Time: the only non-renewable resource you have. Once it’s gone—no matter how you spent it—you’ll never get it back. That’s why the answer to the following question is so important:
How much is your time worth?
It’s a question we don’t think about very often, and when we do we usually get the wrong answer. We often spend our time rather than our money, even when it doesn’t make sense to do so. My dad would spend a couple of hours to save a couple of bucks. “I’d rather that money be in my pocket than theirs.”
But what he was really saying was that his time was only worth about a dollar and hour.
Let me put it in a different perspective. The news around here was full of stories of people spending hours in line stocking up on gasoline to avoid a projected $0.25 per gallon rise in price. Even here in central Texas, where we were relatively unaffected by Harvey, I saw this behavior. I even saw a picture on Facebook of a guy filling trash cans with gasoline—something that is both dangerous and illegal. This behavior doesn’t make sense on a practical level, because you only postpone participating in any price increases, which will be greater because of artificial demand, as will any actual shortages caused by the storm’s impact on refining capacity.
But to get back to my original question, let’s look at this behavior from purely cash flow perspective. Assuming you value your time at a modest $20 per hour, the typical time spent in line was about two hours as reported, and the projected 25-cent price increase is accurate, you would have to stockpile 160 gallons to break even in the short term. And you’d only break even if you don’t include any opportunity costs. Could you have spent that two hours doing something productive, something that would have earned you a few dollars? Then you’d have to fill even more trash cans to break even.
Now, I’m not saying everyone who bought tons of gas last week should sign up for an episode of Gasoline Hoarders. One of my friends bought 50 five-gallon cans, filled them with gasoline, and took them to Houston to hand out to people running rescue boats. You can’t put a price tag on that kind of altruism. The way doing good in the world makes you feel is priceless. And this week, the long lines in Florida were a matter of timing rather than hoarding.
Now that’s just the beginning. Think about some of the things you do in your real estate redevelopment work or other job. Is there some that would actually be more cost effective done by someone other than you? I bet there is! Sure, I can build a kitchen cabinet, but professionals can sure do it faster and more efficiently! And how much does it cost to build that cabinet if I miss out on a good deal while I’m doing it? My time is worth a lot more when I run my businesses than when I work in my businesses.
Every time you have to decide how to allocate your time, ask yourself three questions:
- How much does doing this myself save me?
- How much could doing this myself cost me?
- How much time will doing this myself cost me?—time I will never get back!
Keep track of these answers over time. Sooner or later, you’ll figure out just how much your time is worth. To you.