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The opportunity cost of 1 hour of your life
What is an hour of your life worth?
Think about it for 60 seconds. Seriously.
If you're like a lot of people I've asked this question, you'd respond with “priceless!”.
What you'll find is that there is a huge difference between the perceived value of your time and practical value of your time.
Why is there such a big gap between perception and reality when it comes to our time?
This post began life as a thought reflection and should remain so after you've read it.
It started with something like this…
I asked myself – What is really worth me spending my time on?
How do I consciously or unconsciously choose what I allocate my time to daily?
And when I do choose to spend my time on something, what it is really costing me to do that?
Time is the one asset that we all get allocated in our lives daily.
Whether you’re rich or poor, you get the same 24 hours.
Although we all get the same allocation every day, to some, time is abundant, whilst to others, time remains ever scarce.
People with little to no time on their hands tend to be middle class types living the life usually in major cities.
This group spend most of their adult lives giving up time to acquire money. Consequences of modern day living or poor decision making.
So if you are 35 and living a financially ordinary life, chances are you will swap the next 30 years for money.
A third of that time will be spent working to survive. That’s 10 solid years of actual graft i.e. just over 87,000 hours of your life.
This tug of war between time and money persists for most people’s lives.
In the ideal world, most people would like to have lots of time and lots of money.
Given this ideal world doesn’t exist for most people, the next best option is to get the right balance between how we use our time and how we manage our money.
And if done right over a period of time, one starts to close the gap between perception and reality when it comes to the value of time.
Opportunity Cost of Time
The concept of opportunity cost pretty much refers to a trade-off.
Do you ever consider what you are trading off for every other hour that you spend doing something that you know is not adding value to your life?
For example, watching TV or wasting time on Social Media.
Although these are not bad things most of the time, they do come at a cost.
Another way to understand this trade-off is through an example:
Imagine you live in Kent and had to visit your relatives in Edinburgh.
You have 2 options on how you can get there:
Option 1 – You can fly there for 2 hours (via London) either way at a cost of £300
Option 2 – You go there by multiple trains for 12 hours either way at a cost of £200.
Total cost of flying is 4 hours and £300.
Total cost of the train is 24 hours and £200.
Cost Savings by Train: £300 – £200 = £100
Time Savings by Plane: 24 hours – 4 hours = 20 hours.
So in this example, the train saves you money (£100) and the plane saves you time (20 hours).
Another way to look at these savings is to work out the effective cost i.e.
£100/20 hours = £5 per hour. I.e. it took 20 hours to save £100… Therefore £5 an hour.
An individual considering whether to go by plane or train would be indifferent if they looked at it this way.
But most people have a time value of money of more than £5 per hour, so they’ll end up taking the plane.
This example appears easy and obvious enough, although not so straightforward in other real life examples.
Take retirement, for example –
Most people know they'll retire one day at a cost of both time and money.
Yet they choose to live for today and possibly work for the next 30 years… rather than designing a future life that works for them through delayed gratification.
When seen through the lens of the day to day units of time, the true opportunity cost of living for today is seen more clearly.
The Opportunity Cost of 1 Hour of Your Life
What’s interesting about the above train and plane example is that you and I could make the decision because we are usually operating in market norms.
i.e. the world of price, quantity, etc.
We can relate to money and time because all through our adult lives, we are trained to swap time for money.
This is the way of thinking in the Standard Life Plan.
What if you had more control of your time and didn’t need to operate through the same rules of comparing time and money?
How different would life be?
And how much more value would you place on 1 hour of your life?
An interesting outcome from our journey to Financial Independence is this alternative way of looking at the value of time.
I recently got invited to speak at a school to help some pre-University students prepare for the next 3 – 5 years of their lives financially.
I accepted the invitation and went along because this line of work resonated more strongly with what I believe my true calling is.
Although in monetary terms, the opportunity cost of doing that meant I would have lost out on a lot of money. Afterall, time is money as most believe.
Interestingly, I counted the experience of service to be worth a lot more.
In my mind, doing such work would add value to people and would not only mean a lot to them but would mean so much more to me.
Speaking from my personal experience, Financially Independence does so much more than just give you options for the future.
You are far more likely to operate in the Social norms than in Market norms in your day to day interactions.
I.e. you are more likely to seek out and invest your time in more fulfilling work than you would otherwise.
Take this blog post that you’re reading, for example.
The time it has taken me to create it is as follows:
Thinking and planning – 1 hour
Writing & Creating – 2.5 hours (I struggled to write after the kids night routine)
Other admin – 0.5 hours
Total of 4 hours.
This is more time that I could have spent with my kids or just doing whatever else I fancied.
However, spending that time on creating this blog has been extremely meaningful to me.
It is yet another step closer to creating an ever more helpful platform that moves many people forward daily.
And this is only possible because I consider carefully what I spend my time doing.
Plus, setting off and achieving Financial Independence has not only helped us financially, but really changed how we think of time.
The whole point of understanding opportunity cost is not for you to second guess every decision you make.
It is more for you to realise that every choice you make has consequences, and by thinking about it, you hopefully make better decisions.
Given everything in life requires a real trade-off, you have it within your grasps to pursue a life that truly works for you.
There is a direct connection between every hour of your current life and the future life that you desire.
The more deliberate you are about using each hour more intently, the more you'll join the growing minority doing something very important –
Seeking financial independence by gradually separating time from money.
This is how an hour of your life becomes priceless.
- 9 Tips for Living a Simpler & More Fulfilling Life
- Growth Mindset – How to Start Your Day With Purpose
- How to Become Financially Independent In Your 30s
- 7 Tips to Help You Find Time For Your Side Hustle
What is an hour of your life worth? How would you answer that question? Do please comment below.
Do please share this post if you found it useful, and remember, in all things be thankful and Seek Joy.