HOW MUCH IS YOU TIME WORTH?
Consumer Culture Editorials
From the pages of SAVVY-DISCOUNTS.com
Understanding money, debt and income. Deceptive advertising and marketing manipulation, how to get the best values, the Columbine tragedy, and even a little history of mass marketing. Editorials by Rick Doble, Editor.
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4.0 HOW MUCH IS YOU TIME WORTH? - CONSUMER CULTURE ARTICLES, FROM SAVVY-DISCOUNTS.com NEWSLETTER
I heard a story about a wealthy man who spent time shopping for a Jaguar automobile. In two days he saved $10,000 (plus taxes & interest). Even though he had money, he felt it was worth his while to shop around. His hourly pay (16 hrs.) worked out to a tax free $625 per hour - not bad even for a professional.
Everyone wants a bargain. However, saving just a few bucks may not be worth the trouble. People need to have a rough idea of how much they should save for an hour's worth of effort spent bargain hunting.
== Lets take two examples:
A married career woman working over forty hours a week, making $30,000 a year with two children would need a good reason to spend her time saving money when she could be with her family.
A retired couple on a fixed income with lots of time but very little money, might find it rewarding to spend hours scanning the sales fliers and clipping coupons.
There are other things to consider as well. When you save money you are earning tax-free money, free of income tax, social security and sales tax. You may also be saving any interest you would have had to pay to borrow the money. According to my calculations (SAVVY-DISCOUNTS.com Vol.1 # 2), $1 saved could equal $2 earned.
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== Fancy Calculations
So how much is a hour of your time worth?
In order to get a rough figure you would need to make some fairly elaborate calculations. First, take your gross annual salary, add all your benefits (average = 17% of salary), then subtract all your yearly work related expenses such as commuting and the cost of buying and cleaning your work clothes. After that divide the above amount by the total number of hours you work per year, including commuting time and overtime. This gives you a realistic pre-tax hourly wage.
Finally to allow for all taxes and any interest you would have paid to borrow money, divide the pre-tax hourly wage by about 2 (since $1 saved can equal $2 earned - see above) to come up with a realistic wage. (If you never borrow on time and never carry a credit card balance, you might divide the hourly wage by about 1.4 to only factor in your taxes.) This is the minimum hourly wage you should be earning for your time spent saving money.
== A Simple Method
Instead of doing all the math computations mentioned above, I did some calculations and came up with this easy and very rough rule of thumb:
== Simply divide your annual salary in thousands by five. This equals a minimum that you should be getting per hour. For example, a worker making $30,000 per year would divide 30 by 5 to come up with $6.00 per hour.
A professional making $100,000 should save at least $20 per hour.
A minimum wage worker earning $10,000 should save at least $2.00 per hour for it to be worth his or her while.
I realize that this hourly wage seems very low. That's because it is a realistic figure. It includes all your work related time and expenses (not merely hours on the job) and then deducts sales tax, income tax, social security and borrowing costs.
Let me emphasize that this method is a very crude, but it is easy. If anyone has a simple and more accurate method, please let me know.