Time allocation is the act of dividing your daily, weekly, and monthly hours between different sets of activities. Typically, a person has constraints around their time, such as work, the needs of family and friends, and vacation days. Effective time allocation works around these constraints in order to achieve a person’s ultimate goals and desires.

However, there’s an issue with time in that there are only 24 hours in a day. This forces people to allocate a limited number of hours between personal time, family and friends time, and work time. However, a person’s time allocation often skews more towards work than towards personal time and/or time spent with friends and family.

The result is that people spend a disproportionate amount of time trying to make money. They think that “effective time allocation” means putting more money in the bank. This isn’t true. In fact, greater current and future value can be yielded from other activities. This article discusses how best to allocate your time so that it yields the greatest return.

The Importance of Time Allocation

Time allocation is important because time is finite (for humans, at least). This means that we only have a limited amount of time to achieve the nearly limitless number of things we want out of life. Proper time allocation allows us to live a fulfilling life full of contentment and joy. Not to mention, the right time allocation also makes you as financially free as you are happy.

However, few people have mastered the art of time allocation. Instead, many of us over-allocate our time to the wrong things for the wrong reasons. Given the fact that most of us are required to allocate between 8 – 10 hours a day to work, it’s common for people to over-allocate time to income-producing activities. Which makes sense…in a sense.

How People Misallocate Their Time

We’ve all been taught since birth to become a high earner and achieve financial freedom. If we can make a lot of money, we’re told, we can use our resources to buy all the things we really want out of life. But if the point of life is to live it to the fullest, why are we wasting our time trying to make money rather than actually living it?

I’m reminded of the quote in the movie Wallstreet, starring Charlie Sheen. “I think if I can make a bundle of cash before I’m thirty and get out of this racket,” Sheen says, “I’ll be able to ride my motorcycle across China.” But as Rolf Potts of Vagabonding points out, Sheen (or anyone, for that matter), could work for 8 months as a janitor and still afford to drive a motorcycle across China.

This highlights the fact that it’s easy for us to misallocate our time, thinking we’re working towards something tomorrow that we could really achieve today. Further, it’s common for people to undervalue activities that don’t result in the immediate exchange of cash. Working an extra hour to make $100 might seem better than taking that hour to read a book or head to the beach.

But often, personal time (which includes friends and family time) can actually yield you greater value in the form of qualitative present value (i.e. happiness or contentment) and quantitative future value (i.e. more skills that result in higher income). For example, even though you can make a quick buck working for someone else, investing unpaid time into your own passions or interests can make you happier as well as give you skills that differentiate you from the general population.

To recap, people misallocate their time due to the following factors:

  • Overvaluing income-producing activities
  • Undervaluing the happiness gained from personal time or non-income-producing activities
  • Failing to put a monetary value on future earnings based on unpaid personal time
  • Believing that the goals they want to achieve are only attainable “tomorrow”

Let’s now take a look at a mental framework you can use to better understand when it makes sense to give your time away and when it makes sense to keep it for yourself.

When to Say No and When to Say Yes

The issue with our propensity to misallocate our time towards income-producing activities comes from our inability to value non-income-producing activities. This causes us to often say “yes” when an employer increases our workload instead of saying “no” and re-allocating that time towards things we actually want to do. Which makes sense, seeing as money has a fixed value while “happiness” or “fun” is much harder to assign a unit of measure.

So, when trying to allocate your time between work and personal activities, the best way to do it is to assign everything you do a value. For example, I run a financial content consultancy as well as act as the finance editor for FitSmallBusiness.com. While both of these activities yield me steady income, my ultimate passion, goal, or desire (insert buzzword here), is to write screenplays, documentaries, and books for a living.

Therefore, while over-allocating my time towards my client work might make sense from a short-term financial sense, what long-term goals am I actually giving up? I might not be making any money writing scripts, sure, but the longer I put off actually writing screenplays, the longer it’ll take me to break into the industry.

So while it might seem more prudent to focus on these income-producing activities, doing so actually takes me farther away from my goals. And I bet in a lot of cases the same thing happens to you, too. This means that people need to start saying “no” to their obligations rather than saying “yes.”

But of course, this doesn’t tell the whole story. Obligations are obligations for a reason. Further, money is still important, regardless of what self-improvement gurus tell you. It’s therefore impossible to place a blanket “no” on everything you don’t want to do. Instead, it takes careful time allocation to live within the confines of normal society while still pursuing your interests and desires.

Creating a Time Allocation Mental Framework

When allocating your time, you need to create a standard unit of measurement that you can apply to any activity. With income-producing activities it’s easy. However, people still fail to accurately value their time, even when money is involved. For example, a $100k annual salary might sound like a lot, but what if you work 80-hours a week? That’s only ~$26 an hour.

Is your personal time worth $26 an hour? If it’s worth more (which I hope it is), you’ve already misallocated your time. Because when you’re working for money, you’re essentially selling your personal time to someone else. So, when you’re creating your time allocation mental framework, you need to value all of your income-producing activities in the form of an hourly wage.

You’ll then need to do the same thing for your non-income-producing activities, which is admittedly much harder. To make it easier, it’s always better to use your income-producing activities as a benchmark. For example, if you know you make $26 an hour, when you’re thinking about re-allocating an hour to something that doesn’t yield you any money, simply ask yourself: is this more valuable to me than 26-dollars? Often times, the answer is “yes.”

To recap, when creating a mental framework to make better decisions, you’ll need to do the following:

  1. Value all of your activities in dollar terms
  2. Reduce all of your activities to an hourly wage
  3. Use the hourly, income-producing wage as a benchmark
  4. Assess all non-income-producing activities against that benchmark
  5. Allocate your time towards all non-income producing activities that are higher than the benchmark

The Art of Saying No and Saying Yes

Knowing when to give your time to others and when to keep it to yourself is great. However, it’s only effective if you actually know how/when to say no and how/when to say yes. For example, you might know that it’s more valuable to work on your own project than work for your boss. But how do you tell your boss to f*ck off without quitting or getting fired?

The answer is to be simultaneously firm and flexible. In today’s remote and work from home environment, you’d be surprised how flexible employers can be. In fact, the best employers won’t even care how you allocate your time as long as you deliver on the work you were hired to do. So in effect, the art of saying no and saying yes in order to better allocate your time is actually the act of saying both no and yes.

For example, all my clients, colleagues, partners, and superiors know that from 9:30am – 12pm, I’m writing screenplays (and this blog post). That’s when my creative juices flow the most. And even though I need to be creative when approaching my income-producing activities, it’s much less creatively intensive.

This allows me to compromise. If I’m honest with the people I work with and tell them that I need to protect these 2.5 hours for my own use, chances are they’ll understand. And then I can spend the rest of the day giving my time to other people, making money, and feeling happy about the exchange.

Overall, if you’re delivering value to your clients, employees, or employers, then they should be happy to make concessions based on your time allocation. So don’t be afraid to say “no” when you’re asked to do something that’s income-producing. Conversely, don’t think you have to say “yes” every time you have a twinge of passion. Instead, do both, and be honest about it.

Conclusion

The way you approach your time allocation is the most important strategy of your life. Effective time allocation is the act of dividing your time between inc0me-producing and non-income-producing activities. You can do this by valuing your time in dollar terms and then choosing the activities that yield you the most current and future value.