Trading your time for money is an integral part of modern life. You have the ability to work for an employer and receive funds to buy food, shelter, and luxuries from them. The economics of time and money, and how you build leverage with your skills and expertise, are intertwined throughout all stages of our lives.
I don’t believe jobs are going away any time soon. But just because you have a job doesn’t mean you can afford to not think about how you make money.
It’s possible to unlock ways to earn more money through efficient usage of your time. You can increase your wealth accumulation by increasing the hourly value of your time. There are even ways to earn money without time-based inputs.
But what are you working for in the first place? What exactly is it that your 9-5 is pushing you towards? What life are you working towards and living right now by committing to full time work?
Welcome to the first instalment in the Work Series. This series is focused on increasing the value of your time and reframing how you approach work.
After all, the ultimate goal is to Choose Work You Love.
Time Is Money
Everyone has heard the old saying that “time is money”. It’s often used by people who value their time based on how much money they can earn from their job. You don’t have time to waste, because you need to spend that time earning money.
There is a truth to this early on in your life. You may have graduated with debt that needs to be repaid. Or you may have accumulated debt from a car purchase or a credit card.
There are many families struggling with negative net worth – the bottom 25% of US families had a negative net worth in 2022.1 The same data also shows a lower net worth balance for younger families in general.
Younger people simply haven’t had time to work and accumulate wealth. To them, time is money. If you aren’t working, you aren’t building the wealth you need to support yourself in the future.
But wealth isn’t just about money.
Your early years shouldn’t be squandered in ways that waste your time. But that doesn’t mean that time not spent earning money is time wasted.
Using Time Wisely
I’ve written before about the concept that everything you do is an investment. Investing your money into income-producing assets helps to fund your future. But investing in experiences can pay other dividends that reward you throughout your life.
Spending your time wisely is how you become a well-rounded person. You can do this whether you’re at a job or not. In fact, Gen-Z seem to be prioritising this aspect of life, rather than grinding away at a job. Investing in yourself and content creation via the internet has become an opportunity for many who are looking for an alternative to the traditional 9-5.
In my article about modern day slavery, I described money as “crystallised human effort”. On the surface, money allows you to buy the things you want. In reality, it frees you from the obligation to have to make, or do, or find those things yourself.
Money is how you transform your efforts into unrelated outputs. The ideal scenario is therefore to acquire money in a sustainable, easy, fun, or fast method. You then use that money to acquire the things you want at a lower rate than what it took you to acquire the money.2
By doing this, you create profit in the form of time.
Money Is Time
Time is a resource you cannot buy. Once time passes, it is gone forever.
If you are able to create a method by which you can trade your time for money at a higher rate than what you spend that money towards, you can profit both in time and money. This doesn’t always play out in practice, though.
Here’s an example. Say you earn $40 an hour (after tax) at your job, and you have the option to hire a cleaner to clean your home for 2 hours, at $30 per hour. If it takes you 3 hours to clean your home, there is a cost of $120 worth of your time necessary to clean the home. You could theoretically spend $60 to achieve a $120 output – a clean home. On paper, you profit 2 hours of time and $60. But there are a few caveats to this.
Firstly, you may not value your time outside of your job as the same while working. If you work full time, you likely can’t choose to work more hours and turn that into more pay. The hours spent at home are effectively “$0 hours” in monetary terms, so you may want to spend them productively by doing the cleaning yourself. In addition, you may enjoy engaging in specific hobbies (like audiobooks or podcasts) while doing it yourself.
The tasks you choose to outsource is up to you (outsourcing none also makes sense). But knowing the value of your time and your money is essential.
You must understand how to efficiently allocate money. Early on, money should be used to stabilise your financial situation. Once you have enough money (i.e. you have an emergency fund and can cover ongoing costs), the money itself stops being the primary objective. You can begin to focus on what the money affords you.
Freedom.
Why a High Hourly Rate Matters
As I mentioned earlier, increasing the amount of money you earn is essential to progress. Your hourly income expedites every goal in every sphere of personal finance, provided you don’t continue to overspend.
