Buying Time

#liverichly There’s a fine line between stressing over each moment wasted and spending our time richly, but we make that decision every day whether we like it or not. After all, we can’t hoard time.

Time is peculiar. It’s a commodity, but everyone, no matter how rich or how poor, gets exactly one minute per minute. Time can not be hoarded. Not only do you receive one minute per minute, but you must spend exactly one minute per minute! It can’t be traded, although we can trade in things that substitute for time. It’s absurdly difficult to measure; you will never know how much you had until it’s actually completely gone.

Consider the trade-off of time vs. money. Like most commodities, there is a supply and demand curve for time. Sorry for the economics lingo!¹ “Supply and demand curve” is economist for “As the price goes up, I’ll buy less of it.” However, because it’s literally impossible to trade time with someone directly,² each person values time different using their own curve, and that curve might not even be consistent! We’ve all had the experience of desperately needing time one day, and sitting around with less to do other days!

Consider the implications of this! A billionaire still only gets one minute per minute. Dekamillionaires³ get one minute per minute. The poorest people on Earth get, you guessed it, one minute per minute! Therefore, the value of time varies by as much the variability in spending. How much is your time worth?

Understanding the approximate value of your number is key to living a rich life. Just as we are frugal but not miserly with money, we must also be frugal but not miserly with time. There’s a fine line between stressing over each moment wasted and spending our time richly, but we make that decision every day whether we like it or not. After all, we can’t hoard time.

So how much is your free time worth? For most Americans, we can subtract out various activities like sleep, hygiene, eating, exercise, socialization, chores, and the paperwork of adulting. Out of the 168 hours in a week, a healthy lifestyle will lose at least 50 to sleep, at least to 10 to eating and food prep, another 5 to exercise and hygiene, and probably an average of 10 to paperwork and chores. We are all of us tribal primates, and will literally die of lonliness and isolation, so we can probably factor another 10 hours a week to spend time with loved ones, even if we’d prefer more. So we are left with 83 hours a week, or if we are living rich and full lives, probably closer to 70 hours that we may spend each week as we please. Folks who are still working may have more like 20-30, depending on their commute, or they may not be meeting their basic needs and actually have negative free time!⁴

For a nice round number, say you have $10M in investible assets and are retired on $30K/month, pre tax. Your 70 hours/week of free time might plausibly be worth about $90 each, post tax, if you had no structural expenses. But you do! Your house needs maintenance and upgrades, your vehicles must be repaired and replaced, you must pay for vacations, and education, and food, and all the other items that go into a modern upper middle class life.

So now we reach the heart of the trade-off between time and money. Every line item in your monthly budget reduces your hourly rate. In choosing to spend money on, for example, a nicer house, you are choosing not to buy a service that will save you time, for example by hiring cleaners. You are also choosing to spend your time maintaining that house! Still liking that fancy high maintenance house? On the other hand, if you buy a dishwasher, you are revealing that you value the money cost of a dishwasher less than the time cost of washing dishes.

Economists have another piece of lingo that they like to use here: “revealed preferences.” It basically means, “Yeah, yeah. We hear you saying how much you value this, but words are cheap. What you do says how you really value this thing.” I regularly ask myself whether I’m being a hypocrite, or whether I’m truly living my values. Part of that is spending my money consistently across my entire budget.

Let’s assume, for example, that you don’t mind cleaning, but you don’t like it either. And you have the opportunity to purchase time from a housekeeper at $50K/year, which works out to about $25/hr. Should you do it? You are literally buying back your time here. Basically, it comes down to whether your surplus budget is worth more than your surplus time. If you genuinely value your time at more than $25/hr, this is a no brainer.

Or is it? The cleaner won’t magically understand your preferences. They are a real human being, with all the glorious and messy preferences, likes, dislikes, and life complications that entails. They are not a magic wand that produces tidiness and cleanliness. You will spend time and energy expressing yourself, supervising, helping them with their troubles, etc.⁵

If you go with a cleaning service instead of an employee, the rate will be higher and the personal relationship lower, but there’s still overhead, and now there’s issues of trust, with an endless parade of new faces through your bedroom every week. Still, if we do a good job selecting the person or service, we can buy back some time here. To be safe, we should probably add some overhead. Let’s call it 50%, which means that in this example, we are revealing a preference to purchase time for anything less than $37.50/hr.⁶

Now let’s look at the other side: selling time. Would you spend an hour on an activity that you neither hate nor love in exchange for $20? $50? $900? Or perhaps you work, in which case you can just take your hourly rate. (Remember, you can get a rough hourly rate by taking your yearly compensation and dividing by 2000. So $400K is $200/hr, $200K is $100/hr, and so on.) Hopefully the number you buy time at is lower than the number you sell time at!⁷

How much would you pay to not clean your house? How about a meal service? Laundry? A driver? A home with a shorter commute? Why aren’t you buying back your time?

There are several possible good reasons. Perhaps you hate the idea of having someone tromp through your bedroom to clean it. Perhaps cooking is a hobby. Perhaps you want the budget flexibility, and it’s difficult to buy a small enough amount of time to make sense. But perhaps, you are being unreasonably frugal and think that you’re saving money when you’re really just being miserly and shortsighted. An hour spent washing dishes is an hour not spent visiting your parents, or reading a book, or petting a whale, or getting the genuine joy of going out of your way to improve someone’s life!

Look, it’s fine if you don’t have an exact number for what your time is worth. We are not perfectly logical spending robots. The idea is to get a vague number, and to have that be generally consistent across your entire budget. And of course you will adjust that based on your other preferences. You will spend more per hour to get rid of activities you hate, and you will gift time or sell your time at a reduced rate for activities you love!

The next time you look at your credit card or checking statement, see if anything jumps out at you. What are your revealed preferences for your hourly rate? Is it consistent? What’s the lowest value way you spend your time? What’s the highest? What’s your plan to increase the value of your time?

1. Who am I kidding? I love nerding out with economics lingo!

2. Various concepts for how this might work in an alternate universe have led to amazing works of science fiction and fantasy.

3. Deka = 10x. So a dekamillionaire has ten million dollars.

4. Yeah, you can probably get away with this for a year or two! But even here, you are still spending time! Don’t have time to do any exercise at all? Guess what? Instead of spending one hour exercising, you’re just shortening your life by a couple hours! OK. So it looks like I just pointed out a way to spend more than one minute per minute. Ugh.

5. Remember, service workers are not robots. You’re not a monster, right? Yeah, I didn’t think so. Humans need love, respect, autonomy, etc. You’re going to have to make room for this person in your life, just as they are making room for you in theirs. And as an employee, they are doing most of the adjusting.

6. This is different than what the service provider is getting paid, and almost always higher! Don’t confuse your own revealed preference for buying time with how much you are paying the person!

7. Remember, in our example, these are both activities you neither hate nor love. It’s perfectly rational to buy time at a high price and sell it at a lower price if you love your work and hate the chore you are outsourcing! Or perhaps you don’t have the requisite skill to do the thing at all!