By: Andrew Rosen, CFP®, CEP®

Here’s another thought I’ve been noodling on for some time now. When you read the title of this blog, I’m sure you thought, “Andrew, you totally botched the saying.” You would be correct, although it’s intentional.

The old saying is ‘time value of money’ and it generally refers to the fact that money is more valuable today than the same amount of money would be in the future. The logic is basically two-fold. One is that I’d rather have $100 today than 10 years from now because I can invest it today. Even at 1%, it will be worth more than $100 in 10 years. Two is even if you don’t invest that $100 and leave it your drawer, a $100 is worth less in 10 years due to inflation. Basically, $100 buys you less groceries and gas in the year 2030 than it does in 2020.

Now, here’s my concept. I’m taking this idea and flipping it on its head, a bit. As I’ve observed and advised clients, I actually think there’s a more appropriate bigger picture concept here. The notion is that TIME IS THE VALUE OF MONEY. Bear with me and I’ll explain.

If we take a moment to look at what’s our most scarce and precious resource, it’s clearly time. Time on this earth, time with our loved ones, time to make a difference, and time to enjoy the beauty that is life. I know some of us may feel money can be equally as scarce, but I’m not sure anyone would argue the value of time.

If we break down our lives, we’re either spending time earning money or spending money earning time. The question then becomes, how valuable is your time? The formula is simple. (For our example, let’s say you make $100,000/yr.)

The Formula

  • $100,000/yr income
  • 40-hour work week
  • 50 working weeks a year
  • 40*50 = 2,000 working hours
  • $100,000/2,000 = $50/hr worked

Using that example, we’ve quickly solved the value of your time. You’re arguably worth $50 an hour. But here’s where things get interesting. There are actually 8,760 hours in a year (sorry, I can’t help myself here, I’m going into an internal song and dance—525,600 minutes how do you measure, measure a year).

It’s really easy to value your time at work, right? The question is how do you measure the remaining 6,760 hours in a given year?

We all have different incomes, as our industry assigns a value to the job. Some are deemed more valuable (rightly or not) and some less. So, we’re not all not equal when it comes to our 9-to-5 workday value. Someone who makes a million dollars a year, vs. someone who makes hundred thousand, has a difference of $500/hr. However, those two people also came home from work, had a catch with their child, took their mother to dinner, attended a dance recital, or went on a date with their spouse.

In theory, aren’t all these activities equal value, regardless of how much money you make? I don’t think anyone would argue these same non-work activities are all on an equal playing field when it comes to the value of time. Perhaps we’re better off using percentage of money to allocate to a percentage of time, versus using absolutes.

Now, I’ll rephrase the question and ask, what is the value of your time? If I said you only had $100,000 to spend on the remaining 6,760 hours, how would you allocate it? What percent would go where? (Even I’d have to take a deep breath and prepare myself, this is some heavy stuff for a Tuesday morning.)

Your money should be spent on your most valuable resource. The way I see it, it’s a fairly binary formula. You either spend your money maximizing your time on the most highly valued things, or you spend your money giving you more time. (Yes, you can use money to buy more of the scarcest resource on earth).

Before we take a closer look at these two items, there’s a quick exercise you need to go through. You need to spreadsheet those 6,760 hours and figure out how they’re going to be allocated. For instance, if you sleep eight hours a day, that equals 2,920 hours. (You could also see it as leaving you only 3,840 hours that aren’t sleep or working.) I’d say the value of your free time just went up, no?

Now, take all the other activities in your life and assign how much of the 3,840 remaining hours they take. Look at your commute, grocery shopping, TV time, date night, family time, etc. It’s a sobering exercise, right? Let’s say you spend 2,840 on stuff you hold little value for, but feel you have to do (like grocery shopping or cutting your lawn). This leaves you with 1,000 hours a year to spend on the things you truly value. If that’s the case, you really have to decide how you wish to spend these 1,000 hours. THIS IS CRITICAL STUFF.

Now that we’ve gone through this exercise, it’s time to allocate your money to maximize your time.

Money spent on maximizing your time.

The way I see it, you have your list of 1,000 hours and activities you want to accomplish. Some of these things have costs and some don’t. You can allocate your money wisely on how to enhance these valuable activities. Additionally, you can use your money to do more of the higher-valued activities on your list. Either way, time is how we should be valuing our money.

For example, if I value vacation as a top priority, then I’ll allocate more dollars to having more vacations, or to doing more activities on those vacations, like a helicopter ride, to make it more memorable. There are no wrong answers here. It’s very subjective. But I think we can all agree, a bigger budget affords you more ability to maximize the value.

Money spent buying you more time.

Here is my other groundbreaking concept and, on the surface, it seems impossible. How does one buy time? There’s no store selling time. Not even Amazon has that figured out, or have they?

You see, there’re two sides of this coin. One, you can use your money to maximize your time, or two, you can use your money to buy you more time. (FYI, they are not mutually exclusive). If I decide I’m done cutting my lawn forever (which makes sense, because I don’t own a lawn mower) and instead pay someone $2,000/yr to do it for me, what have I effectively done? I’ve spent $2,000 to buy me 100 hours back. Effectively, I’ve shifted these hours from a zero value of my time to a priceless allocation of my time, moments spent with my family. Effectively putting a value on my time.

I also think hiring a financial planner, such as Diversified, can take away the countless hours of managing your finances, taxes, insurances, and estate planning. The value is the outsource to a professional team who can, quite simply, put more time and expertise into it than you can. This nets you more time shifted back to your most valued allocation. I don’t mean this as a shameless plug for my company, but rather as an example of how service professionals can be invaluable if you look through the spectrum of what they really give you—more of your time, the most valuable and priceless resource in the world.

Time the true value of money

Coming full circle, how valuable is your time? How valuable is your money? These are really important questions to think through. With intention and a little work, you can figure out how to allocate both. Much like money, isn’t your time more valuable today than it is in the future? Have I officially proven that time the true value of money?

I’ll leave you with a heavy and meaningful quote that resonates with me. I’ll set it up for you as well. 2016 Bruce Springsteen River Tour, five days before my dad tragically passed away. My dad and I are at a concert of our favorite, The Boss. And at the end of the River Album, Bruce says on stage the following: “Time slipping away. And once you enter the adult world, the clock starts ticking and you’ve got a limited amount of time to do your work, to raise your family, to try and do something good.”

This quote sits in my house framed with my Bruce Springsteen signed guitar. I hope you all find a way to make time the true value of your money.

Miss ya pops!

In his role as Financial Planner, Andrew forges lifelong relationships with clients. He coaches them through all stages of life and guides them to better achieve their life goals. Andrew loves helping others by spreading his knowledge on finance, investments, and the pursuit of happiness/fulfillment. He writes nationally recognized, weekly blog posts on these topics and is a regular contributor to Kiplinger. Andrew has been published in The Wall Street Journal, Barron’s, Financial Advisor Magazine, US News & World Report, USA Today, CNBC, along with many other publications.

For more information or to book a consult with Andrew or the other firm partners, Kyle Hill and David Levy, click the link below.

Andrew Rosen, CFP®, CEP®
Kyle Hill, CFP®
David Levy, CFP®

Financial planning and Investment advisory services offered through Diversified, LLC. Securities offered through Purshe Kaplan Sterling Investments, Member FINRA/SIPC. Headquartered at 80 State Street, Albany, NY 12207. Purshe Kaplan Sterling Investments and Diversified, LLC are not affiliated companies.