Don't Tell Me That Was "Only $8.33 per Hour"

This post is kind of long, so here is the main point for the most impatient of you: considering just the dollar hourly return of an activity is not enough. Read on to learn how to properly assess the value of an activity.

The Last Straw

I am going to a concert of a Russian artist this weekend. I am going with a friend and the tickets cost $25 each. ? few days ago, I logged into the concert hall’s website to purchase tickets for the two of us, happily filled in all the fields and proceeded to checkout. The total was $63.50 with a total of $13.50 in service fees!

Um, what?! Are you serious?! I am not being stingy here or anything, but I was completely outraged by this website’s (who shall remain nameless as I do not wish to give it the honor of advertisement) fees. So as an indignant consumer and avid advocate of financial responsibility, I made the trip to the concert hall and bought the tickets in person. Hours spent = 1.5. Dollars saved = $12.50 ($1.50 was spent on bus ride).

As I got home, I happily tweeted the news of my accomplishment out into the world. My new Twitter buddy @PaulTran92 quickly calculated that this project earned me $8.33 per hour. Not so great, is it?

Paul’s tweet was exactly the impetus I needed to write this long-overdue post. Listen up, people, you have to learn about yourself to learn how much your time is worth.

How People Tend to Think About the Value of Their Time

I encounter people making this mistake all the time. When my dad deals with annoying things like health insurance reimbursements, fixing something around the house, etc. he always says “I have already spent too much of my time on this. My time is worth a lot of money. I could have just paid someone $200 to fix this and made more money in those two hours I just wasted.”

This is flawed reasoning. Really, you can only use this reasoning if you are actually getting paid by the hour and you have a project that is just waiting for you to spend your time on that could generate you positive earnings. Then, yes, the trade-off is between the money you generate through cost saving and the money you could be generating by working on the project. Otherwise, you are comparing apples with oranges!

How People Should Think About the Value of Their Time

Let us face it - most of us do not get paid by the hour (neither does my dad). We are salaried employees. Therefore, we simply would not make more money during the time that we spend on time-consuming cost saving projects. So stop thinking of it in that way. That is not reality!

The good news is that you can think of it in the correct way by slightly adjusting the perception of the value of your time. But for this, you have to invest some time in getting to know yourself and learning what you value.
Let us review with a real example:

During my 1.5 hours spent saving $12.50, I spent:

• 15 minutes of it walking around San Francisco. This allowed me to breathe some fresh air and enjoy my “outside time” of the day.
• An hour on the bus, where I read up on a great explanation of the economic crisis by Robert Solow.
• The remaining 15 minutes I spent waiting for a bus. I called my mom, had a quick conversation and assured her that I was alive and well.

All these things I would have done if I had gone home directly (and it is questionable whether I would have been that productive at home due to all the distractions such as Twitter, Facebook and my comfortable bed), so really the hourly payoff of this activity was higher than $8.33 per hour since I did not waste any of it by chasing the $12.50 cost saving. This is because I know that educating myself on the economy and family talking time are valuable to me.

Now, I am not going to put monetary value on those things because I am a practical person and assigning dollars to intangibles has no place in my personal financial infrastructure. But what I will point out is that this is the real trade-off you should be considering; the trade-off between what you “earn” by engaging in cost saving and what would ACTUALLY be doing if you were not engaging in it. It is NOT the $8.33 per hour vs. the $30- or $50- or $80 per hour that you have mentally calculated you earn from your yearly salary and anticipated year-end 2009 bonus.

In my case, I got lucky since it was not a trade-off at all because I was able to save $12.50 and do all the things I would have been doing during that time anyway.

Conclusions?

1. Learn about what is truly valuable for you to spend your time on.
2. Be real about the value of trade-off activities on your time. If you are not actually earning an hourly rate, do not make one up based on your salary and then compare that to the hourly rate you “get” by engaging in an activity that results in actual positive earnings (savings = earnings). Those are apples and oranges.
3. Only then, weigh the trade-offs and make the right choice between activities. One that you will not regret because you were real about the value of each to you.

