One of the most important concepts in economics is opportunity cost. When you think of the cost of an activity (e.g., going to a movie), you need to consider not just how much you pay (gas, price of ticket) but also the value of what you could have done in that time (walking your dog).
Putting a price on time is a tricky matter. In a work context, economists use compensation as the measure. But what is your time outside of work worth? Clearly it must be worth more than you can earn in that time, otherwise you would be working!
A recent WSJ piece provides some useful guidance on how to price your free time. Examples: do you take the flight with the three hour layover to save $100? Do you do your own laundry or take it to the cleaners? All of these questions end up revolving on how much you value your own time.
There is now a calculator to help you value your time at a website called Clearer Thinking. I found out that my own answers were very inconsistent. I wanted a lot more money to work an extra hour per week than I was willing to pay for a machine that would save me an hour each week. I am guessing I am not alone in that regard. Try it out! Especially good for new MBA students who will need to be examining the value of every spare hour once school starts.
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