There was an interesting post on Lifehacker recently about when is it worth to haggle. They had all kinds of ideas on what was worth bargaining for and what was not, to which I say, nonsense! How can you make this kind of decision without knowing the value of your time?
My time is worth about $75 per hour. How do I know this? Because that’s about how much money I can make in an hour if I focus just on making money.
- This is based on my current consulting rate ($150 to $200 an hour)
- Take into account the amount of time it would take me to find consulting work
- Take into account the point of diminishing returns, which means I can’t literally spend 24 hours a day consulting
- Take into account the amount of time I need to spend on breaks, eating and so on
So if X time devoted to bargaining is going to net me Y money, I should see if X over Y is greater than $75/hour.
Examples
- If I need to bargain for 20 minutes in order to get a $2 discount, that’s clearly not worth it to me because I will be saving $6 per hour spent.
- If I need to bargain for 2 hours in order to get a $2000 discount on a new car, that’s clearly worth it because it translates into a rate of $1000 an hour.
Other Uses
This is also important when you evaluate services. For example, it would cost me around $400 a month to hire cleaners for my house. However, to keep my house clean to the point where I feel comfortable, it costs me 4 hours a month, or $300 of time. In other words, I shouldn’t hire cleaners and do the work myself.
Lesson learned, always figure out what your time is worth. It will allow you to make much better decisions on how to spend it.
