Sunday, May 4, 2008

How much is YOUR free time worth?

I went to the full-service car wash today. This is the first time I have ever done it since there were a lot of automatic washes in Denver and then I usually would just vacuum by myself. However, here in Dallas there are very few automatic washes (it must be because they allow hose washing which Denver didn't for several years due to water restrictions). So anyway, I decided to go to the full service wash for the first time ever here in Dallas. I took both of our cars. Each car took 20 minutes and cost me $20 per car. Had I done this myself "for free" with a hose wash it would have taken me at least 3 hours. Inherently then I have decided that my free time is worth at least $40/2.33 or $17 per hour. In reality I think I paid even less for my free time because I was able to read a book (something I wanted to do) while I waited for them to wash my car. I probably saved 2.75 hours of "free time" by paying to have the cars washed at a net cost of $14.54 per hour. The whole thing got me thinking though, what is my free time worth?

This is no easy question to answer. The simple mathmatical answer is that free time is probably worth at least your annual net after tax and work-related expenses income/the number of hours per year that you work. For instance if you make $75k per year net of taxes and work 40 hours per week, then on a per hour basis your time is worth 75,000/52*40 or about $36/hour. You can use this calculator to get a more complicated answer that states your leisure time in terms of the number of hours you work to get an hour of free time and how much you are paid for those work hours. However neither of these approaches seem like a wholly satisfactory answer because for most people they really couldn't choose to work 3 more hours on a Sunday (when I had my car washed) and make an extra $108. It seems that different hours of the week should carry a different value. Likewise the marginal value of certain hours is high while for others it is low. For instance if you are sleeping four hours per night then an extra hour of sleep is probably of high value to you. But if you are sleeping nine hours per night already an extra hour of sleep is probably not worth that much to you.

However, the confusion doesn't stop there. You then have to factor in intangibles. For instance, I have been reading a lot of books about being a dad since I have a little miss Armchair on the way. One word of advice that hit home with me was the reality that when a father is on his deathbed he rarely says "I wish I had worked more," but he often might say "I wish I had spent more time with my children." So then how do I value time I will spend with my daughter knowing that it is time that I will never have the chance to spend with her ever again? What is the opportunity cost of working, washing the car, or mowing the lawn instead of participating in my daughters first word, first step, first whatever?

The bottom-line is that I need to think about all these questions and come up with my own way to value my free time. After thinking about it though the $14.54/hour I just spent on the car wash to buy some free time sure seems like a good deal!

If you have thoughts about how you value your free time please share them in the comments.

1 comment:

Experts on Credit said...

I used the calculator. Think I need a raise