3 ms·

I completely agree, but would like to note a common fallacy following this logic. If my hourly rate is $20, I might think that a $200 phone is worth 10 hours.

I completely agree, but would like to note a common fallacy following this logic. If my hourly rate is $20, I might think that a $200 phone is worth 10 hours. The thing is, the majority of those $20 I make are probably already allocated to things like rent, food, transportation and so on. If those things account for 50% of my expenses, for example, the $200 phone is actually worth 20 hours of my time. (That is, unless all my necessities are already accounted for, and I'm working 10 hours on top of what I usually work to buy the phone.) It's important for freelancers to account for what is essentially their "operating expenses" when making purchasing decisions.

OJFord 8y ago
You could do it like that - subtract 'essentials' (for some definition) from your hourly rate - but you don't have to. You could also say your rent et al. are X hours, and watch you don't 'spend more hours' than you work.
twic 8y ago
If you earn twice as much one month, you don't spent twice as much on rent, groceries, or commuting that month. You do spend more than twice as much on tax, probably should spend twice as much on savings and pension contributions, and probably will spend twice as much on living large. So surely it's important to account for the marginal cost of spending money, but not operating expenses?
Valakas 8y ago
Indeed. I use something instead called "savings rate". How much per hour of the money I make is not spent in basic stuff? I also go one step further. In calculating this savings rate, i add to the 40 work hours, much more that are spent for work and/or are not actually free time: commuting, dressing for work, shopping basics, washing dishes/clothes, ... etc. From there you get the real non-free-time-cost of anything non-basic you buy. Turns out things are much more expensive than they actually seem like.

OJFord 8y ago

You could do it like that - subtract 'essentials' (for some definition) from your hourly rate - but you don't have to. You could also say your rent et al. are X hours, and watch you don't 'spend more hours' than you work.

twic 8y ago

If you earn twice as much one month, you don't spent twice as much on rent, groceries, or commuting that month. You do spend more than twice as much on tax, probably should spend twice as much on savings and pension contributions, and probably will spend twice as much on living large. So surely it's important to account for the marginal cost of spending money, but not operating expenses?

Valakas 8y ago

Indeed. I use something instead called "savings rate". How much per hour of the money I make is not spent in basic stuff? I also go one step further. In calculating this savings rate, i add to the 40 work hours, much more that are spent for work and/or are not actually free time: commuting, dressing for work, shopping basics, washing dishes/clothes, ... etc. From there you get the real non-free-time-cost of anything non-basic you buy. Turns out things are much more expensive than they actually seem like.