hour and create more than $21.88 in value.
Using our same example, this would make an hour of your time suddenly worth almost $110 or 10X a distracted hour!
Here’s how these numbers look for the U.S. median salary, top 10% of earners, and the average salary for a software engineer in the Bay Area.
|Annual Salary||Average Hourly||Distracted Hourly||Focused Hourly|
These numbers are all estimates, but the point is clear. The better you’re able to utilize your time, the more value it creates and, ideally, the more you’ll be valued.
To create more value you need to be hyper-aware of how you’re spending your time
Of course, you can’t be in a state of intense focus like this all day.
Instead, to increase the overall value of your day, you need to make the best use of your best hours. In practice, this comes down to a few basic, yet powerful changes to how you work:
- Understand the difference between how you want to spend your time and how you actually are
- Use personal data to uncover your peak productive hours
- Create a daily schedule template to protect your peak hours for maximum productivity
- Build better habits to maintain your focus and attention throughout the day
- Optimize your work environment to be less distracting
This is the exact process we use at RescueTime to help make the most out of every single day. If you want to start creating more value with your time, sign up for free today!