The Wealth Vs. Leisure Trade-off
One of life's classic struggles is deciding how much time to spend working and earning money vs. how much time to spend on relaxing leisure activities. Some of us may choose to work long hours, earn overtime or take second jobs in order to increase material wealth, while others spend their free time with friends or lounging on the beach. If you find yourself landing firmly in one camp or the other, it is likely the people who make the opposite choice seem annoying. But in reality, this is simply a basic economic problem of consumer preferences.
We Need a Mix of Free Time and Money
There is certainly a trade-off between time and money because we cannot exist without at least a little bit of both. If we were to spend all of our time relaxing without ever earning any money, we would end up broke and eventually run out of money. If however, we spent all of our time working, we could not enjoy any of our hard earned money. When our lives shift too far in one direction or the other, we have a craving to move back toward the center.
For example, think about a busy lawyer as the typical example of someone who works a lot and has little time to relax. The lawyer might work six or seven days a week, sometimes staying up all night to prepare for a big case, but the lawyer also probably pulls in a ton of money! But because this lawyer works so hard, they might really enjoy a single day off or even a relaxing cup of coffee in the morning. These precious few moments of relaxation become highly prized to the lawyer because they are so few and far between.
On the other hand, imagine a struggling part-time retail employee. This worker might be earning close to minimum wage and working 20 hours a week. They have lots of days off and plenty of time to drink coffee! Their craving is the opposite of the lawyer. Rather than hope for another day off or an hour of downtime, this person may want for more working hours and less leisure time!
The happy balance between these two extremes probably falls in between the overworked lawyer and the retail employee.
Graphing Consumer Preferences
The trade-off between the lawyer and the retail employee can be explained by the microeconomics concept of the indifference curve, pictured above. Working hours and leisure hours are substitutes; there are 24 hours a day and those hours can be spent either on leisure or on labor. The green curve labeled "h" represents a level of happiness. In this example, let's say the lawyer spends 70% of his time with labor and the retail employee spends 60% of his time on leisure. Both of these people fall on the same curve h, meaning that they are equally happy.
If however, each of the two people were able to spend 50% of their time on labor and the other 50% on leisure, they would move beyond the pictured curve onto a point further outward, representing a higher level of happiness. For the lawyer, each additional unit of leisure increases happiness, just as each additional unit of labor increases happiness for the retail worker. When these two people find the right balance, they are happier because they have, in simple terms, enough money and enough time to enjoy their money.
Why This Matters
It is important to understand your priorities with your life. Our goal should be to maximize happiness in our lives, and in order to do this we must make sure to have enough money to enjoy our time without overworking ourselves. There is no point to working too much because it will not increase your happiness.
It is important for each of us to determine at what point money stops helping us to become happier. If we are struggling week to week to get by, an extra $100 could feel like the greatest thing to ever happen, but if we make $60,000, working longer for an extra $2,000 might make no difference at all. But many people forget this and get lost in thinking that their self-worth is tied to their salary.
Once we reach a certain level of material comfort -and this level is different for each person- we should refocus our priorities and learn how to maximize the value that we place on our lives and figure out how to make the most of what we have. This becomes a much better path to securing lifelong happiness than an ever-increasing paycheck.