Table of Contents
Your time and money, if managed well, can elevate your quality of life significantly. Finding ways to make the most of these two valuable resources can enhance how financially secure and enjoyable your days are.
Read on to understand the time and money relationship and how to make it work as well as possible.
Key Points
• “Time is money” reflects the idea that available hours can be converted into earnings, meaning unproductive time represents a financial opportunity being left on the table.
• Opportunity cost is the value of what you give up when making a choice, and because both time and money are limited resources, choosing one typically means sacrificing the other.
• Calculating your hourly worth — dividing annual after-tax income by hours worked per year — helps determine whether it’s more economical to complete a task yourself or outsource it.
• Compound interest can be a potentially powerful tool for maximizing both time and money, allowing savings to grow not just on the original amount but also on accumulated interest over time.
• Automating monthly bill payments saves time and helps avoid late fees.
What Does the Phrase “Time Is Money” Actually Mean?
The phrase “time is money” means that a person can translate their available hours into money by getting paid to work. If you’re sitting around relaxing, for instance, you could instead be working and earning cash.
Of course, it’s every person’s decision about how much they want to work or enjoy their free time as they see fit. Some people are driven to work 60 or more hours a week and are focused on how much they can deposit in their checking account. Others, craving work-life balance or, say, taking care of children, may work much less (if at all).
The True Opportunity Cost: How Time Means Money
“Time is money” can be further explained in terms of opportunity cost. Opportunity cost is the value of the option an individual gives up when they make a choice. Because time and money are both limited resources, choosing one typically means sacrificing the benefits of the other.
Here’s how it works: Say a person has an hour to spend. That person can choose to work and earn money for that hour if, for instance, they’re working on building wealth in their 30s. Or they can choose to do something that does not yield any income, like reading a book. The person who reads the book loses the opportunity to earn income for that hour. If they could have earned $50 an hour instead, the opportunity cost of choosing to read a book is $50. Thus, time is money and money is time.
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Understanding the Deep Relationship Between Time and Money
Balancing time and money can involve a trade-off. To make more money, some people spend more hours on their careers and have less time for the other obligations and pleasures in life, whether that means being with family, relaxing, or pursuing hobbies and passion projects. Working long hours can also mean less time to clean, shop, and otherwise handle chores. If one makes enough by working, they can perhaps delegate those duties and hire someone to handle them.
For example, an individual might be able to afford to pay a painter $25 an hour to paint their dining room while they earn $50 an hour working at their job in marketing. The individual essentially nets $25 an hour by doing this, which they could use to boost the savings in their bank account. If the person paints the dining room themselves, they lose the $50 they could have earned doing marketing work.
Seen through a financial lens, it might be sensible to embrace strategies that maximize your earning power with the limited time you have. If, however, you are a person who earns less and you enjoy painting and caring for your home, you might well decide to do the paint job yourself.
9 Actionable Tips to Maximize Your Time and Money Today
As you see from the painting example above, good time management is not just about working every waking hour. It’s about allocating time for tasks wisely and balancing work and personal lives. Otherwise, your health, mood, and personal relationships could suffer.
Here are some time and money management tips to get you started.
Prioritizing High-Value Tasks Over Busywork
You only have so many hours in a day to get things done, so prioritizing is critical. Work, picking children up from school or daycare, grocery shopping, and preparing food are daily and weekly priorities. So too are things like exercise, seeing loved ones, and doing whatever feeds your spirit, from rafting to reading. Plan your priorities daily, and focus on accomplishing them over busywork like cleaning out the junk drawer in your kitchen.
Time-Blocking to Protect Your Financial Goals
Your daily schedule is critical, but planning your time weekly and monthly can also keep you on-task and organized, especially when it comes to financial goals like saving for your children’s college fund or retiring early.
Block out time for reviewing your bank accounts and any retirement accounts you have. Likewise, schedule time to go over your budget and pay your bills. Organizing your time and your finances can make you much more efficient and focused on your goals.
There are many calendar-keeping tools available, from journals to apps. Using alerts on your mobile phone can also help you keep track of the “musts” on your daily schedule.
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Valuing Your Time: Knowing When to Delegate or Outsource
Your time is valuable, and you can literally put a price tag on it. To find out what your time is worth, divide your annual after-tax income by the number of hours you work in a year. The resulting amount is how much per hour of your time is worth, and it can help determine whether it makes more sense to do a task yourself or delegate or outsource it to someone else.
If outsourcing a task costs less than your hourly rate, you may consider it worth the money. For instance, let’s say you earn $60 an hour and typically spend four hours of your time off on weekends cleaning your house. If you could hire someone to do the cleaning for $55 an hour, it may be worth it to you to regain four hours of your time and still be ahead money-wise by $15. The same goes for other chores like yardwork and lawnmowing.
