Evaluating The Time Value of Money

the-eleventh-hour-758723_1280Today I want to talk with you a little bit about the time value of money.

I don't mean that in the sense that your economics and mathematics teachers talked about the time value of money and how to calculate it with some complex formula in your fancy calculator. But rather, I want to talk about what your time is worth in terms of money.

No matter if you are salaried, hourly, or a project-based contractor, you truly are exchanging time for money. Some of you might be getting $8 for an hour of your time and others might be getting far more than that, but we all exchange our time for money in one form or another.

This also means that when we buy something, we are not only exchanging our money for that purchase, but we are also exchanging our time for it too.

The Time Value of Your Purchases

Here's an example. If you earn $10 per hour of work and you just spend $90 on a fancy bottle of perfume at the mall, you will have to work a whole entire day to pay for that one tiny glass bottle of chemicals.

Math equation: $90/$10 = 9 hours of your precious time.

If you live to be 80 years old you will have lived approximately 701,280 hours according to my fancy calculator. Nine hours of out that 701,000 may not seem like much, but that's just for a bottle of perfume. What about for other things you buy?

The Time Value of Your Career

Switching gears here a little bit, let's think about how much of our time we really exchange for money.

Most adults will work a 40 hour/week job for 35-ish years before they retire. That's 72,800 hours which is just over 10% of your life span. That doesn't include things like the time you spend on your daily commute, the time you spend getting ready in the bathroom mirror, or the time spent on working lunches, working late, or working the weekends. In reality, most of us spend way more than 40 hours/week working in exchange for money.

The Time Value of Your Time

Not to get too much more profound, but what is your time really worth to you? Isn't it worth more than working an entire day away from your kids, pets, hobbies, friends, etc. just to buy a bottle of designer perfume? I'd like to think so, but most of the time how we actually spend our money says differently.

We tell our friends and family that we don't have time to spend with them, but the truth is that most of us would rather exchange our time for money instead.

If you spend 10% or more of your lifetime working, and another 33% of your lifetime sleeping, what are you going to fill the rest of your time with? It's up to you to determine that time value for yourself.

But I hope you don't decide to waste an entire day to buy a chemical-filled glass bottle of perfume anytime soon. I know I'll think twice before I buy something next time I go shopping.




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