The relationship between time, money, and happiness

The relationship between time, money, and happiness

The older I get, the more I'm convinced that time is money (and money is time). We're commonly taught that money is a “store of value”. But what does “store of value” actually mean? It's a repository of past effort that can be applied to future purchases. Really, money is a store of time. (Well, a store of productive time, anyhow.)

Now, having made this argument, I'll admit that time and money aren't exactly the same thing. Money is a store of time, sure, but the two concepts have some differences too.

For instance, time is linear. After one minute or one day has passed, it's irretrievable. You cannot reclaim it. If you waste an hour, it's gone forever. If you waste (or lose) a dollar, however, it's always possible to earn another dollar. Time marches forward but money has no “direction”.

More importantly, time is finite. Money is not. Theoretically, your income and wealth have no upper bound. On the other hand, each of us has about seventy (maybe eighty) years on this earth. If you're lucky, you'll live for 1000 months. Only a very few of us will live 5000 weeks. Most of us will live between 25,000 and 30,000 days.

I've always loved this representation of a “life in weeks” of a typical American from the blog Wait But Why:

Your Life in Weeks

If you allow yourself to conduct a thought experiment in which time and money are interchangeable, you can reach some startling conclusions.

Wealth and Work

When I began to fully grasp the relationship between money and time, my first big insight was that wealth isn't necessarily an abundance of money — it's an abundance of time. Or potential time. When you accumulate a lot of money, you actually accumulate a large store of time to use however you please.

And, in fact, this seems to be one of the primary reasons the Financial Independence movement is gaining popularity. Financial Independence — having saved enough that you're no longer required to work for money — provides the promise that you can use your time in whichever way you choose. When I attend FI gatherings, I ask folks what motivates them. Almost everyone offers some variation on the theme: “I want to be able to do what I want, when I want.”

To me, one of the huge ironies of modern society is that so many people spend so much time to accumulate so much Stuff — yet never manage to set aside anything for the future. Why is this?

In an article on Wealth and Work, Thomas J. Elpel explores the complicated relationship between our ever-increasing standard of living and the effort required to achieve that level of comfort.

Ultimately you are significantly wealthier than before, but you are also working harder too. Nobody said you had to pay for oil lamps and oil or books and freshly laundered clothes, but you would feel deprived if you didn't, so you work a little harder to give your family all the good things that life has to offer.

Increasing Wealth & Decreasing Costs

It's a catch-22. You work more to have more money to buy more Stuff…but because you have so much Stuff, you need more money, which means you have to work more. It's almost as if the more physical things you possess, the less time you have.

How do you escape this vicious cycle? There are two ways, actually.

Spend Less, Live More

The first (most obvious) way to remove yourself from this hedonic treadmill is to deliberately reduce your spending so that it's below the level needed to maintain your lifestyle. As I've argued before at Get Rich Slowly, frugality buys freedom.

When you reduce your lifestyle, it takes less time to fund it. If you're earning $50,000 per year take-home and spending all $50,000, you leave no margin for error. If something goes wrong — you lose your job, inflation skyrockets — you're in a bind. Plus, you don't give yourself a chance to seize unexpected opportunities!

But if you reduce your spending to $40,000 per year, you give yourself options. You can choose to continue earning $50,000 and bank the difference (building a store of time) or you can choose to work less today (taking the advantage of the time savings immediately).

Spending less also helps fund your future. Learning to live with a “lesser” lifestyle means you don't need to save as much for retirement. If you spend $50,000 per year, for example, then you need roughly $1.25 million saved before you can retire. But if you decrease spending to $40,000 per year, your target drops to around $1 million.

It takes much less work to fund an ongoing lifestyle of $40,000 per year than it does to maintain a lifestyle that costs $50,000 per year. And if you're in the fortunate position where you can slash your lifestyle from, say, $120,000 per year to $30,000 per year, you can really reduce the time you spend working.

Buying Time Promotes Happiness

But what if you like your lifestyle and don't want to cut back? Or what if you're not able to cut back? There's still a way to use the relationship between time and money to increase your sense of well-being.

Last year, the Proceedings of the National Academy of Sciences journal published an interesting article that declared buying time promotes happiness. The authors conducted a series of experimental studies to look at the link between time, money, and happiness. Their conclusion?

Around the world, increases in wealth have produced an unintended consequence: a rising sense of time scarcity. We provide evidence that using money to buy time can provide a buffer against this time famine, thereby promoting happiness.

Using large, diverse samples…we show that individuals who spend money on time-saving services report greater life satisfaction. A field experiment provides causal evidence that working adults report greater happiness after spending money on a timesaving purchase than on a material purchase.

