It's rare for companies to pay freelance writers by the hour; instead, you're typically paid a per-piece or per-word rate. If you estimate poorly, you can end up earning a much lower hourly rate than you anticipated. So I spend a lot of time calculating what I earn per hour to make sure I'm generating a reasonable income.
What I've learned through this process is the benefit of thinking of all of your time in terms of hourly rates. It can make a lot of decisions easier: Should you take the train or drive? Hire someone to paint your house or do it yourself? Order through Uber Eats or pick up take-out? Hire a virtual assistant or do the work yourself? Invest in a new tool or do the work manually?
Asking yourself, "Is this worth my time?"—and answering that question with hard data—can help you make better decisions about how you spend your time, both at home and at work.
Determining What Your Personal Time is Worth
If you're eligible for overtime and live in the U.S., you get paid a higher rate (1.5 times your normal hourly rate) when you work over 40 hours a week.
Why? Personal time is often more valuable than the time you allocate to work. Maybe you're willing to work for $35/hour, but would you charge the same rate for giving up time with friends and family, time for relaxation, time for fun, or time for chores or running errands? For many people, the answer is no. Time away from work is far more valuable.
That's what the professionals at Clearer Thinking had in mind when they created this calculator that helps you determine what your personal time is really worth.
In addition to asking you questions about your current work situation (hours worked, hourly rate, etc.), it asks thought-experiment questions like:
- If you were offered a new job doing similar work, what's the minimum after-tax hourly rate you would accept?
- How much would you charge for a part-time job doing one additional hour of work per week?
- How much would you be willing to pay for something that would complete a personal task for you, saving you nearly four hours of time?
- How long would you wait in line to get a $100 gift certificate to a store you shop at regularly?
- What percentage raise would compel you to take a job working 10% more hours each week?
It then calculates the median of the values you provided for the different questions to determine a specific hourly rate that represents how you value your personal time.
The calculator told me that I value my personal time at $67.86/hour. And knowing my hourly rate for my personal time makes lots of decisions easier.
Is a convenience service worth the cost?
There are a lot of convenience services we can take advantage of today: Food delivery services, grocery shopping services, laundry services, driving services. Each of these comes at a cost, but you can determine whether or not the cost is worth it to you by comparing it to your personal time hourly rate.
For example, Kroger is the major grocery chain where I live. Kroger offers a curbside grocery pickup service where they do all of the shopping for you. You just drive to the store and wait for them to put your groceries in your car. The cost of this service is $5.
Normally, it takes me two hours to make a list, go to the grocery store, pick up my groceries, check out, drive home, and unload those groceries. If I use the curbside pickup service, the amount of time I spend on those tasks is reduced to one hour. If an hour of my time is worth $68—and the service saves me an hour of my personal time—the $5 fee is well worth it (assuming I have the $5 to spare).
Laundry services are different. Let's say a laundry service charges $30 per load of laundry. If I do it myself, it takes about 30 minutes to put clothes into the washer, transfer them to the dryer, fold the clothes, and put them away—not accounting for washing and drying time because I'm not actively working on the task during that time.
With a laundry service, I bypass the time spent washing and folding clothes, but I still have to put them away, which takes about 10 minutes. So in total, the service saves me about 20 minutes (or a third of an hour). A third of my hourly personal time rate of $68 is $22.67 (68 / 3), which is lower than the laundry service fee of $30 per load.
So doing laundry myself is a better use of my time and money.
Is working extra hours worth your time?
Say you're a full-time, hourly employee who makes $35/hour. Your boss asks you to work two hours of overtime. You'll make 1.5 times your hourly rate: $52.50/hour. If you value your personal time at $68/hour, the $52.50/hour might not be worth giving up two hours of your personal time.
Of course, this is just one way to evaluate the decision. If you could really use the extra $105, it might be well worth your time to work an extra two hours—even if what you'll earn is less than the value for your personal time.
