04 Apr Time is money: Smart spending decisions to buy back time
“Remember that time is money.” This is the simple advice that Benjamin Franklin offered to a young tradesman in 1748. I knew a Hedge Fund manager who unabashedly heeded this advice on opportunity costs. Fluent in the language of mega-deals (and strapped for time by travel and conference calls) he knew that his time commanded a hefty premium, so he identified a clever arbitrage: he paid someone to teach his kids how to ride a bike. Like the young tradesman, he understood that “Money is of a prolific generating nature” and by intelligently allocating his money it could “beget money, and its offspring can beget more, and so on.”
Yes, spend money to buy back time
The math don’t lie and the research is emphatically clear – whether it’s a meal-prep service or an in-home visit from your personal trainer buying time promotes happiness. Yet despite rising incomes and, yes, declining work hours, why do 80% of Americans feel “money rich, yet time poor?” Attributing this phenomenon to our always on culture is a gross oversimplification; time poverty cuts through economic theory, identity, career demands, relationships and the psychology of money. Sure, a simple exchange of money for time, like paying a high schooler to shovel your snowy driveway is a no-brainer; Yet we can agree that circumventing parental responsibilities under the auspices of “time is money” is not a good look. Where does one draw the line? How does one strike the right balance? Does the right balance even exist?
This two-part post will explore the research between time, money and happiness and then will evaluate ways in which the RadReads community uses money to buy back time. You can access the complete list of 28 tactics (in a Google Sheet) below:
Why we feel “time poor”
It’s tempting to just point our fingers towards economics. Commodity theory looks at the relationship between resources and scarcity:
When any resource is perceived as valuable, it is also perceived as scarce. So, the more we get paid for our time, the more we value it, and the more intensely we feel the loss of any moment.
Barnard economist (and author of Spending Time: The Most Valuable Resource) David Hamermesh goes a step further by reminding us of the paradox of human existence: money is theoretically infinite but time is not. The relative gap between the two drives our feelings of time scarcity. Society’s increase in income has greatly outpaced our life expectancies and the differential induces stress. Hamermesh told EconTalk’s Russ Roberts (emphasis mine):
Yeah, we’re living longer, but compared to 50, 60 years ago in [most rich countries] life expectancy has only gone up by about 15%. Where, the income that we have [even adjusted for inflation has] more than tripled. So, we have a lot more money, and only a little bit more time in which to spend it. I think that’s the main reason why we feel more rushed.
But we’re not purely rational agents. In fact, when it comes to money the limbic (i.e. emotional) part of our brain often overtakes our (logical) neocortex. This is why rich people are always scared of being broke and how the pernicious scarcity mindset makes us feel like we never have enough. Ashley Whillans, an assistant professor at Harvard Business School (and pre-eminent researcher on time and money) told The Cut’s Charlotte Cowles that people today have a diminished perception of their financial security which exacerbates feelings of “time scarcity:”
Most people don’t have the same jobs for 10 or 15 years like previous generations did, which leads to a feeling of financial insecurity. It isn’t about how financially secure you really are, or how much money you have in the bank, but how financially secure you feel that predicts whether you are willing to give up time to have more money.
The idle rich?
Is it possible that our pursuit for status makes us feel “time poor?” Think about your response to the question: How are you? If you’re answer involved the word “busy” you’re in the majority. (American’s notably eschew the typical European response of “I’m fine”). Hamermesh believes that being busy is newfound status marker used by the professional elite to convey “moral superiority.” Ironically, this is a marked departure from how the “idle rich” historically spent their time “going to the Ascot to watch horses or to the salon.”
Three tiers of buying back time
I surveyed our community of 16,000 RadReaders spanning executives, entrepreneurs and creatives to identify ways in which they spent money to buy back time. The results were clustered in five categories: Home, Family, Self-Care, Finances, Commuting, Work, and Travel. I then loosely categorized the activities by price point (using a big urban center like NYC or LA as the baseline).
Whillans’ research suggests that spending as little as $40 to buy back time can meaningfully boost our happiness. When it comes to house-related tasks, this $40 can go a long way. Most people can afford this, especially considering that in 2017 Americans spent on average $1,110 a year on coffee.
This category included expenditures that were in the thousand dollars. They often involved paying experts (researchers and virtual assistants) to work on your behalf and some of the travel tips (like shipping your luggage) were particularly impactful for those with children. (And whoever said laser hair removal, brilliant!)
But this price point is accompanied by an additional friction, which shows the limits of using money to buy back time. Many of these activities (whether it’s hiring a landscaper or using concierge services) require you to act as a project manager – thus by definition, boosting the time commitment and possibly the related stress.
And finally, we have the big ticket items. Understandably, many of these are out of reach for those outside of the 1%. Yet they still provide clues about the trade-offs between money, time and happiness.
What lessons can we learn?
We all know about the albatross of commuting.One of the most common responses (across age groups) was paying a premium to live closer to your place of work. However, Whillans’ research demonstrated that even as wealth increased, “wealthier people spend more time engaging in stressful activities, such as commuting.” One possible interpretation is the American obsession with large homes. Despite shrinking family sizes, the median square footage of our housing stock continues to increase.
Not only does this push people further away from the urban centers where most jobs can be found, it misses an opportunity to “save money to save time.” There’s a price (both time and money) to this lifestyle creep in the form of cleaning, maintenance, and furnishing a larger residence.
One way to tap into this trade-off is to capture the time savings that can come from job flexibility. Whillans surveyed 42,721 employee responses from Glassdoor and found that “non-cash benefits such as social experiences and the opportunity to take leaves had a greater impact on job satisfaction than money did.” One analysis showed:
All else being equal, benefits such as generous parental leaves, flextime, and sick days had a larger effect on job satisfaction than receiving an additional $60,000 in annual salary(on top of an average salary of $48,000) did. These results held even after controlling for income, age, gender, education, industry, employer type, firm size, and firm revenue.
The most powerful lever: How much you work
In addition to long commutes and bigger homes, the biggest question is how much to work. The answer combines ambition, identity and social status. And Whillans reminds us that hard choices about careers – such as not taking that partner promotion – are the most powerful levers for buying back time. One RadReader shared her own experience about opting-out of the workforce:
When should you stop outsourcing?
This brings us full circle to the dude who paid someone to teach his kids to ride a bike. There’s a limit to how much one can outsource. Hamermesh estimates that even the wealthiest can only outsource “4 hours” of their rote tasks per day. He flippantly adds:
You can’t pay somebody to sleep for you. You can’t pay somebody to eat for you. You can’t pay somebody to go to the theater for you, or to read Proust for you.
The New York Times’ Carl Richards (better known as The Sketch Guy) believes that it’s yet “another example of people with too much money not stopping to consider how much satisfaction can come from doing basic things well yourself.”
After all, how we spend our time literally sums up to the life we live – the same cannot be said for financial expenditures. If we see beauty in the mundaneness of everyday life, maybe we don’t need to buy back anything. Maybe we’ll realize that we have all that we need.
My digital workshop – The Fulfilling Path to Financial Independence – on May 2 will review the extensive research on time and money and how it applies to your career.