For tasks, compare what the cost is in terms of time and money by doing it yourself vs. outsourcing. If hiring a lawn service costs more than what you earn per hour, you may want to do it yourself. But if you could outsource the chore to the kid down the street (or your own child) for a rate that’s less than what you earn in an hour, it may make sense to do that.
Creating a Realistic Budget That Frees Up Your Time
When it comes to the financial aspect of money and time, creating a budget can help optimize your efforts to wrangle your funds.
A budget helps you account for your income, expenses, and savings so there are fewer surprises and you can hit your goals.
Making a budget typically involves looking at your monthly after-tax income, including keeping track of money from side hustles and the like. Next, subtract the cost of your monthly necessities (housing, food, medical care), as well as debts, and then allocate what’s left to spending and saving. This process should reveal if you are living within your means, or spending more than you earn.
If your expenses exceed your income, look for ways to cut back on spending, such as eating out less, biking to work instead of driving, or canceling your gym membership and working out at home instead. The ultimate goal is to create a budget that you can live with that has room to save for long-term goals, like the down payment for a house or for retirement.
Leveraging Compound Interest By Saving Early
Another possible way to maximize time and money is through the power of compound interest. Compound interest means you earn a return not just on the amount you originally put in a savings account, but also on the interest that accumulates.
Over time, you can potentially end up with much more than you started with, which may be one way to help build generational wealth. And the earlier you start saving, the more time your money has to grow, since compound interest is generally able to work its magic over a longer time horizon.
Here’s how compound interest can help your savings add up. If you have $6,000 in a high-yield savings account with a 4.00% APY that’s earning compound interest monthly, and you add $100 per month to the account, you’ll have $7,467 at the end of the year. After 10 years you’ll have $23,670, and in 20 years, $50,012.96.
You can use a compound interest calculator to see how much you might save over time.
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Investing Time in Your Financial Education
You can also spend time learning about money by educating yourself with financial books, podcasts, and websites. These can teach you about saving, budgeting, paying off debt, and contributing to retirement accounts. A professional financial advisor may also be helpful to talk to as you’re considering different types of financial tools, accounts, and techniques.
It might be worth putting in, say, an hour a day to make yourself more financially knowledgeable if you can learn how to spend less and save more.
Putting Finances on Autopilot to Reclaim Your Time
Automating your monthly bills can be a win-win. Paying bills on time is the biggest single contributor (at 35%) to your credit score, and taking care of those charges before they accrue late fees also makes good money sense.
What’s more, in terms of the time vs. money equation, setting up automated bill payments will also free up some space in your schedule. Your bills will be paid on time each month, without you having to click around websites or write checks and buy stamps to mail them. It will take just a few minutes of work upfront, but the task is then much easier.
Tracking Spending Habitually to Avoid Wasted Hours
Remember that budget you diligently prepared? Stick to it by following the 30-day spending rule. Wait 30 days before purchasing an item to avoid overspending and racking up debt. If you do spend too much, you may end up paying overdraft fees or credit card interest payments, and you’ll have to spend precious time getting yourself back on track.
Using High-Yield Accounts to Let Your Money Work for You
Cutting back on spending and saving more of your cash can be an important strategy to help your money work for you by beating inflation. And where you stash your savings makes a difference. Basically, you want to earn enough interest on your dollars to outpace the rate of inflation.
Putting your cash in a high-yield savings account, as noted above, is one potential way to boost your savings and stay ahead of inflation.
The Takeaway
Time and money are two valuable but limited resources. Making the most of each one requires some smart strategies, such as budgeting, scheduling, reducing overspending, saving, and finding work-life balance. But by respecting the value of time and money — and managing them well — you may enjoy a better quality of life and reach your financial goals.
Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.
FAQ
Is time worth more than money?
There is no one right answer to the question of whether time is worth more than money. It depends on what’s most important to each individual. For example, for a person with a new baby who prioritizes time with their child, time is clearly the most precious commodity; they might rather have less money and more time. In another scenario, however, someone might say money matters more. They might be willing to work extra time for years to ensure they have a successful, well-paying career, even if they don’t have much free time to enjoy their lifestyle.
Who originally said the phrase “time is money”?
The phrase “time is money” is often attributed to Benjamin Franklin, who is said to have originated it in an essay he wrote called “Advice to a Young Tradesman” that was published in a book in 1748.
How can I calculate the actual monetary value of my personal time?
One easy way to calculate the value of your time is to divide your annual after-tax income by the total number of hours you spend working in a year. The resulting number is how much your personal time is worth per hour.
Why is time often considered more valuable than money in finance?
Time is often considered more valuable than money in finance because, unlike money, time is a resource that can’t be replenished. Time is finite — once it’s gone, it’s gone for good. With money, however, there is typically always the possibility to earn or obtain more.
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