I have a friend who managed to become quite wealthy without ever taking any major financial risks (starting a business, buying a bunch of real estate, etc.).
When I asked him how he'd managed to accumulate so much wealth over the years, he told me:
"I always factored my hourly rate into how I spent my time."
At any moment, you could be doing a number of things to make money, like:
- working
- freelancing
- even completing tasks on Mechanical Turk
You could also be doing things to save money, like:
- clipping coupons
- cooking your own meals
- shopping around for cheaper insurance
But in order to decide which of these are worth doing - and which aren't - you need to determine your hourly rate. This is, roughly speaking:
Your annual salary / 2,080 hours = your hourly rate
(Note that if you're salaried, chances are you work more than 40 hours a week. So your true hourly rate may be much lower than this.)
Here are some real life examples of how I've applied my friend's advice to make better decisions based on my hourly rate.
Every year, my bank sends me these coupons promising me $100 if I open a new savings account.
I know from experience that it only takes about 30 minutes to open the savings account, so I will effectively earn $200/hour. This is more than my hourly rate.
Since this is time/money profitable, every time I receive one of these coupons in mail, I know it's worth the time to go open a savings account.
On the other hand, I have to change my car's oil every three months.
I know from experience that it takes 30 minutes longer for me to change my own oil than it does for a mechanic to do so, and I only save $15 by doing it myself. So I effectively save about $30 an hour. This is less than my hourly rate.
Since this is not time/money profitable, I don't change my own oil anymore.
(Note that this a purely economic approach. If you enjoy changing your car's oil - or are allergic to bankers - you may weigh your hourly rate differently in these situations.)
By thinking in terms of your hourly rate, you can invest your time more wisely into profitable opportunities, avoid unprofitable ones, and hopefully end up as wealthy as my friend did.
If you follow me I won’t waste your time.
Read other answers by Quincy Larson on Quora:
- I have my web startup prototype built (just a MVP). I have $100k (my own) in funding. What will be the next step to take using this money to move forward with the product?
- Why am I so productive during the deadline rush? How can I be in this state most of the time?
- What is the most profitable business you could start with only $5,000?
from Quora http://ift.tt/2lmGgXy
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