Together, these results suggest that using money to buy time can protect people from the detrimental effects of time pressure on life satisfaction.

If you want to improve your quality of life, don't use your money to buy Stuff, use it to relieve “time pressure”. Instead of buying a fancy car, purchase time-saving devices. Hire a housekeeper or a yard-maintenance company. Maybe consider a meal-delivery service.

Interestingly, the effects of “buying time” have the greatest impact on folks who have less money: “We observed a stronger relationship between buying time and life satisfaction among less-affluent individuals,” the authors write.

Finding Balance

My biggest takeaway from thinking about the relationship between time and money is this: When you spend less, you can work less. In a very real way, frugality buys time. But on a deeper level, frugality buys freedom — financial freedom, freedom from worry, freedom to spend your time however you choose.

When you treat time as money (and money as time), you can better evaluate how to allocate your dollars and your hours. When you know how much your time is worth, you can decide when it makes sense to “outsource” specific jobs.

Ultimately, there's a balance to be had, and that balance is different for each of us. You have to decide how much time you're willing to spend on present comfort and how much time you want to bank for the future. I believe there's no single right answer to this dilemma.

What about you? How do you view the relationship between time, money, and happiness? Do you have some examples from your own life of buying time in order to improve your happiness? What balance have you arrived at — and how did you get there?

More about...Economics

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Evan
Evan
2 years ago

This is exactly what people miss! It’s not about money necessarily, it’s about time and freedom. I was having an interesting conversation last night, semi-related, about how there’s research showing that people perceive time more slowly if they have more variety in their life. If perception is reality, then that means you can, in a way, make your “life” longer by bringing more variety into your day to day activities. This can be pretty hard to do if you are working long hours. Therefore, as you say, frugality leads to more time freedom. More time freedom means you can set… Read more »

late bloomers money
late bloomers money
2 years ago

Great stuff JD, I agree, finding the balance is key. Most of us work hard hard now and think that we can sacrifice our time now so we can have better life later on. But I don’t want to look back 20 years later and realize all I’ve done with my time was work!

Jason@WinningPersonalFinance
2 years ago

I don’t know if there is any money challenge that’s more difficult than finding that balance between time, money and stuff. We can all go live in the woods and retire today. Most of us would not be happier doing so. Hiring a cleaning person would set me back on my path to FIRE. But if I do, my house would be cleaner than ever and I’d have that time back to do what I want today. Maybe it’s worth working for an extra three months to never have to clean again. Making the decisions may be hard but they… Read more »

JeffreyTurner
JeffreyTurner
2 years ago

I have always regarded money as a claim on labor, which is essentially the same thing, however by framing it as a claim on time perhaps that allows us to refocus on how we use our time, rather than on how we live on passive income. My main concern with the Fire community is that it is difficult for people to let go and give accumulating money, in order to enjoy the time we actually have. I fear that saving money could in itself become an addiction that devours our lives. It would be good to see how many people… Read more »

Mary Jones
Mary Jones
2 years ago
Reply to  JeffreyTurner

RE: “…difficult for people to let go and give accumulating money, in order to enjoy the time we actually have. I fear that saving money could in itself become an addiction…” Indeed! My parents lived like paupers until the day they died (both >90 years old). Drove us crazy. They talked about going to Alaska, or having a new house built. But they never did. They had so many assets (more than $1M), they had to spend it away on assisted living an skilled nursing care. Left us 5 kids about 90K to divvy up. I wish they had spent… Read more »

James Donnel
James Donnel
2 years ago
Reply to  Mary Jones

Dear Mary… Did you spend a moment thinking past your statement? They saved $1M and had that to spend for their assisted living and care. What if they had spent that $1M on homes and cars and travel? Then YOU would be paying for their assisted living. You were left with $90K originally, but in this case you would have the debt of their estate “given” to you (health care debt is now part of their estate). You could have had them live with you at the end of their lives and relieved them of the burden of the cost… Read more »

Joseph Christman
Joseph Christman
2 years ago
Reply to  James Donnel

James, you speak from my soul. I feel as though Mary Jones is the type of person we despise because they allowed their parents, whom spent an entire lifetime saving, to slowly die in a nursing home so that she could not be inconvenienced by her parents. I believe that we should take care of those whom cared for us…and that is not something the rich can be inconvenienced with.

anon +40
anon +40
2 years ago

I buy time frequently, & it’s one of the main reasons I could never do that FIRE stuff. For example, I pay for food delivery after work bec. I hate to cook & don’t want to spend time doing that when I could be writing (my passion) or spending time w/family (my loves). I don’t buy a lot of things, I don’t have any debt, but I’m desperately short on time bec. my job, my family, & my hobbies make demands of me, so I’ll gladly use money to buy me more time NOW when I need it, not some… Read more »

FullTimeFinance
FullTimeFinance
2 years ago

In my opinion money is a tool. Time and enjoying it is a goal. Money is just a tool to facilitate that goal, and not even always correlated with it.

