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April 24, 2021

What's your time really worth?

By Gordon Powers, Sympatico / MSN Finance

Is it worth driving the extra few minutes to save three cents a litre on gas or a couple of bucks on groceries? Should you hire a housekeeper to free up your time? A gardener?

Well, it all depends on what you figure your time is worth.

Valuing your time in a monetary way is a tricky proposition. For instance, if you earn $75,000 a year through a regular work week (8 hours a day, five days a week, for 48 weeks) your time is worth roughly $39 an hour. If your yard service costs about $20 an hour, you've got a pretty sound economic reason to write a cheque, instead of buying that leaf blower.

But that's not the whole story. Unfortunately, a sizeable chunk of what you earn goes to the government. In addition, your money goes a good deal further in, say, small-town Ontario, than it might in Toronto.
Ian Walker, a professor at the University of Warwick came up with a formula a few years ago to help assess the monetary value of your time which, he suggests, has become increasingly more valuable in recent decades. 

His calculation takes into account your gross hourly wage, your marginal tax rate, and the cost of living in your area. The equation looks like this:The value of your time = [wage (100-tax rate)]/cost of living.

His analysis is based on the assumption that what you make is an indication of how you value an hour of your time, because that's what you're willing to sell it for to an employer. But the calculation also depends on the cost of living in your area and those killer taxes, since they determine how far your money will actually go when it comes to spending it. 

At $75,000, your marginal tax rate in Ontario would equal roughly 35%. And, if you’re lucky enough not to live in Toronto, your cost of living might be .95 times the national average, reducing that real hourly wage to something like $25 per hour. Here's a tool to help you with your own calculation.

Of course, the formula doesn't distinguish between earned income and investment income, which are taxed at different rates. And it's not easy to get a good cost-of-living number outside the big metro areas. But one thing is sure – unless you make more money than you can count, the more you can do yourself, the further ahead you’ll be. 



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...