Myth: You can either have free time or you can make lots of money. But not both.
Fact: Money buys time.
When I was a kid, I didn’t care about making a lot of money. I’d rather have the time, flexibility and freedom to enjoy my life, I thought.
In hindsight, I was buying into a popular myth: making money demands a time-crunched lifestyle.
How many people do you know who say, “My buddy earns six figures and he works 80-hour weeks; I’m content to earn next-to-nothing and enjoy a standard work week.”
That’s a poor comparison (no pun intended). The overworked six-figure earner is making a similar hourly wage as the mid-pay-grade 9-to-5′er.
Both suffer from the same problem: they’re stuck in an employee mindset. They have an “hourly wage” or “annual salary” mentality: both phrases associate time (hourly, annual) with income.
The myth that “rich” is synonymous with “too busy for friends/family/fun” is fed by the false assumption that people must trade their time for money.
But almost no one becomes rich by selling his or her time. In fact, the reverse is true: wealth lets us buy time, rather than sell it.
How Valuable is Each Day of Your Life?
Everyone trades money for time.
Do you live in a city with terrible public transportation? If your answer is yes, then you probably face the following dilemma:
You could ride the bus to work / the gym / the grocery store, but that would take 40 minutes, including waiting times and transfers. Or you could hop in your car and drive there in 10 minutes.
Maintaining a car is expensive as heck. But if you live in an area with slow public transit, you save hours each day by driving.
Your time – your life – is valuable. So you use money to buy time.
Let’s Get Nerdy
During college, my poorest of days, I packed dirty clothes into a backpack, walked several blocks to the Laundromat, and waited for two hours for the wash/dry cycle to run its course. Laundry consumed half an afternoon each week.
Money solved that problem. Now that I own a washer/dryer, I have an extra two hours a week.
In other words: I didn’t buy appliances. I bought time.
That purchase doesn’t make economic sense until the value of time is factored into the equation. What do I mean? Let’s get nerdy about numbers for a second:
A low-to-mid-range washer and dryer costs about $1,188 from Home Depot ($550 each plus tax) and lasts about 8 years, which means I’m paying $149 a year to own these appliances.
Operating these appliances costs approximately $132 a year, assuming two loads a week. ((3.5 kilowatt hours per load * 0.30 cents/kilowatt hour * 104 loads/year) + (0.22 cents in water costs/load * 104 loads/year)). That means I’m paying $281 annually for the convenience of owning these appliances.
One load of laundry at the nearest Laundromat costs $2 (one dollar to wash, one to dry). Running two loads per week costs $208 annually.
At two loads a week, it makes economic sense NOT to own a washer/dryer, until you take the value of time into account. I’ll gladly pay an extra $73 a year for the convenience of doing laundry at home.
I’ve wrung out this example, but it highlights how ordinary people use money to buy time. Middle-class people make this tradeoff. Wealth just allows us to do it more.
I’m Arbitraging My Laundry
Cynics love to criticize people for spending their time earning money, only to trade that money for time.
That would be a valid criticism if people were making a one-to-one trade. But most people buy time through a process known as “arbitrage.”
Arbitrage refers to the process of capitalizing on the price difference between two markets.
World travelers are savvy arbitragers: they capitalize on purchasing power disparities between nations. They earn money in dollars, euros or pounds sterling, but spend money in Laotian kip or Colombian pesos.
Economists call this “geographic arbitrage.” I call it “napping on a Thai beach for $10 a day.”
Buying time follows the same principal. We earn money at a rate of $20 or $40 or $60 or $80 per hour, and use that money to buy more hours at a lower rate.
Repeat this process often enough, and eventually you’ll buy your freedom. (This is precisely how I could afford to travel for two years.)
Have I Mentioned the Best Part? It’s Fun.
Arbitrage has a second advantage: it’s fun.
As I mentioned in an earlier post, I’ve started outsourcing some of life’s drudgery. I quit troubleshooting this website myself. I pay someone to handle tech support, and I use the extra time to build relationships with other bloggers.
I also quit ripping out carpet and installing bathroom vanities. I outsource these tasks so I’m free to read books and tackle bigger writing projects.
Sure, you could make a case that I’m doing “higher-level work” that will result in a bigger payday down the road. That’s the logical way to justify these costs, and it’s valid.
But let’s be honest: building relationships and reading books is also a heckuva lot more fun than ripping out drywall. I’m not just doing higher-level work, I’m also leading a more awesome life.
The Bottom Line: “Time vs. money” is a false dichotomy. Wealth buys time.