Never Work for Free

Daniel YergerFinancial Planning 2 Comments

A gathering of powerful men sits, cantankerously debating the solution to a mutual problem. Among their shouting, a stranger enters their company and offers a solution to their problem. “It’s simple.” He says, which of course, raises a question from the group: “If it’s so simple, why haven’t you done it already?” To which he replies, “If you’re good at something, never do it for free.”

Those of you who recognize the paraphrasing of this masterpiece scene from The Dark Knight might of course wonder what lesson is to be gleaned from the offer of a madman to mobsters, but one should really contemplate that last sentence of dialog. It’s not to say that you should always expect payment for every little thing you do, but rather, that of all the resources available to everyone, time is the most finite, and an exchange of your time for value not for you, but for others, should be considered carefully. So today, we’re talking about the value of your time, saying yes and saying no to those who ask for it, and when you should make exceptions.

The Value of Your Time

The value of time is one of the oldest economic questions. The way you might value your time today is based on your job or your income. For example, if your salary is $120,000 a year, you’d simply take that $120,000 and divide it by 2,080 (fifty-two weeks times five days times eight hours) to arrive at an hourly rate of $57.69. Of course, your time is actually worth even more than this. Consider the payroll taxes your employer pays (7.65%) for your time along with benefits such as insurance and 401(k) matching. For example, an employee of MY Wealth Planners being paid $120,000 annually would have time worth at least $68.45 an hour when those additional costs are considered.

The economic arguments for utility maximization around the value of time would suggest that you should then pursue tasks that reward you with more than the value of your time and you should delegate or forgo things that are worth less than your time. You should mow your lawn, but if you’re a lawyer who bills $350 an hour and a lawn mowing service costs $60 an hour, you should have them mow the lawn, and so on. However, this can get tricky when we’re asked to spend our time without a financial incentive to balance against. In other words, when we’re being asked to spend our time for $0. Now, we gladly do this all the time for our family and friends. Driving your kids to a softball game might cost you tens or hundreds of dollars of your time, and you gladly spend it because the value of time watching your kid hit their first triple is priceless. But the gauge starts to shift when we’re asked to do things we don’t really care about. Helping our friend move? Sure we’ll do it. Helping them move to their eighth apartment in five years? Our enthusiasm might wane.

At some point, we all draw a line in the value of our time and make the decision that we’re not going to spend it on something, even when someone asks. This is doubly important when asked to spend our time in a working context for someone else’s benefit. For example, we might volunteer our time at a non-profit. We will never expect a financial return on that investment, but we’re happy for the work they do and the outcomes it provides, so we’d gladly spend it even though we’re not the beneficiary. But the line between giving our time and spending our time is more sharply drawn when it’s for profit. Almost everyone has a story of a manager who asked us to come in on our day off, or who wrangled the time clock to fight overtime pay, or otherwise who’ve simply had the audacity to ask us to work for free. Even I personally recently dealt with such a case. A private firm asked me to consult on a product’s development for a finite time window and time commitment; when their internal project management got off track and the project ran over the original time window, they extended the contract and payment. When it happened again, they asked for free work the second time around. As Dr. Brad Klontz, a financial psychology researcher likes to put it: “I’m sorry, but I can’t afford to spend my time working for free to help you make money.”

Saying Yes and Saying No

So what are the guidelines? Do we simply say no to everything that doesn’t benefit us? Well, while that might be a capitalist utopia (dystopia, probably?), it simply doesn’t mesh with how we like to think about ourselves as people, nor does that structure of behavior likely result in us building a world we’re happy to live in. So, what’s the balance of the issue? Well, a better approach is to apply a basic rule and a balancing test. The basic rule is this: “The default is no.” Many of us are “yes people,” who like to raise our hands to volunteer at every opportunity. But, because of the finite nature of time and energy, this is inevitably a dangerous proposition, because as we say yes and yes and yes, we will inevitably run out of either the time or the energy to meet our obligations, ultimately resulting in a negative outcome for everyone: We’re burned out and the people who are counting on us are disappointed in us.

“The default is no” is a helpful framework, because thinking it, even saying it to people who are about to ask us for our time or energy, sets the stage: “It’s not personal that I’m saying no, it’s just very likely. So with that in mind, what are you hoping I can help you with?” From the position of default no, you can politely hold that position and avoid letting your obligation’s scope creep out of your control or willingness to be involved. This method is so powerful that executing it properly is actually considered a mark of success.

“The difference between successful people and really successful people is that really successful people say no to almost everything.” -Warren Buffett

With “no” firmly established, we can then look to what might make us say yes. This is where the balancing test comes in. How you balance yes and no is up to you, but here are a few helpful suggestions:

  • Will you be paid more than your hourly rate? This is a simple utilitarian measure.
  • Will you have more impact with your work than your hourly rate? For example, if you could make $100 an hour or volunteer your time for a value of $20 an hour, might you be better off working an hour and donating 5x the impact of your volunteered time?
  • Will you enjoy it? There’s nothing wrong with spending time in ways you enjoy.
  • Will it be meaningful for the beneficiary of your time? For example, while you might not make money helping underprivileged kids to read, it will be incredibly valuable to those kids.
  • Do you already want to do it? There’s always the possibility that your gut simply says yes by default to this particular thing, and if that’s the case, have at it!

Should You Make Exceptions?

This is a tricky thing. Everyone can imagine a scenario in which all the hard and fast rules of whether you should or shouldn’t agree to something can be broken for the right reason. Our opinion is that your time is best spent on the things you truly care about or value. For example, one client was recently put in a position to consider a $1.5 million dollar offer to not retire later this year. Now, I don’t know about you, but I’d have a hard time saying no. Yet, this client was perfectly comfortable with saying: “No, thank you.” That client has a powerful belief in the value of their time and what its meaning holds for them. How they choose to spend their time in retirement is far more valuable to them than a seven-figure sum!

Ultimately, you can always choose to make or not make an exception at your discretion. It’s your life, after all. But I’ll close on this last meaningful insight: The regrets of people dying share common themes, and most common of all is that they spent too much time on work and not enough time on things that are meaningful to them (family, friends, good causes, and so on.) So in the consideration of whether you should work for free, consider whether you will look back on having said yes “fondly,” or whether you will remember saying yes at all.

Comments 2

  1. A nice framework to help decide what to volunteer for or agree to help someone with. It makes the decision objective and leaves out the guilt.

  2. This is a great way to think about this, but I would propose a slight change. I think it makes more sense to think about the value of your next hour than your last hour.

    Maybe you get paid hourly, and your employer would pay you a (higher) overtime rate. Or maybe you are a lawyer, as above, but in a small town with a finite demand for legal services. Or you’re a salaried professional, and earning the next dollar requires some sort of “side hustle” that will almost certainly pay differently.

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