I’m certain that time is money as I get older (and money is time). Money is typically taught to be a “store of value.” But what exactly does “store of value” mean? It’s a collection of previous efforts that may be used for future purchases. Money is essentially a time bank. (Or, at the very least, a reserve of productive time.)
After making my case, I’ll accept that time and money aren’t precisely the same thing. Sure, money is time storage, but the two conceptions vary in some ways.
Time, for example, is linear. It is irretrievable after one minute or one day. You can’t get it back. If you squander one hour, it’s gone for good. However, you can always make another dollar if you waste (or lose) a dollar. Time passes, but money has no “direction.”
Even more crucial, time is limited. Money is not a factor. In theory, your income and wealth have no upper limit. On the other hand, each of us has around seventy (perhaps eighty) years on our planet. You could live for 1000 months if you’re lucky. Only a handful of us will live for 5000 weeks. The vast majority of us will live between 25,000 and 30,000 days.
- Work and Wealth
When I finally understood the link between money and time, my first big realization was that prosperity isn’t always an abundance of money — it’s also an abundance of time. Or possible time. When you have a lot of money, you also have a lot of time to do anything you want with.
Indeed, this appears to be one of the key reasons why the Financial Independence movement is gaining traction. Financial independence – having accumulated enough money that you are no longer forced to work for money – guarantees that you may spend your time any way you want. When I go to FI events, I ask them what inspires them. Almost everyone says something along the lines of, “I want to be able to do what I want when I want.”
One of the great ironies of modern life, in my opinion, is that so many people spend so much time accumulating so much Stuff — yet never manage to save anything for the future. Why is this the case?
Thomas J. Elpel discusses the difficult link between our ever-increasing standard of living and the labour necessary to obtain that level of comfort in his article on Wealth and Work.
You are ultimately substantially wealthier than before, but you are also working more. Nobody said you had to pay for oil lamps and oil, or books and clean clothing, but you’d feel deprived if you didn’t, so you work a bit more to provide for your family with all the beautiful things that life has to offer.
It’s a catch-22 situation. You work more to earn more money so you can purchase more stuff…but since you have so much stuff, you need more money, which means you have to work harder. It’s almost as though the more material possessions you have, the less time you have.
How do you break free from this vicious cycle? There are two options.
- Save Money and Live More
The first (and most apparent) strategy to get off the hedonic treadmill is to actively cut your expenditure down below the amount required to sustain your lifestyle. Frugality, as I’ve already argued at getting Rich Slowly, buys freedom.
It takes less time to fund your lifestyle when you lower it. If you make $50,000 per year take home it and spend it all, you leave no room for mistakes. You’re in a jam if something goes wrong — you lose your job and inflation skyrockets. You also don’t allow yourself the opportunity to embrace unforeseen possibilities!
However, lowering your annual expenditure to $40,000 gives you more possibilities. You have the option of continuing to earn $50,000 and saving the difference (creating a time bank) or working less today (taking the advantage of the time savings immediately).
Spending less also helps you save for the future. Learning to live with a “lesser” lifestyle allows you to save less for retirement. If you spend $50,000 each year, for example, you will need around $1.25 million in savings before you can retire. However, lowering your expenditure to $40,000 each year reduces your aim to roughly $1 million.
It takes far less effort to support a $40,000-per-year lifestyle than it does to sustain a $50,000-per-year lifestyle. And if you’re lucky enough to be able to cut your lifestyle from, say, $120,000 per year to $30,000 per year, you can drastically reduce the amount of time you spend working.
- Purchasing Time Increases Happiness
But what if you enjoy your current way of life and don’t want to change it? What if you are unable to reduce your spending? There is still a method to exploit the link between time and money to boost your happiness.
Last year, the journal Proceedings of the National Academy of Sciences published intriguing research claiming that purchasing time enhances pleasure. The authors ran a series of experiments to investigate the relationship between time, money, and happiness. What was their conclusion?
Income increases have had an unforeseen consequence throughout the world: a growing sense of time scarcity. We show that spending money to buy time can provide a buffer against time famine, encouraging happiness.
Using large, varied samples, we show that people who spend money on time-saving services are happier in life. A field experiment shows that working individuals are happier after spending money on a timesaving buy rather than a material purchase.
These findings show that using money to buy time can shield people from the negative impacts of time pressure on life’s happiness.
If you want to improve your quality of life, instead of spending money on things, use it to ease “time pressure.” Instead of a flashy automobile, invest in time-saving technology. Hire a cleaner or a lawn-care service. Consider using a meal-delivery service.
“We noticed a greater connection between buying time and life satisfaction among less-affluent persons,” the scientists wrote.
- Finding a Happy Medium
My main lesson from considering the link between time and money is that when you spend less, you can work less. Frugality buys time. On a deeper level, though, frugality buys freedom – financial freedom, freedom from anxiety, and freedom to use your time as you see fit.
When you approach time as money (and money as time), you may make better decisions about how to spend your money and your time. You can determine when it makes sense to “outsource” particular duties once you know how much your time is worth.
The Bottom Line
Finally, there must be a balance, and that balance is unique to each of us. You must evaluate how much time you are willing to spend on current comfort against how much time you want to save for the future. I feel there is no single correct answer to this quandary.
So, how about you? What is your perspective on the link between time, money, and happiness? Do you have any examples of purchasing time in your own life to increase your happiness? What is your current state of equilibrium, and how did you get there?