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Money in your pocket, time on your hands

How much did that super-grande caramel mochaccino that you had this morning cost? Just $5, you say?

Think again. It also cost you part of your life. According to the principles of Your Money or Your Life, the money management book by Joe Dominguez and Vicki Robin, money equals life energy. In other words, you worked some period for that mochaccino, thereby spending part of your life to pay for that fleeting treat.

"Consciously or subconsciously, we all use some kind of formula when deciding whether to make a purchase. Typical factors that weigh into most major purchase decisions are the amount of cash in our pockets and the debt limit on our Visa cards," says Russell Wild, MBA, a fee-only financial planner and investment adviser based in Allentown, Pa.

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"But an ultimately more important factor, and one often ignored, is the amount of life energy or true personal cost involved in making a purchase."

Thinking of money as life energy is an excellent way to spend less. For example, would you buy yet another pair of shoes if you knew it would cost you five hours of your life? Or how about a new car when your old one works fine if you lose several weeks of your life to pay for it, and yet more time to maintain it?

When considering a purchase, Jane Boursaw of Traverse City, Mich., keeps this concept in mind: "Do I really want to spend X amount of hours sitting at my computer for this item?" she says.

"Is it worth the time I'd have to spend away from my family, or time I could be doing something I really wanted to do -- like playing with my kids, reading, napping, planting flowers? I try to think about that when I pull out my credit card or checkbook."

What's your time worth?
If you want to know how much time your purchase is costing you, the first step is to determine how much your time is worth. If you make $20 per hour, you might assume that your time is worth $20 per hour. Not so. You also need to consider how much it costs you to work at your job. Figure out how much you spend every year on these items and services.

  • Commuting to and from work, including gas and car maintenance
  • Gifts for office parties
  • Lunches at work
  • Coffee breaks
  • Vacations you take to get away from work
  • Wine and beer you drink to unwind after work
  • Your work wardrobe, including cleaning costs
  • Therapy that you go to because you hate your job
  • Child care

Now subtract this from your yearly after-tax salary and divide by the number of hours you work in a year. That would be 2,000 if you work a 40-hour week with one two-week vacation per year. However, you should also count the time you spend commuting, working overtime, doing work at home and attending work-related outings such as conferences after hours and on the weekends.

The result is how much you actually earn at your job, and how much an hour of your time is worth.

 
-- Posted: May 25, 2005
     

 

 
 
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