I just had a long online chat with my brother concerning my choice to fly to my grandmother's funeral instead of driving. He said it seemed like an unnecessary expense. Ok, this type of thinking something that's been eating at me for a while now. I have a theory that time is money- or more specifically, that the time I'm not being paid for at work is still valuable. Even though this is something I have to do (well, I don't have to, but that's another discussion about must vs. should), I still have to place a value on my time in order to make the best decision, as objectively as I can, for these type of time vs. money problems.
To this end, I have established this equation:
a is the value that you establish for your "leisure" time.
b is the number of hours saved by the time saving activity (flying in this example).
C is the cost of the time saving activity (the cost of airplane tickets, parking, etc. in this example).
d is the cost of the original activity.
This equation is to specify the point at which the time saving activty is a better choice than the traditional activity. As you will notice, the other conveniences of the time saving activity- such as no grumpy toddler in the car for several hours, etc.- are not calculated in any way other than time savings.
Now, let's work this example shall we, with math that's simply made for ease.
Let's say I value my leisure time 25% more than my work time- which I get paid $80/hour for (don't worry, it's only for ease of math, not any type of reality here... now I'm sad :( ). That would put my value of my non-work time at $100/hour.
Driving, it would take me 6 hours each way to get to the funeral. Flying, including time at the airport, travel to the airport, etc. will take 6 hours total (generous estimate for ease of calculations). So, I'm saving 6 hours of time valued at $100 each. (100*6)-(C-d)=0
The cost of flying round trip and associated costs is $300. (100*6)-(300-d)=0.
The cost of driving is calculated like this. It's a 700 mile round trip in a car that gets 20 miles per gallon. That means that I will use approximately 35 gallons of gas just on the trip, at an estimated $2.50/gallon. That gives d a value of 87.5. (100*6)-(300-87.5)>0
Is this true? (600)-(212.5)>0 or 387.5>0 TRUE. Flying is the better choice at this value.
Now, what if I was to value my time at $30/hour? well, that would be (180)-212.5>0 FALSE.
Someone who values their time at $30/hour- all other things being equal- should NOT fly in this scenario.
Does this make sense to everyone?