Trading time for money; trading money for time

If you work at a ‘normal’ job, where you show up roughly 40 hours per week, and the company pays you some fixed number of $$$, then it can be said that you are trading TIME (your forty hours) for MONEY (your salary). If you want more money, you have to either convince the company to pay you MORE for each of your hours, or you have to work more hours. Over the coming months, I’ll be discussing the reality behind this ongoing trade (because, really, trading time for money, and trading money for time, is something that goes on and on in all parts of your life) – because the better you can understand how this applies to YOUR LIFE, the more likely that you’ll be able to trade UP!

What do I mean when I say ‘trade UP’? Well, the best example I can come up with is the One Red Paperclip story that was in the news back in 2005 – in which Kyle MacDonald, starting with a single red paperclip, made a series of trades which eventually resulted in his ownership of a small house in Kipling, Saskatchewan (Canada). You should read it – the story is a lot of fun 🙂

Anyway, another example of trading UP, in the game of money, is (and to keep it simple, this example is both obvious AND a little unlikely) :

  • Imagine you work for a landscaping and yard-work company
  • AND there’s enough work that you can choose to work anywhere between 20 and 60 hours a week
  • AND you get paid $10/hour
  • AND, after taxes, you take home $8/hour
  • AND, because you need the money, you work so many hours that you don’t have time to cut your own grass, so you pay the kid down the street $10/week to cut your grass.
  • AND it would take you two hours per week to do the job yourself.

SO you’re making two trades – you trade an additional two of your hours (each week) for a total of $16 (two hours, for $8/hour) – and you trade $10 for two of your hours. You traded well, since the alternative would have been to work two hours less for the company, and two hours more for yourself, and end up six dollars poorer.

In real life, there are two key ways that you’re trading time for money :

  • the hours that you spend being paid for producing something of value for an employer (or client, or customer), and
  • the hours that you spend doing something for yourself that you would otherwise have to pay someone to do for you.
  • AND – you should probably consider the time that you spend doing stuff that has no financial impact (watching TV), but keeps you from doing things that DO have financial impact (cleaning your house)

At the same time, you’re regularly trading money for time :

  • when you pay someone to do something that you could have done yourself (change your oil, clean your house…)
  • when you pay extra for ‘convenience’ (fast food instead of home-cooked meal, prepackaged snacks instead of home-made…)

In all cases, you can assign a $$$ value to the time involved (how much money did you earn – or save – by doing this thing yourself?  how much time did you save by paying someone to do this thing for you?)

AND… if that was all you took into account, then it would simply be a matter of ‘doing the math’ – figuring out which activities will either earn you or save you the most money, on an hourly basis, gives you an idea of what YOUR TIME is worth, and making sure that you focus on the highest-$$$ activities (possibly including the ones that you’ve been paying other people to do up til now).

Which would be a good start.  BUT it may result in your spending all of your waking hours performing your highest-$$$ activity, and not taking time to do things that you LOVE to do, but which you can pay people relatively small amounts of money to do for you (or which have no financial impact – things like reading books, watching movies, doing yoga…).

SO, over the coming series of posts, I’ll also be discussing an ‘adjustment factor’ – in which you also take into account the non-financial costs and benefits to these various activities.  If you can earn $100 doing activity A, which you hate, or $80 doing activity B, which you love – which one should you do?  I guess it depends on how much you need that extra $20 – if it will pay for the medicine that will save your child’s life, then activity A will probably win out.

Now – I find this topic kind of fascinating – sort of like Applied Microeconomics – but I’d LOVE to know whether this is something that anyone ELSE will find interesting/valuable.

So PLEASE – leave a comment below and let me know what you think!

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