To see what I mean by the cost of time, think about having to buy something. You have to pay to buy a product, and you also have to spend some time completing the transaction. For example, if you want to buy a book to take on vacation, you can drive to a bookstore, find something on the shelves, stand in line to pay for it, and drive back home. The book will arrive in your mailbox or on your doorstep in a few days. But the online purchase takes only two minutes of your time.
Economists take the familiar adage that time is money and present it in the same kind of equation.
If you're a regular reader of this magazine, you probably don't punch a time clock. You're not paid by the hour, and you can't convert some of your time into extra dollars by putting in a few extra hours of work. An easy starting place for thinking about the cost of your time is to take your annual salary and divide it by total hours worked per year. Another way to uncover your own cost of time is to imagine that someone offers to pay you to spend an hour to do some unrewarding task, such as going to the store and buying groceries. You can work out your own individual value.