Freddy Ky
Freddy Ky
2 years ago

Money is a renewable resource. Time is not!

TNflash
TNflash
2 years ago
Reply to  Freddy Ky

Time can be extended by living a healthy life style and enjoying happiness.

S.G.
S.G.
2 years ago

I think the money problem is partially cultural. We have a culture that doesn’t pass on virtues like prudence, and we see that in how people interact with money. In many ways wealth is like being thin or well educated: it takes a sacrifice today to invest in your future and in each immediate present that can be a difficult decision to make, even if you have a solid philosiphical structure. If you don’t have that structure you have even more difficult.

Joe
Joe
2 years ago

I’m in the spend less camp. Now I have more control of my time.
Buying time seems very inefficient to me. Labor is too expensive here in the US.

Buying time in cheaper countries is much more affordable. I’d like to try that someday.

Wealthy Content
Wealthy Content
2 years ago

Love it, great post! It sounds so basic but you have to catch yourself as your brain seems to be wired differently based on the inputs received over its lifetime.

Dan @ Stocktrades
Dan @ Stocktrades
2 years ago

Awesome post JD. I’m currently working towards selling my second home, taking the profits made and moving back into my original home, which I have been renting out for the better part of 5 years. This will drastically reduce my living expenses(I will literaly only have my mortgage and basic necessities like food utilities and insurance) to the point where I can actually quit my job and work full time on my website. The satisfaction and hapiness that this brings me is far more than anything I have felt from getting paid 6 figures at the job I have now.… Read more »

Jon
Jon
1 month ago

“living life on my own schedule” well ok you’re no longer 9am to 5pm but you still have to spend time with people that pay you, be it at 7am or at 9pm, which timing might most likely depend on those customers so it might be just a matter of semantics “live life on my own schedule”…. when you still serve whatever customers for whatever reasons you are NOT (yet?) on your own schedule!

Noonan
Noonan
2 years ago

Great post about a very important topic JD! A severe job-induced “time famine” motivated me to FIRE in 2008 at age 48. Since then, I’ve been much happier. I attribute this to the fact that i’ve gained almost total control over my schedule. No bosses are telling me what to do or when to do it—except for the boss i happen to live with. 🙂 At its essence, a decision to FIRE reflects a personal choice that additional time is a lot more important than additional money. A growing body of behavioral science suggests that consistently choosing time over money… Read more »

Andy
Andy
2 years ago

Couldn’t agree more. It is unfortunate how many people work themselves to extremes for an endless cycle of worry and more stuff. The only way to really get out of it is to find a point of contentment, knowing that more is not always better.

Jon
Jon
1 month ago
Reply to  Andy

you can’t really get out of it while watching continuous bombardment of advertisements that tell you that you need this and that and the other to be happy… people in sales and in marketing should take a break, stop creating fancy false images of happiness and stop selling s*** that no one needs!

Dick Peters
Dick Peters
2 years ago

Some interesting posts. I am living proof of what you say. Am 88, retired at 59 to better care for my wife (now married 67 yrs.) and family. Walked away from a lot of money by retiring early but have had a very meaningful life. Took much lower pension and stock options by retiring early but have gotten along just fine, with even second home until recently. Have had a rewarding retirement with growing family, serving church and non-profits. Happiness is much more important than even time. It is great to have both time and money now, which we won’t… Read more »

Jon
Jon
1 month ago
Reply to  Dick Peters

you’re one of the few that could do that. unfortunately. for many reasons, one of the few.

TNflash
TNflash
2 years ago

Good article JD. It’s very pertinent for our time and I am in full agreement with you. I spent my whole life living below my means so I could afford to “buy back my time”. I passed up buying the latest trendy stuff and always tried to buy quality made things that I needed and things that would appreciate instead of depreciating in value. I accomplished my goal at 55 and retired early. It is a wonderful feeling. Anyone that wants to experience a high degree of personal freedom and happiness should try it.

jmabta
jmabta
2 years ago

I found it interesting and passed it along to my kids but I thing it misses the value of work. Although we all work for money. Our work is invaluable to society. We help others if we are doing heart transplants or selling used cars. Jobs and work have intrinsic value and our goal should not be to just stop working

Jon
Jon
1 month ago
Reply to  jmabta

yes please, I really agree with the fact that work/activity is needed by normal persons, can’t just sit on the couch watching tv all day… but can they sell used cars ethically, without trying to rip off the other people?

