Money Value of Time

Welcome back readers,

Those who are aware of financial terminology might have assumed that there is a mistake in the title, because the phrase “Time value of Money” is common in the field of finance. It deals with calculation of relative value of money at different time frames, simply putting it, Rs. 100/- in 2020 is neither same as Rs.100/- in 2010 nor same as it would be in 2030.

I am not writing on Time value of money; you will find a lot of reading material on the internet to know more about it. I am writing on “Money Value of Time” and thus, the title is right.

Money value of time means the value that one assigns to one’s own time. It is subjective and personal. We are free to think optimistic about value of our own time but it is essential to find a rational mean. Let’s look at a simple example – Say Mr. Arjun is a corporate trainer and quotes Rs.60,000/- for a day of training which lasts for about 6 hours. The figures enable us to immediately calculate the per hour rate and assume the same as time value which apparently would be Rs.10,000/- per hour. What if Arjun has to spend 2 days in travelling for the same single day training, will the quote remain same? Of course not! Hence, it is obvious that we are neglecting the hours spent for the training but not training itself, but when it comes to spending days, we become aware of the related extra hours rather days that has to be spent.

As I mentioned earlier, it is personal and subjective whether to calculate the value on daily basis or hourly basis. I would recommend it to be on hourly basis for self employed and daily basis for those in employment.

For a self-employed person, being aware of our own money value of time, we can easily decide upon material and immaterial matters. Aspects which we ourselves should look into and how much time it is worth and/or at what point we should withdraw.

Having unrealistic expectations either on lower or higher sides, both will lead to unfavorable outcomes. The problem of not evaluating the value of time as well as value of human effort is common in case of small business or the business which is in survival mode. At times it may be essential to overlook the value of time devoted, but it is always necessary to be aware of the same.

Spending time with family & friends is invaluable, going on vacations is more important than calculating the loss due to our absence in our business. I know every important matter cannot be valued on this basis, but it will give much needed clarity in many day-to-day matters and enable us to utilize our time more productively and decide on delegation to take advantage of leverage.

CA. Avinash Shukla

Email: caaashukla@gmail.com,

Mo: 9890184190

Comments

  1. Aviva trains INC Solapur StudentsNovember 17, 2020 at 11:54 PM

    Nicely articulated Avinashji reinforcing that time is money and underestimated even today

    ReplyDelete

Post a Comment

Popular posts from this blog

Financial Management by a Left-Brain Dominant Person

Dear Readers, I discussed about Right brain dominant person in last blog, I will write about peculiar characteristics of a Left-Brain Dominant persons and their strengths and weakness in relation to Financial Management. Left brain is responsible for logic, number crunching, data, language, observation as well as intra personal intelligence. Those with dominant left brain need a lot of data before deciding on anything, they have ability to understand & analyze large data, find patterns in numbers, they are good at calculations and establishing logical reasoning in almost anything. Such persons may lack intuition and may not be able to decide unless the numbers are favorable. Such people are too objective in decision making and tend to miss the subjective or emotional component of the same. It is highly recommended for left brain dominant people to be in Finance, engineering or data analytics. Can we conclude that such people are really good at Financial management? Apparently...
Read more

Cost – Price – Value

Welcome back readers, Today I am writing about three terms which rules the profitability of each business rather each transaction. Cost – Facts / reality It is the amount paid to acquire, produce or maintain anything, the point to note is “amount paid”, once the payment is done it becomes a fact. Even in complex scenarios like production the facts/costs can be ascertained, of course it may include setting up a complex process to accurately ascertain the exact and complete costs, but certainly it is possible. As most of you must be aware that costs have its own behavior , costs may be fully controllable, partially controllable or not controllable at all, some are apparent, some may not be visible easily and so on. When we refer to controllable costs, it is obvious it can be controlled before actually transacting. Once the transaction happens, it becomes fact/reality. Price – Negotiation It is the amount paid to acquire, produce or maintain anything. You would say, this is exac...
Read more