No, Really – What’s Your Time Worth?

by JT McGee

time, valuing time, how much is your time worth, what is time worth per hourThose who believe personal finance is intertwined with behavior have plenty of examples.

Loss aversion is one of the best.

Humans respond more strongly to loss than they enjoy a gain of equal size. That is, we’d prefer to avoid a $10 loss than we would enjoy a gain of $10.

It’s as irrational as the commonly held belief that we shouldn’t finance depreciating assets, but we’ve come to accept it.

What’s Your Time Worth?

Personal finance requires that we understand money as a substitute for time. This was a key part of my article about living without money. Living without money is merely living without easy trade. Money provides a mechanism through which I can trade my time with someone else’s.

The discussion of money as a function of time is mostly limited to frugality. Why expend ten hours of time per year to make homemade laundry detergent if the savings is only $50 per year? Is your time worth more than $5 an hour?

Of course, this topic (like many others) isn’t always so simple. Just because I earn more than $5 per hour working does not mean my marginal cost is always $5 per hour or more. I waste a few hours a week, which could probably be better spent making $5.

Alas, I’m still going to turn down $5 an hour. Lazy is worth five bucks an hour.

Time Loss Aversion

The human preference for loss aversion is best demonstrated in marketing. Consider the following “transactions” which place a value on our time:

  • Commercials – There are 8 minutes of commercials on TV for every 22 minutes of content. A TV show can be purchased online for $.99 without commercials, thus valuing our time at roughly $.125 per minute, or $7.50 per hour – 5 cents less than Federal Minimum Wage.
  • Online Commercials – Hulu shows 3.5 minutes of ads per 22 minute show, which values our time at $12.02 per hour. That’s a significantly higher rate than offline advertising.

I assume the difference is made up by the difference in advertising effectiveness and different CLVs per audience. Regardless, I would venture to guess that many people who value their time at far more than $12.02 per hour watch Hulu rather than pay $.99 for a TV show.

  • ATM Advertisements – A new form of swapping time for money, a company known as “Free ATMs NYC” is seeking to displace ATM fees with 10 second advertisements. ATM users can agree to watch a 10 second ad and use the machine for free, or instead pay $3 (thus valuing their time at $1,080 per hour) and avoid the ad altogether.

This is a far more interesting case, since it appears that the ATMs are at least somewhat subsidized by business owners who agree to house an ATM in their business. One bar owner found that a free ATM brings foot traffic. This foot traffic apparently converts into occasional customers. Customers already in the bar also have easier and free access to more money for more drinks, food, or other goodies the company sells.

Picking Favorites

Obviously how much we enjoy something will be included into a calculation for the market value of our time. Interestingly, on almost every article related to the new ATM service, people are leaving negative comments. It must be due to the bank-hate going around, I don’t know.

I haven’t ever paid an ATM charge. I probably won’t ever pay one. A Visa and Mastercard credit card is good enough to avoid cash for 99.9999% of transactions.

Even still, if my choices were to pay a $3 fee or watch a 10 second ad, I’d surely watch the ad. I find it hard to believe others wouldn’t.

My time is decidedly worth far less than $1,080 per hour. How about yours?

Photo by: Simon Shek

{ 11 comments… read them below or add one }

tom December 21, 2011 at 00:28

Hmmm… I actually thought about this today.

I paid a high premium for bagged lettuce instead of buying a head of lettuce and cutting it up. I still feel like I wasted money, but I paid for the convenience of not having to chop it up and wash it. Chopping and washing would most likely take 5 minutes, but I paid a $5 premium for 2 bags of pre-chopped and washed lettuce, valuing my time at $60 an hour for this “transaction”.

The problem with the question, how much is your time worth?, is that it can be applied to virtually everything. I’m sitting here typing out this comment when I could be cleaning, which is something I need to do. This pushes that task until a later time, which pushes something else until later, and so on, until it ends up costing you additional money because you eventually realize you are way to tired to make dinner and decide to get take out. Is it worth it to me to type this comment when, ultimately, it will cost me a premium down the road? Normal people don’t think of these things, but every choice has an opportunity cost.

Now… off to do some vacuuming… wait… no, I think I’ll go to bed instead!


JT McGee December 21, 2011 at 19:22

$60 an hour is pretty steep, but luckily only 1/18th that of the cost of passing up a free ATM. 😉 I still think the lessons of opportunity costs are some of the most important in personal finance.

This story needs an ending, though – what did you choose? Was it bed or vacuuming? I’m betting on bed.


tom December 21, 2011 at 20:46

You know it 😉


gharkness December 21, 2011 at 05:58

I’d allow the ten-second ad to run, which is NOT the same thing as **watching** the ten-second ad. I am quite perverse and don’t allow myself to be “sold” that easily.


JT McGee December 21, 2011 at 19:22

You can’t be bothered to watch and listen to an ad for $1,080 per hour? I’d put in 140 hour weeks at that wage!


PKamp3 December 21, 2011 at 11:01

I think a lot of people overvalue their leisure time – truth is, for many folks (present company included), they spend a fair amount of time doing things that don’t earn them money, like watching sports. Still, your time is worth something, which is a good deal for people who are willing to take a rough guess…

Roughly? My time is worth less than $1,080 an hour, haha.


JT McGee December 21, 2011 at 19:24

Leisure time gets a pretty high value for me, to be honest. Thing is, though, I think I assign a really high value to it for myself. The more valuable I make it, the less lazy I am, right?


Ashley @ Money Talks December 21, 2011 at 14:30

Ok, on the paying to not watch commercials thing. I guess it depends on what you are going to do with the time freed up by not watching commercials. If you are just going to watch more tv then I’d rather keep my money.

It’s not like I spend every single free moment earning money (don’t I wish!!). We DVR our shows and watch them while skipping commericals. With the extra few mintues we have to spare we just watch an extra show. Would I pay $5, or whatever, to watch an extra show each night? No.


JT McGee December 21, 2011 at 19:23

Where do you get a DVR for less than $5 a month? 😉


101 Centavos December 21, 2011 at 21:11

I’d let the 10 second commercial run, but I’d be checking e-mail on the blackberry, and not pay attention.
Is the $10 monthly fee for DVR service from the cable company worth the minutes saved by zipping through the commercials? Don’t know if I value it that way. The convenience of having WWII In Color or Serie A Soccer on tap whenever I feel like watching is worth the $10.


Dr Dean December 22, 2011 at 08:52

I agree a 10 second ad for free ATM is a good deal. But then, like you I never use ATM’s-maybe twice a year. I am one of the few that still goes inside banks or use the drive through.

Of course I’m not out partying all night needing extra cash for the next round….

Interesting, thoughtful discussion of time.


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