We often hear that time is money but have you ever calculated it? Literally?
When I was 22, I decided to calculate the exact number of working minutes it took for me to SPEND $100 in cold hard cash. At the time, $100 required me to work 5 hours and 38 minutes to earn. As I have progressed in my career, the time required per $100 spent has fortunately gotten shorter; an ideal trajectory for us all.
This calculation directly attached working hours to the price tag of any shiny new object that captured my attention. Pondering purchases in minutes-worked resulted, more often than not, in me returning the tempting item back on its shelf. The joyful jolts borne from impulsive splurges now seldom felt worthy of the time it took for me to earn that money.
This framework helped me regain a sense of choice over the feeling of constant deprivation I felt in my twenties. I lived on a tight post-university budget, paying myself a cash allowance of $120 per week for meals, entertainment, and clothing. I wanted to aggressively repay student loans and my rent was exorbitant at my first job in Toronto. These self-imposed fiscal handcuffs permitted few indulgences, so after months of “good” behaviour, I would often rebel by splurging on pretty little things to fill the void in my self-worth which was aggravated by long works hours, loneliness and my zealous penny-pinching. I soon became a yo-yo budgeter, bingeing then dieting. I tried a multitude of tactics to improve my money management from custom Excel spreadsheets to the full Quicken suite. I created daily ritualistic money routines to count every cent. They mostly ended in failure and with me feeling like one too.
My ultimate goals were to save and travel more but I desperately needed a paradigm shift. I had to learn that splurging on feel-good items meant needing to work even more for the things I really wanted. Emotionally-driven purchases were the small leaky holes in my financial bucket. Once I started quantifying the value of money as a function of time, I stopped believing that hard work deserved its own reward; this erroneous mindset rewarded effort not outcomes, which when it came to savings, prolonged the attainment of the important goals I had set. The unhealthy link between consumerism and self-worth created the “I deserve it” mentality which had hidden costs that I wanted to make visible.
Fortunately, I stumbled onto Gail Vaz Oxlade‘s incredibly helpful Budget Binder and Spending Jars on her show Til Debt do us Part. Her resources coupled with David Chilton’s 10 Percent Solution and other tips in his book the Wealthy Barber helped me forge a solid financial mindset. However, all their tips only came together for me when I conceived this $100 framework. My wants were now tangible – costed out in time. A new coat was 2 days of work, a Caribbean vacation was 6 work days, a nice dinner was 5 working hours, my car was 3.5 days a month, rent was 8.5 days a month. I could now ask myself if the expense was worth its weight in time. If the answer was “Fuck Yes!” then I bought it without hesitation. By seeing money expressed in time, I learned to appreciate the value of each minute I worked. Binge buying stopped because when contextualized in real working hours, most impulsive purchases felt like derailments rather than indulgences, as such many naturally fell to the wayside with a resounding “No!”.
The calculation is easy.
1. Take the amount deposited into your bank account by your employer (your take-home pay after all taxes & deductions), known as your Net Pay;
2. Divide that amount by the number of hours worked in that pay period to obtain your Net Hourly Wage;
3. Divide $100 by your Net Hourly Wage;
4. The resulting whole number is the number of work hours required;
5. Multiply the remaining decimals by 60 to obtain the residual minutes;
6. And presto! This is how many hours and minutes you have to work to spend $100.
So say your Net Pay is $1500 every 2 weeks for 80 work hours. Then your Net Hourly Wage is $18.75/hr. And $100/$18.75 = 5.33 (5 hours) and .33 x 60 = 19.8 ~ 20 mins. Which means you have to work 5 hours and 20 mins for every $100 you spend.
To make this even easier, below is a cheatsheet with reference annual salaries for you to ballpark your own $100 cost in work hours. You will see how taxes often adds an hour of work per $100 spent *ouch*. Hence the importance of using Net Pay as the baseline because in the end, we spend Net Pay (salary after taxes & deductions), not Gross Pay. Reference: Canadian tax calculator
My hope is that this new framework will help you see the value of purchases in a different light; through the lens of time. When we gain a deeper appreciation of a dollar spent versus a dollar earned, we can see in plain-sight how instant gratification from impulse buys delays us from reaching our goals, akin to drilling holes in our boat while rowing ashore. Simple mental tools such as this one can give us the confidence and peace of mind to make better decisions every day, when it counts so we can more easily prioritize and focus on the important planned expenditures in our lives; the ones that will give us the satisfaction and joy we ultimately seek.
“Geeks R Us” Appendix :
For geeks like me, here is the complete table where I calculated the difference between Gross and Net Pay. It shows how deceiving Gross Pay can be when used to calculate anything, especially to determine how much we can afford to spend on monthly mortgage or car payments, this is because our pay is deposited after taxes and deductions – Net Pay is our real spending power.