This can also be useful when considering whether or not to take a new job that requires you to work more hours. Say you're salaried and make $80,000/year working 40 hours/week at your current job. For the new job you're considering, you'll be expected to work 50 hours/week. That means you'll have to give up 10 hours each week of your personal time.
If you multiply 10 by your personal time hourly rate ($68 x 10 = $680), and then multiply the result of that equation by 52—the number of weeks in a year—the result ($680 x 52 = $35,360) is the minimum amount of extra money you should accept to move into the new job. Again, this puts aside the nuance of things like job satisfaction, but it's one way to help you make tough decisions.
How should you spend your personal time?
Say I'm considering going to visit a friend in Florida. I could drive for 10 hours to get there, or I could pay $450 for a one-way plane ticket.
The flight will take five hours total between the time I leave my house until I arrive at my destination. So I have to calculate my hourly personal time rate for those five hours ($68 x 5 = $340) and add the cost of the plane ticket ($340 + $450) to determine my total investment ($790).
Then, I can compare that to the 10 hours it would take me to drive at my hourly personal time rate ($68 x 10 = $680) and add the cost of gas for the trip ($680 + $100 = $780). It's slightly cheaper to drive, but knowing that the costs are so similar, I can make the decision based on how I'd rather spend my time.
If I'm a nervous driver—or if I want more time to spend with my friend in Florida—it's probably worth the extra $10 for a plane ticket.
Determining What Your Time at Work Is Worth
If you're paid by the hour, it's easy to figure out what an hour of your time at work is worth. If you're salaried and aren't sure what you make an hour, use this equation to determine your hourly rate:
Salary / 52 / # of hours you work per week
For example, if you make $80,000/year and typically work 40 hours/week, your hourly rate is $38.46 (80,000 / 52 = 1538.46 / 40 = $38.46).
If you'd rather not do the math yourself, you can use this CalcXML calculator to quickly determine your hourly rate.
When using the equation or calculator, you may want to make a few adjustments based on your situation. For example, if you don't get paid for vacation but take two weeks off each year, you'll divide by 50 weeks instead of 52 weeks. If you expect to make more or less money this year due to a raise or variable income, make that adjustment. And if you want to factor in taxes, you can do that as well.
Once you know your hourly rate, you can use that number to determine whether or not completing a work task is worth your time at work.
If you're a business owner or freelancer, you can do calculations similar to what we did for your personal time when deciding whether it makes sense to do things like:
- hire an accountant (versus doing your taxes yourself)
- hire a contractor for a few hours a month (versus spending your time on a task it doesn't make sense for you to do)
- invest in a tool (versus doing something manually)
But these calculations can also be helpful for salaried employees. For example, maybe you're looking for ways to convince your boss to hire someone else to handle a portion of your workload (so you have more time to focus on higher-value work) or invest in a tool to automate that work.
Say you spend a lot of time each month doing manual data entry to move information from one tool to another. You've been using Zapier's free plan for a while, and you used Zapier's productivity calculator to see exactly how much time you've saved.
But to continue getting the most value from the tool, you need either more Zaps (automated workflows by Zapier) or multi-step Zaps, so you need to subscribe to a premium plan. If you make $35/hour, you only need to save an hour each month to justify the $25/month cost of Zapier's Starter plan.
If you can show your boss that it's cheaper to pay for the tool than your time—as well as how you'll use the time you save to produce higher-value work—that's a pretty easy investment for your boss to agree to.
Remember: This Method Doesn't Work for Every Decision
There are situations where this method isn't helpful. For example, if you need to paint your house and can't afford to pay someone else to do it, it doesn't matter if it would be cheaper to hire a painting company than what it costs you in personal time.
Or say your favorite part of your job is the four hours a week you spend writing social media posts. It might be cheaper to hire someone else to do it, but it might not be worth giving up something you look forward to doing.
But in the right context, asking yourself if a task is worth your time—personal or professional—can help you make decisions more confidently.
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from The Zapier Blog http://bit.ly/2Y3RfHS
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