Don't Be Lazy; Go Do It Right Now

I am a lazy person. Seriously. I am pretty lazy.

The problem is that I am also a high achiever. I am very driven and have become even more driven in the last few years of college. The way I see it, the value of self-awareness is to:

1. Figure out my goals – what I value in life, both professionally and personally.
2. Become aware of my character flaws that stand in the way of reaching my goals.
3. Come up with tricks and fixes to counteract those character flaws.

I got away with laziness all throughout high school and college. In high school, my only extracurricular activity was being a news co-editor of the high school newspaper during senior year (what Stanford saw in me in 2004, I have no idea). In college, I spent the first few years in laziness and fear of committing my time. Only by the end of junior and beginning of senior years did I realize that I should have done anything and everything that interested me.

So I went lightning speed and in my last quarter at Stanford, I took a full graduate unit load, TA-ed a microeconomics course and wrote an undergraduate thesis. Good times.

In January 2009, I suddenly found myself on my first job, sitting in an office for 8 hours a day and performing magic tricks with Excel. I went from being busy with 100% control of my time to being busy with only 30% control of my time. How do you get any of your personal goals or life errands accomplished when you are working nine to done? Here was an opportunity to let my laziness take over.

But I did not let it. And I do not let it every day. I have been putting in operational life rules by which I live so that my laziness does not take over. So what are they?

1. Lunch breaks are not only for eating lunch, but running errands. Whether it is a quick trip to the shoe cobbler, Walgreens, Safeway or a quick call to the bank, doctor’s, etc, I make it a rule to run at least one errand or take care of at least one thing during the weekday lunch hour. It does not matter how small it is. It is all about baby steps. Chipping away at my to-do list one errand per lunch makes a huge difference at the end of the week.

2. Why put something off for tomorrow if you can finish it in the next 15 minutes? This one I borrowed from my advisor who quoted my former office mate. If you can write up a quick note, quickly call the bank to take care of an issue, open a Roth IRA, etc. in the next 15 minutes, just do it. Seriously, stop reading and go do it right now (and then come back to finish the post). This rule works well for both work and personal projects.

3. If you are not feeling efficient and feel like you are wasting time, immediately take care of two tasks on your to-do list. Just like inspiration breeds more inspiration, productivity breeds more productivity. The more you accomplish and cross off your to-do list, the more inspiration you will feel to keep going. The 10th task will feel like a breeze and you will not be able to stop yourself from crossing off more and more tasks. Each task will become easier and easier.

4. When you get home at night, clean the room and the kitchen before your brain figures out what you’re doing. I usually fly into the apartment, throw my jacket and purse on my bed, run into the kitchen and start furiously doing the dishes. Before I know it, the dishes are done. I’m still pumped up, so I clean up my room, put all my clothes in the closet and take out the trash. The routine takes 20 minutes, but by the time I realize how much cleaning sucks, everything is done! Simple as that.

5. Accomplish at least one thing a day that is just for your own personal development. I call these “personal projects.” A personal project can be the smallest thing, such as writing an email that you have been putting off (like the one I wrote to Ramit Sethi last week…it was so funny, but he still blew me off…whatever). It can be a blog post. It can be sewing up a torn piece of clothing (yes, I do sew up my opaque tights…those suckers tear after like one wear and it would be too annoying to throw them away).
The importance of this one project per day is to feel that you are not only your work and that you are taking proactive steps to grow personally outside of it. The most important investment you will make is investing in yourself.

The common thread in all the rules? Be spontaneous, do before you have time to think of all the obstacles and just keep going.

By following these rules for the past three months, I have managed to set up a dynamic spreadsheet tracking all my spending, write some blog posts, connect in person with a few awesome bloggers like Penelope Trunk and Jenny Blake and become a personal finance mini-expert.

Many more projects are in store, but I have forgotten what it is like to be lazy. Because when I get home at night, I cannot wait to work on my personal project of the day.