What Is Your Work/Freedom Ratio?

One little financial calculation that can be interesting to think about is your work/freedom ratio, or WFR.

This is the ratio between time spent working and how much freedom, i.e. non-work, time that buys you. It’s the amount of freedom-from-work, or freedom from time that would otherwise need to be spent working.

For example, if you work 35 hours a week for the UK minimum wage of £8.91 (as of 2021), that’s £311.85 a week and £1247.40 a month. Let’s ignore taxes for this for now. The other side of the calculation depends on your living costs. Let’s say this person’s monthly living costs are £1100. Their work/freedom ratio is then 1247.40 / 1100 = 1.13. So one hour of work earns 1.13 hours of living, and we’re interested in that 0.13, as that’s the “freedom” earned on top of the working time. It ends up as about 8 minutes of freedom-from-work for each hour worked.

The higher the work/freedom ratio, the faster you can earn free time relative to working time. This might sound a bit capitalistic and depressing, because it is. That’s the nature of exchanging time for money, and why we’re interested in trying to escape this ratio.

It’s clear that having a higher salary will improve the work/freedom ratio. Like many frugal factoids, the WFR works the other way round as well. Lowering living costs also improves the WFR. If you can live on less, then you earn freedom at a faster rate than someone who lives on more. This is reminiscent of the king and the lifestyles story.

It’s also possible to aim for the best of both worlds: a higher income and lower living costs. This tips the work/freedom ratio as much as it can be in your favour. With a high WFR, it’s possible to gain a week of freedom with a day of work, or even better. It’s quite an aspirational frugal target.

The work/freedom ratio is the inverse of the proportion of income spent on living costs, which in turn is the inverse of your savings rate. For example, if you save 50% of your income, you can probably retire in about 17 years from now. Importantly, this depends on the fact that you’re saving a large proportion of your income, but also that you’re living on a smaller proportion of it. Both sides of this matter.

As you invest your surplus income, the investment accumulation gains will begin to add a nice boost to your WFR, as they provide a financial nudge in the right direction over the long term. This is crucial. Given enough time, this will eventually snowball into being financially independent, which is equivalent to having an infinite work/freedom ratio: zero work is required to cover your living costs.

May the WFR be ever in your favour.