Understanding how to get the most out of your time starts with knowing—in exact terms—what your time is worth.

At some level, we all have an internal gauge for how much our time is worth.

On extreme ends of the spectrum, it is easy to know if a task is worth your time. As you move toward the middle of the time-value spectrum, however, it becomes less clear if a particular task is worth your time or not. And this is the problem: most of life is lived in the gray zone of the time-value spectrum.

Everyone has an hourly value, but very few people can actually tell you what that number is.

Unless you are getting paid your hourly rate every hour of every day, then the value of your time is not the same as your hourly rate.”

## Part I: Realized Income Methods

We will start by using Realized Income Methods to calculate the value of your time. These calculations are based only on income you have actually received (or realized), hence the name Realized Income Methods.

To get started, you need two numbers:

- The amount of time you spend to earn money.
- The amount of money you earn during that time.

## Step 1: How to Track Your Time

The first step is to measure the total amount of time you invest to earn money, not just the hours you are physically at work.

If you’re unsure how much time you spend working, I recommend using 2,500 hours per year as a starting point.

## Step 2: How to Track How Much Money You Earn

The number we are trying to calculate is your take-home pay. This is the amount of money you have left after deducting taxes.

If you are also an entrepreneur, I recommend using yearly earnings for these calculations because small business income can fluctuate (sometimes drastically) from month to month. Looking at your earnings over a longer time period helps to smooth out these inconsistencies and provide a more realistic value of your time.

## Step 3: Calculate the Value of Your Time

divide your total money earned (Step 2) by your total time spent (Step 1)

although we might know what we would charge per hour, we rarely calculate how much time goes into earning money outside of our working hours. By accounting for all of the time we invest to earn money, we get a clearer picture of what our time is actually worth—and it is usually much less than what you would charge for an hour of work on your job.

## References

Clear, J. (2015, December 22). The Value of Time: How Much is Your Time Really Worth? *James Clear*. https://jamesclear.com/value-of-time