Hourly Rate Principle

Benefit: Better time allocation


The "Hourly Rate Principle" is a decision-making criterion for managing your time, based on the value you generate in an hour of work. It suggests to use your actual hourly earnings as a reference point while deciding between alternative activities that would take different amounts of your time (e.g. commuting via taxi or bus).


  1. Determine your actual hourly earnings. This could be from your job or any income-generating activity you engage in.
  2. Realize and note down moments in your life when you have the option to choose an expensive alternative that will take T1 minutes over a cheap alternative that will take T2 > T1 minutes.
  3. Calculate the potential value of the time difference between the two options. For example, if you earn $100 per hour and one option saves you 30 minutes, that's a potential value of $50.
  4. Compare this potential value with the extra cost of the expensive alternative. If the cost is less than the potential value, the expensive alternative might be the better choice.
  5. Keep track of these decisions and outcomes over time. This can provide useful insights and help refine your decision-making process.
  6. Balance the monetary perspective with other non-monetary factors that matter to you, such as stress levels, health benefits, personal satisfaction, or environmental impact.

Example-1: Commuting

Say you earn $100 per hour at work. Your commute options are:

  1. a bus that takes 60 minutes
  2. or a taxi that takes 30 minutes.

If the taxi costs less than $50, choosing the taxi would be beneficial according to the Hourly Rate Principle. The 30 minutes saved could be spent working, generating a potential $50 (half your hourly rate). However, if the taxi costs more than $50, the bus is a better choice because the money saved outweighs the potential income from the time saved.

Example-2: Outsourcing Tasks

Suppose you have a side business, and you're spending a lot of time on administrative tasks that could be outsourced. If you make

  1. $100 per hour on your main work
  2. and you can hire a virtual assistant for $25 per hour to handle administrative tasks,

the Hourly Rate Principle would suggest outsourcing those tasks and dedicating that time to your main work where you create more value.

Example-3: Meal Preparation vs. Ordering Food

If meal preparation takes you two hours and you earn $100 per hour, that's effectively a $200 cost for preparing your meal (not including ingredients). If you can order a healthy and enjoyable meal for less than this amount, it might be worth considering, freeing your time to engage in work or activities that provide more value.

Example-4: DIY Home Repair vs. Hiring a Professional

If a home repair takes you six hours and you could have been working and earning $100 per hour, that's a $600 cost. If hiring a professional costs less than this, it could be more cost-effective and time-efficient to hire the professional.

Example-5: Self-learning vs. Taking a Course

Suppose you need to learn a new skill for work. If learning on your own takes 50 hours, that's a $5000 cost at an hourly rate of $100. If there's a course available that costs less and can significantly reduce the learning time, the Hourly Rate Principle suggests that taking the course could be a better investment.


The Hourly Rate Principle is a tool for decision-making. While it can guide you towards more efficient use of your time, it should be used in conjunction with other factors that contribute to your overall wellbeing.