Building the means to increase your hourly wage will stave off most impacts of the rising cost of living. There is a limit to how much cash you can free up simply by reducing your expenses. At a certain point, you will have to increase your income. This is non-negotiable.
The earlier you do this, the easier every step going forward becomes. Each job you work will ideally have a higher hourly wage, giving you skills and experience that enable you to work jobs with more impact.
If you gain the skills to work jobs with higher impact, you have the leverage to command a higher rate of pay for that work.
What Is Leverage?
Leverage has a few meanings, and two are relevant to this discussion. Leverage is both the strategic advantage & power to act effectively in the world, as well as the ability to amplify future investment gains by borrowing capital.
Strategic advantage comes from creating an understanding of the world, and attempting to navigate it in an optimal manner. Your strategic advantage can come from possessing specific knowledge or skills, or being able to perform an action quicker or better than others. Think of this as the things you possess that allow you to work more efficiently than others (and why you deserve to be paid more for your efforts).
In a financial context, leverage refers to investing a sum of money onto an investment platform and multiplying the value of your investment by the leverage offered. For example, a $1000 investment with 2x leverage will result in a $2000 portfolio. You have essentially borrowed $1000 of capital from your broker. This is one of the rare methods of investing where you can lose more than what you invested. If the investment goes to $0, you’re on the hook for the full $2000 – not just your $1000.3
Considering that everything you do is an investment, you can increase your leverage by performing actions that expand your impact beyond what you have physically done yourself. Think of this as the means by which your efforts are distributed to the benefactors of your effort.
Leverage In Action
An example of leverage in action is this article. I could have said the words in this article to someone in conversation. The impact and reach of my words is limited to the person I spoke to. With an online article (or other online media), multiple people can read the article, and each can be impacted by what I have written. This makes my overall impact on the world larger, and increases the leverage on my time.
I used my specific knowledge (and time) to write the article, and the means by which I have shared the information allows me a much more efficient distribution of that information.
Finding ways to achieve outputs as efficiently as possible, while allowing as many people as possible to benefit from those outputs, is how you maximise the impact and value of your time.
Controlling Your Hourly Rate
Finding a way to increase your income is essential if you want to work in a way that brings you joy. You cannot expect to do good work if you don’t control the type or value of the work you do. Building skills allows you to command an hourly rate based on knowing the value of the work you perform.
Some jobs have a lack of growth opportunities, where the processes used are only relevant in the context of that business. Other jobs are so heavily regulated (e.g. nursing, accounting, teaching, construction, and other roles that are often tied to unions) that either the rate of pay or ability to access the job is restricted and outside your control.4
This is why many people feel trapped in their job. The skills they’ve relied on to get a “good” job didn’t lead to a job that was “good enough”.
You need to be able to take the learnings of your job, and apply them to your life or to other jobs. By doing this, you can take experiences and turn them into novel solutions for challenges presented in your future.
Not only is this useful for you to develop skills that make you a more well-rounded person, but it often rewards you financially, too.
I used this approach to double my salary in five years.
Closing
Jobs are fantastic vehicles to earn money, grow your skills, and grow your network. And ideally, each job you work should tick at least one of these three boxes:5
- Learning new skills & knowledge
- Earning a high salary
- Building your network
You may love the work you do. It’s ideal if you do. But if it isn’t serving your financial, learning, or networking needs, then you may need to consider alternatives to that job. If you don’t, you risk losing the ability to earn a competitive wage, limiting opportunities in the future.
Increasing the hourly rate of your time is essential. It underpins every aspect of Saving, Investing, and Choosing Work You Love, and is a necessary part of living a life you love.
Thank you for reading.
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- https://www.federalreserve.gov/publications/files/scf23.pdf , table 2, “Percentile of net worth, Less than 25, Mean net worth, 2022”. ↩︎
- The total costs of acquiring money – in time, health, effort, stress – should not be understated. ↩︎
- While true in principle, your broker will liquidate you to protect themselves before that happens. ↩︎
- Often both. ↩︎
- In addition to making you happy. ↩︎