*This was one of my first articles, but it didn't transfer over from Substack. Reposting here now.*

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Everyone has heard the phrase “Time is money” at some point. Maybe your dad yelled that when you were taking too long to get ready for school back in the day. Maybe your boss uses that line when he’s waiting on you to finish a report. “Time is money” is one of the world’s favorite clichés. Ironically, time isn’t money at all. It’s something much more valuable.

Time and money are engaged in a constant game of tug-of-war in our lives. We sacrifice time to gain money. You work forty hours a week to get a $1200 paycheck. You give up your Saturday morning to make extra money mowing lawns. We then turn around and spend our money to gain more time. You spend $2000 on a week-long vacation in the Florida Keys. You pay a maid $500 to handle your household chores. Why? To free up your time. This cycle repeats over and over again.

We often treat time and money as equals, but they aren’t. Why?

• Money has diminishing marginal utility

• Time is finite, while money is not

Diminishing Marginal What?

If you took an introductory Econ class in college, you’ve probably heard the term “diminishing marginal utility”. If you’re unfamiliar, marginal utility is the additional utility, or enjoyment, gained from an additional unit of something. The classic example goes something like this:

When a hungry consumer eats one piece of pizza, they gain a ton of utility. However, as they get full, the satisfaction from each additional slice gets lower and lower.

That first slice of pizza is fantastic. You’re starving, and you gain 10 “satisfaction points” from the first slice. However, the second and third slice only give you an additional 6 points. By the tenth slice, your additional enjoyment is practically zero. Diminishing marginal utility.

Money works the same way, but we rarely think about that. We are constantly focused on what we could do with a little bit more money.

“If I get this raise, I can afford that beach house in Florida.”

“If I close this deal, I can finally pay for that trip to Hawaii.”

“If I make partner at my firm, I’ll be set for life.”

We have this 1:1 perception of income and satisfaction. If I make X amount of money, I will receive Y amount of satisfaction. Our idea of the income and life satisfaction graph looks something like this:

We think that quadrupling our income will quadruple our happiness, but that’s not true. Don’t believe me? A study by Purdue University determined that happiness derived from additional income flatlines after $105,000.

How does income really relate to satisfaction? Check out the graph below:

Diminishing marginal utility. At a $30,000 salary, our happiness is a 2/10. By $50,000 we reach 6/10, and 9/10 by $100,000 a year. The jump from $30,000 to $50,000 income made a huge difference in our life satisfaction, but the increase from $100,000 to $1,000,000 is minimal. Why?

Say you make $30,000 a year in Atlanta, GA. If your rent is $900 a month, it’s going to be a struggle to cover your bills, put food on the table, and have money left for anything extra. At $50,000, you can live pretty comfortably. You may not take lavish vacations or sit court side at a Hawks game, but you won’t lose sleep over next month’s rent.

Now scale up to $100,000 a year. Take out $25,000 for taxes and $12,000 for this year’s rent and utilities. You have $63,000 leftover for whatever you want. Want to go skiing in January? Sure. Two weeks in Europe? Why not. Season tickets for the Braves? No problem. You won’t have a Ferrari, vacation home in Aspen, or private jet, but you can afford pretty much any activity you want as long as you budget accordingly.

As your income scales up from here, you can buy bigger houses, nicer cars, fancier meals, and better clothes, but you can’t go anywhere or do anything new. You just spend more money on upgraded experiences. If you can cover your bills, spend money on experiences, and save/invest the rest, you are in a great place. Everything else is extra.

There is actually a paradox associated with having extravagant amounts of wealth:

Some luxuries won't make your life any better, but losing them after having experienced them will certainly make your life worse.

Time, the X Factor

So you derive a little less satisfaction from each additional dollar. Who cares, as long as you’re still gaining something, right? That’s where Father Time comes in. If you want to make that extra dollar, you probably have to give up some extra time. Money and happiness aren’t linear, but money and time are.

Maybe you work a 40 hour work week and get paid $50,000. You never have to work overtime, and you never have to work weekends. Meanwhile, your cousin is working in investment banking. He makes $200,000 a year. However, he’s working 8 to midnight half of the time, and he has to be on call most Saturdays. Yeah, he’s making a lot more money than you. But what about his time?

As humans, we spend a lot of time fantasizing about that next job. Next promotion. Next pay raise. But we rarely think about what we’re giving up: time.

You want to know my definition of wealth? Being able to wake up every day and do whatever I want. I’m not there yet, but I will be. I’m confident that I’ll be able to make the money that I want over time, but I’m not going to chase money for money’s sake. There’s no specific dollar amount that signifies “wealth”, because that point varies from person to person. No two lifestyles are the same. That being said, constantly sacrificing your time to chase money is a dangerous game to play. Opportunity cost is everything in life.

So Should You Quit Your Job?

LOL, no. This isn’t a letter telling you that career ambitions are a bad thing. On the contrary, there are actually plenty of horror stories about early retirees feeling lost. Work is a good thing. It provides stability, income, and a sense of community. If you have a job that you tolerate, and it supports your lifestyle, that’s awesome. If you have a job that you’re passionate about, put your head down and grind. Fulfilling work provides both a sense of purpose and source of income. You can’t ask for anything better.

While additional satisfaction does tend to taper off as income increases, not all situations are equal. More money gives you more options. If your extra dollars are spent keeping up with the Joneses, you’ll probably find yourself dissatisfied. If you use your excess income to build the life that you want, you’ll probably be pretty happy. More money offers us more freedom, but it’s on us to take advantage.

Closing Remarks

My advice is to be intentional with your actions. Everything in life has a trade off, and you should understand the stakes before making important decisions. There is nothing wrong with pursuing a higher income, better job, or nicer assets. However, you should be honest with yourself about what this process will look like:

• What do I want (more money, new role at work, bigger house, etc.)

• What will I have to do to achieve this goal?

• What will I be giving up (i.e., my time) in order pursue this?

If you are satisfied with your answers to these three questions, go make it happen. Just remember that how you use your money is as important as how much money you have. If you remain intentional with your choices, you’ll be alright.

- Jack

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