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Time and money are finite resources. They're reasonably easy to convert from one to the other. Some people value one more than the other. Some circumstances may warrant valuing one more than the other.

However, taking this into account, how do you work out what your time is worth? Is it possible to put this into a rational formula or is it all irrational and emotional? Say, you know a petrol station 15 minutes away where the price is cheaper and will save you $5. In this case, driving is worth $20 per hour to do the drive. Do you do the drive? Why or why not? Can you explain your decision in a rational manner?

Some people go "okay, well I get paid x per hour and that's how much my time is worth". So in the petrol example, if the person got paid more than $20 an hour, it would not be worth their while to drive the extra distance.

But there's many flaws with this logic. Firstly, it implies that time and money are completely transferable. That's not true. Unless the opportunity cost of the drive is literally you would be late for work, that 15 minutes is probably not going to be used to create $20 worth of utility. Most of us with an extra 15 minutes would probably just waste it.

The other thing is it makes our time incredibly valuable. Watching a movie costs like $40 - for someone on minimum wage. That's not including travel and ticket costs. You wouldn't expect many people on minimum wage wanting to pay $40 to see a movie. That to me seems like looking at their hourly wage isn't how most people value their time.

You can never know the unambiguous value of time because no liquid market exists where it is traded as a commodity. The best you can do is estimate. Given this, we can discuss the relative accuracy of different estimates and discuss how they can be improved.

Simply taking your annual wage, dividing by 2000 and getting an "hourly value" is a very rough, order of magnitude estimate. Most people cannot actually show up at their boss's house at 4 pm on a Sunday and declare they would rather spend 15 billable minutes working than drive to the gas station. Even for independent workers, clients may not be available to do business outside business hours. There are two exceptions:

• Contract-based work where one has substantial freedom in deciding when to actually complete the work. For example, a software engineer employed on an hourly basis may choose to spend Sunday afternoon working instead of driving to the gas station, which will allow him to deliver ahead of the deadline. He will then complete the contract earlier than expected, and will be able to take a new contract sooner, resulting in higher income. This is only possible if you can choose your hours and you are not already working as much as you can physically handle (few people can work every waking hour).


• On-demand hiring such as Uber or TaskRabbit. In this case however, it is worth considering that the market rate of your hour is not stable with respect to time of day, time of week and so on. So the calculation becomes complicated.

I think generally the idea is that you will have f hours of free time, c hours of chores and l hours of leisure activities. If c+l>f, then at some point you will have to increase f by reducing work time (whether by unpaid leave, or being forced to switch to a less demanding job with lower pay). The lost income from increasing f is balanced against the money saved via c. This is a fair approach to accounting when you have very illiquid time, but it only works if you stick to a policy consistently over the long term. If you calculate the value of your time in a frivolous or ad-hoc manner while also being employed on a schedule, the result is probably that you will not be actually using your time or money in a rational way.

In one sense, we cannot really gain or lose time by converting with money. We all have 24 hours per day and no amount of money can change that. It's all about how we use our time. And, rarely is time completely wasted. We have a wide variety of human needs and wants. A balanced life involves many things that have no immediate connection to money, such as sleep, exercise, relaxation, intellectual stimulation, and relationships with family and friends.

Extra time spent driving is not pure waste if we are reflecting on our priorities, listening to educational audio, or chatting with our kids -- things we'd want to do sometime anyway. Extra time spent walking is not pure waste if we benefit from the exercise. Extra time spent doing a home repair job rather than hiring someone is not pure waste if we are learning a useful skill and gaining self-confidence.

The effective cost of spending an hour on something is typically lower than a naive estimate, because of these factors -- essentially, the hour is going to be spent somehow, and humans are meant to be active, physically and mentally.

A job's hourly wage is not a good indicator of marginal value of time because, for one thing, most jobs do not have completely flexible hours/workload at the worker's discretion. An exception would be a contractor/freelancer job.

And if I do have the choice of working a hour less or more at a job at a given wage, the value of time depends a lot on how much I enjoy the job. If I hate the job and work it only because starvation is worse, the value of my leisure time is low. Almost any activity where I could earn something without suffering, or take steps toward getting a job I'd enjoy more, is worthwhile. If I love my job, the value of my leisure time is high. The job meets so many of my human needs that it's difficult to justify taking unpaid time away from it.

The ultimate purpose of earning and saving money is to cover current and future survival needs and then allow us to spend our time in the ways that bring us the most fulfillment.

Lastly, while 24 hours per day is a known constant, how many days we have is not. When it comes to decisions that can statistically lengthen or shorten our (healthy) lifespan, the stakes are higher. Time lost to an early death is the ultimate waste. So much of what fulfills us comes gratis along with those 24 hours per day (as the saying goes, the best things in life are free).

The value of clawing back days that would otherwise be spent in nothingness, or severe incapacitation, is very high. Though people may underestimate this when the marginal days are in the distant future, the value becomes overwhelmingly visible when the end is near. But even so, a person will not necessarily pay everything they have; especially for an older person looking back with satisfaction on a life well lived, the decision may be that the money would do more good in the hands of their loved ones.

You can easily estimate the value of your own leisure time. Just ask yourself how much you'd need to make per hour in order to take a second job :-)

Don't put a money value on leisure time at all. You work to get money, the time is a write off, the money is the focus. When you finish work, leisure is the focus, money should be the write off.

If you measure time as money, then in theory you cannot spend nothing. Going to the movies costs you 40 bucks that will require X hrs to replace. As many do not like the drudgery of work, they want to work as least as possible. Going to the movies will require you to work extra to make up the money loss. Money will automatically become more important than time.

Instead leisure time should be considered infinitely more valuable than money, so you spend the lowly money, to enhance any time you have at play.

Even if you just want to watch a movie at home for 2hr, it is fine. You WANT to do it, so that is more valuable than the potential money you could have earned at work. Sometimes we need this, but just want it. How much money is our health worth?

This all has to be part of a balanced lifestyle of course, no one can play all the time and not work.