One thing we all want to ace? Time management! Time just vanishes so quickly, you blink an eye and already the next day starts. But what is time management? Just like you invest money you invest time too and when you invest time on a task that will yield max benefit relative to it, you are investing your time well. Valuing the time is the key.
There are infinite theories on time management. If you actually think logically and rationally and apply this amazing concept of opportunity cost while managing time, then you would be amazed to see how it makes a difference. Like the name suggests, you need to manage your time and here how you spend your time most productively makes the difference.
Example time once again! If you have 2 hours of free time every evening, you could either spend it scrolling through Instagram or you could spend it on learning how to drive a car. If you chose to enjoy watching fun reels on Instagram then the opportunity cost is the loss of the potential benefit of knowing how to drive a car!
Making time allocation choices is tricky. Here’s how you can apply this theory to time management by learning how to mitigate the opportunity cost.
Applying Opportunity Cost Theory to Time Management
Know Your Priorities
For a social media influencer the above choice of spending time scrolling through Instagram reels is not bad (it’s actually productive since it’s a part of their work). But for someone commuting daily to work via taxi even after owning a car, it might not be the wisest of ideas. In short if you understand your priorities, you spend time wisely and reduce the opportunity cost too.
Long term vs. Short Term Benefits
Time management applies not only to achieve your short term goals but also to excel in your long term goals! Taking the same example, the opportunity cost of losing two hours by spending it on social media may seem insignificant. But the same time spent doing something productive like learning a new skill over one month, could have made a huge difference!
Factors Beyond Money
Everything isn’t money! You do enjoy spending time gardening or chit chatting with your family. It doesn’t give monetary benefits and that’s an opportunity cost which you could have got had you tried to earn money during that time. But, the satisfaction and happiness you get in doing something you love surpasses the lost monetary benefit. All you need to do is manage this time well.
Cost Benefit Analysis
When you start making decisions based on the associated cost (in terms of time) and the benefit you can get out of it, you start managing your precious time well! Comparing the alternatives often gives you the best insights on how you can reduce the opportunity cost and make the best utilization of time.
Delegation Helps
Who says you have to do everything on your own? While starting time management, you can delegate redundant tasks that waste your time to someone else and utilise saved time more productively. Like we hire maids to do household cleaning even when we can do it on our own. But the trade off between money lost and time saved justifies it as you can do something more productive. In short the opportunity cost is lesser!
Track Your Time
Strict schedules may be impossible but keeping a track of your time helps! It’s tough to find the opportunity cost (and in turn improve future decisions) unless you keep a watch on the time spent.
Productivity Focused Decisions Help
What’s the outcome of your work? When you keep a track of your productivity, you know you are making the best decisions and the alternative cost becomes insignificant. Especially if you are running a business or planning to become an entrepreneur, then you need to be even more mindful of dedicating your time to tasks that maximize productivity.
Work Life Balance
No longer a buzzword, this issue is slowly becoming a part of every working person’s life. Here too opportunity cost theory helps. One part is delegating the work. The second part is understanding where you can save time. For example, if a meeting could be attended virtually but you still went for the meeting commuting for 3 hours, those 3 hours could have been used better as the potential opportunity cost of doing anything productive in those three hours is positive!
Minimising Time Wasting Activities
Imagine you spent two hours designing a random wallpaper but probably you could have saved at least one hour by taking help of an AI designing software. Here you can identify the time wasting activities and utilize saved time in a potentially more productive task that reduces opportunity cost too!
Fun Fact: What is 7-8-9 Time Management Theory? This came up like a minimum of 10 times when I was reading about time management. Mainly applying to study sessions, it means you divide 24 hours of the day in splits of 9 hours for studying, 8 hours for good sleep and remaining 7 hours for other activities like eating, relaxing etc.
Law of Increasing Opportunity Cost! Does it Apply to Time Management?
The theories and their never ending complications! But this concept is super interesting. In the simplest terms, the law of increasing opportunity cost in time management means that the more time you keep on dedicating to the same activity, the potential benefit you could have got from dedicating the time to another activity (i.e. opportunity cost) keeps on increasing.
There’s actually another Economics principle behind why this happens. For example, you dedicate 5 hours in one day maintaining ledgers and financial accounts. Gradually your productivity decreases, you know you aren’t as fast as you were in probably the first two hours (this is called the law of diminishing returns!). Had you stopped then (dividing the task into 2 days) and started doing another important task like learning a new skill, the potential benefit would have been higher! This is called the law of increasing opportunity cost.
Woah! Who knew that dedicating too much time to only one activity was so costly!
Numerical Value for Opportunity Cost in Time Management
Sometimes it gets difficult to actually know if the opportunity cost theory is helping you manage time. But if you can measure in quantitative terms then you exactly know if you are making the correct decision. The question is, is it possible to calculate it? Not often but there’s one situation in which you can easily find the numerical value. It is when you calculate the time’s value by the potential earnings you could have gained in that time!
Calculated by wage, the cost you might have got had you spent working per hour and you instead spent it doing something that didn’t generate income is the opportunity cost as that’s income foregone. For example you could have earned Rs. 5000 per hour working on an assignment but you spent two hours socialising with your friends instead. Then the opportunity cost here is Rs. 10,000 as that’s the potential missed benefit.
Phew! That was like a mini masterclass on time management. Who says that theories are only for books and don’t help in making your daily life easier? Application of opportunity cost in time management can make you a pro at mastering the most productive use of your precious time. Did you enjoy learning about this? Do tell me your thoughts in the comments section below.