Ed Herdman
Ed Herdman
2 years ago

I’ve just moved, and looking through those piles of Stuff I see a lot of reminders of the path history took to get here. In the 20th century (especially in the postwar period, up to roughly the 1970s according to some) technology and low wage inequality were improving peoples’ lives rapidly. Stuff made of steel and driven by oil or electricity were hugely freeing, and so was plastic too (and it’s still true). The eventual adoption of Pullman’s train couplings meant that fewer people were getting cut in half working on the rails. During the Depression, many executives rallied a… Read more »

Joseph Christman
Joseph Christman
2 years ago
Reply to  Ed Herdman

Everyone needs to seriously consider reading the responses to articles like this, and ask themselves “Am I someone who has benefited from inequality?” Ed seems to know a lot more about “society” as a whole and how wealth shapes EVERY aspect of life, that which includes the happiness of others. The real issue we are faced with is how long will it take for the middle class to deplete what they see as their “earned lifestyle.” Anyone here who suggests something as silly as a “meal delivery” service as a way to allow them more time to write is exactly… Read more »

Jon
Jon
1 month ago

Meanwhile people serving the system on top of which there is a Bezos or Zuckeberg or others like them hoarding all the billions and billions of dollars and resources for themselves and NOT for the benefit of other members of society might choose to no longer do that. If the company I work for would choose to invest its profit in ME and my co-workers and my community (at least local community) instead of a faceless mass of shareholders (ok, choose a nice face: Bezos) I would go there and work there and do my best there day in day… Read more »

Last edited 1 month ago by Jon
Claire
Claire
2 years ago

Such truth in this post, and I know it to be true. We had to sell our large paid-off house after my husband’s industry shifted to China and his business failed, because we no longer had enough income to pay our ever-increasing property taxes. We moved to a more affordable town, bought a much smaller house and downsized our lives. That was over ten years ago. The amount of free time we have now is worth so much to us! We only work part-time and our modest bills are covered. We didn’t want to wait until we were old to… Read more »

Mike
Mike
2 years ago

Before I retired a couple of years ago I attended a series of classes on retirement. It was useful but only to the point of confirming my plans and knowledge on several subjects. One exercise was a survey that included a question about why you want to retire? Of course the #1 answer was “so I have time to do what I want”. And the answers to “what do you want to do” consisted of the typical standards: more time with grand kids, volunteering, reading, fishing, golf, etc. First year I tried most things that I had interest in but… Read more »

K
K
2 years ago

I was well on my way to a very early retirement until I got married and had a kid. Now I have to scrimp and budget whether I want to or not.

Brain
Brain
2 years ago

Because time is linear & finite, time is more valuable than money. It’s hard to see that as a healthy young person, but the older you get, the more clearly I see it. I’m very aware of trying to not waste time because of my mother who has Alzheimer’s. She no longer knows who I am. She can’t remember who I am. I think of all those hours she frittered away, playing solitaire, or some other “time killer” activity and my heart breaks. Those were opportunities to do a thousand things other than just throw time into the trash-heap of… Read more »

EB.Sawaneh
EB.Sawaneh
2 years ago

I always believe that money is a tool for us to use in achieving our goals. Having time to enjoy life is one of those goals. When we are making money, we need balance with time for ourselves . Although, with enough money, we can buy some time but money cannot buy all forms of time with maximum benefits.

The Poor Swiss
The Poor Swiss
2 years ago

Finding a balance between time/money/happiness is very important. As you said, time is finite while money is not. We should enjoy life more than money. Money for me is just a a tool to help us live the life we want.

Xrayvsn
Xrayvsn
2 years ago

This is exactly the reason I started on the path to financial independence and early retirement. They have a lottery for money, but they don’t have one for time. Therefore time is far, far more valuable and once it’s gone it really is game over. The best way to enjoy your finite time on earth is to be doing things that bring you happiness. Most people are slaves to the 9-5 job because the W2 wages are what allows them to live. How many people would quit their job if money was no longer an issue? I would say it… Read more »

Adam @ Minafi
Adam @ Minafi
2 years ago

The research on time scarcity is interesting! With income increasing in some countries, he number of people spending money to save time will only increase which will then increase the income of people providing those services.

I have definitely felt some of the best money I’ve ever spent was paying to reduce my time doing something. Not all labor either – using a travel agent to schedule a trip recently was an amazing experience too!

Susan @ FI Ideas
Susan @ FI Ideas
2 years ago

Buying time appears at first glance as the opposite of frugal. For those of us that have achieved FI, it makes sense to consider spending on housekeeping or a gardener. But it is so hard to change the patterns of frugality that got us to this point financially. And as we age, we start thinking of going full time in an RV to simplify even more and reduce those types of tasks, while maximizing experiences.

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