The Money Value of Time

by Kevin on November 17, 2013

There is a financial principle called the time value of money. Under the time value of money a set amount of currency today is worth more than the same amount of currency at some point in the future.

It’s pretty simple. If I gave you the option of $1,000 today or $1,000 in one year it would be foolish to take the option one year from now unless you expect deflation in the value of the currency. Here’s why: you could take that $1,000 today and invest it in a savings account earning 1% to send up with $1,010. (Of course you could potentially invest it for higher returns in the stock market, but this is a simple example.)

This principle underlines the value of dollars today and the opportunity cost of dollars in the future.

Today I present to you a new concept: the money value of time.

What is the Money Value of Time?

The money value of time: simply put, time costs money.

Time is the only thing you cannot make more of. If you blow some money on something you shouldn’t have there are ways for you to earn that money back. If you go into deep credit card debt it will be painful to recover, but you can earn enough extra money to get out of debt.

There is no cure for wasting time. You can’t make more time. No investment you have will throw off interest to you in the currency of time.

Therefore, time isĀ extremely valuable. I am learning this more and more with our son.

In the past I had all the time in the world to run a freelance business, do my day job, help out with the house, be a good husband, and even walk the dog every once in a while.

Now… there is never enough time for anything.

This resurgence of understanding the true value of my time changes some things in my life.

For example, shopping at two or three different stores on a given day no longer makes sense. Where it might have made sense in the past to spend an extra 10 minutes driving to another store to pick up some items on our list for less, that equation no longer works. (That is unless we’re talking about a huge difference in price.) Even without my son in the car it is just burning up time to save a few bucks.

As much as my frugality-loving heart hates to say it… those few bucks aren’t worth it. The minutes saved by shopping at one store are.

It also means — and it still grinds my gears — that making more trips that last a short amount of time (you guessed it, nap time) makes more sense than one longer consolidated trip where we pick everything up. That means more gas and miles on the car, but for now it is a virtual necessity.

This shift has also greatly, greatly increased the value of Amazon in my life.

I already loved Amazon. I already loved spending $25 (now $35) to get free shipping.

But now?

We’ve got Amazon Prime membership. Yes, it is $79 per year. Yes, it is worth it. Combining Amazing Prime with Amazon Mom membership we now save 20% on already discounted diapers compared to buying them in the store when we use Subscribe and Save. (And we’re saving that amount on everything we order via Subscribe and Save. That means 20% off on wipes, diapers, diaper genie refills, trash bags, toothpaste…)

And it all comes right to us. No shopping trip. No gas. No mileage. No time.

Plus we get 2-day shipping for free. And Amazon Instant Video service which would be more valuable if we ever felt like we had time to watch videos. Alas, we do not, but maybe one day…

I highly recommend you step back for a moment and analyze what your time is worth. You don’t have to come up with a specific dollar figure, but having a general sense can greatly influence your decisions.

Even if it means you spend more money than you want during a given month.

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