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.
"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?"
"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
- 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.