I used to not pay much attention to how I spent money. If I had money, I spent it. If I didn’t have money, I didn’t spend it.
I didn’t pay any attention to what I bought beyond whatever flashy thing happened to be in front of me at the moment. Savings? Forget it.
Thankfully, I’ve changed a bit since those times, after listening to lots of podcasts and reading books like You Only Live Once by Jason Vitug (affiliate link). As I’ve changed how I manage my money, I’ve also changed how I think about it as well.
I used to think that people who saved up a lot must have some kind of obsession with money itself. Like, they just wanted to fill a big pool with gold coins and dive right, a-la Scrooge McDuck.
Conversely, people who skimped a lot by rewashing and reusing Ziploc bags and eating homemade sandwiches while on bargain vacations surely must just get some kind of perverse pleasure by denying themselves the small pleasantries of life.
Now, I’ve done a complete 180 from where I started. I want a huge pile of money in savings (digitally, of course) and I want to skip on some of the things that everyone else buys.
It was one simple question…
How much does this cost in terms of hours of my life?
Let me explain…
Money = Life
To get money, you have to work. To work, you sacrifice your time: time away from family and friends, time away from doing other things you find more fun and rewarding.
Money is just as a common currency for your time. You can’t get back your time once it’s spent: spending money is giving away bits of your life.
Once I started thinking of money in terms of hours of my life, everything changed.
How to Calculate The Cost Of Things In Hours Of Your Life
The conversion rate between what things cost in dollars and hours of your life is simple: just divide the cost of the item by your hourly wage, after taxes. For me, I make $18.56/hour at my day job before taxes. I’m in the 15% tax bracket, so I make $15.78 after taxes ($18.56 × 0.85 = $15.78). This is the conversion—i.e., how much money I get for each hour spent working.
Let’s see how this plays out. Right now, as I write this, I’m really hungry and I want to go buy a quick tasty dinner from my favorite sushi takeout place. It costs $13, and if I divide that by my after-tax hourly wage, it costs me 0.82 hours of work (i.e., my life).
$13.00 ÷ $15.78/hour = 0.82 hours
I certainly think the price is worth it some of the time. If I did that every day, though, I’d be spending almost the whole last hour of my day just working for my dinner that takes me 10 minutes to eat.
Some Other Things That Cost Hours Of My Life
- Rent – 63 hours of my life
- Monthly truck payment – 13 hours of my life
- Monthly student loan payment – 24 hours of my life
- Sushi Dinner Date – 5 hours of my life
- New (used) truck – 823 hours of my life
How The One Question Has Changed My Focus
I didn’t like the idea of saving money before when there are so many cool things to buy today. But, now that I know that money is literally an exchange for hours of my life, it’s a lot easier to save. Someday I want to have the freedom to not work, whether that be in a traditional retirement or some sort of early retirement.
Each dollar that I save now is not only reserving my future time for myself, but if I invest it wisely, it’ll grow into even more dollars and more future free time. If I can live off of a pot of money, I won’t have to worry about going to work to pay the bills. I can do what I want. I can take all the naps!
Related post: How much does this cost in Taco Dollars?
It’s also been way easier for me to spend less now. My husband has a running joke that half of all the words I ever said were, “I want, I want, I want…” I still want things, but now I prioritize my spending better to buy the things I really want, not just the things I sort of want right now in this moment.
For example, my iPhone is headed downhill. I know I’ll need to replace it at some point. The iPhone I want to get is $750. I can break that up into monthly payments, but either way, it’ll cost me $750. This translates into 48 hours of my life. Is it worth it now? I don’t think so. My iPhone still works, albeit slowly, but it’s not enough of an annoyance that I’m willing to trade in 48 hours of my life just yet.
Everyday Use of The One Question
I’ll be honest. I don’t sit and fret over every purchase I make and bust out a calculator. For big things, I certainly might, but not for all the little stuff.
Even so, just having an awareness that everything you buy has a real cost in terms of hours of your life, or that you can literally buy your freedom in the future by saving, has totally changed how I look at money.
Do you calculate the opportunity cost of your money? Leave a comment below!