Once we have our pay in our bank account, it can be hard to align our spending and the ‘time cost‘ that is, the time we gave up in order to earn that wage, with the purchases we make. Soon enough, as fast as that cash comes in, we are spending our hard-earned money unintentionally without considering the precious hours from our lives it took to earn it.
The idea of working out the Time-Cost of spending first occurred to me all the way back to when I had just started my first job as a Coles Checkout Assistant back when I was fifteen. I remember leading up to my first day of work, all I could think about was the cool skate shoes and Billabong boardies I could buy with my newly acquired paycheck.
As a teenager in a newly single-family home, brand name clothing and shoes was not something I was going to get unless I could pay for them myself. I was sick of having to shop at Best and Less and Payless Shoes so getting a job as soon as I was able to, was my ticket to finally get the things I wanted.
Over the next handful of month’s, I had bought the Etnies I’d wanted for so long, a brand-name jacket, jeans and some swimmers and boardies from my favourite Surf Shop. It felt so amazing to finally have some of the things I had always wanted, and even better – I had earned them. But soon enough, long hours of standing on my feet at the registers and missing out on seeing my friends got a bit old. Not long into my first job I started to consider the ‘time cost’ of my spending.
I was earning a fairly decent $7.67 per hour at my job but when you are earning so little per hour, it’s hard to ignore how much of your life you are trading to buy everyday things. Each time I spent money I began to do the maths.
That Happy Meal from Maccas was a good 45 minutes of my shift. Those bordies I loved so much that I had paid $50 for, were going to take me 6.5 hours or 1.5 shifts to earn! The Etnies I bought were a whopping $130 the equivalent of a good 16 hours of my life or 3 nights – gone!
Eventually, the novelty of spending my money on expensive things wore off a bit as I realised how long it took me to earn that money. I was certainly not ‘a reformed spender’, but I became a bit more intentional with my spending after realising the true cost of my spending.
Why you should consider the Time-Cost of Money
With avenues to Buy Now and Pay Later coming out of our ears, it’s good to have a few tools up our sleeves to help us control our spending and stick to our budgets.
Spending $50 on something might not seem like such a big deal, and maybe it isn’t. But when you reframe the purchase into how many hours of your life it took to pay for that item, you can get a new perspective on your consuming habits.
And of course, there is no secret that the more we spend, the more hours we have to work in order to keep up with our spending level. But this also works in reverse, the less we spend the less hours we need to work. So the less unnecessary stuff you buy can equate to more free time for you to spend however you like, whether that be spending more time with your kids and family, being more active, beach days – whatever floats your boat!
And don’t forget a very important rule. When we save $1 by not spending it, we get to keep 100% of it. But if we earn $1 we only get to keep that amount less tax which could be only $0.70-$0.80 in our pockets so it is always more effective to save more than to earn more!
Related Post: 8 Questions to Ask Yourself to Stop Impulse Buying
How to Calculate the Time-Cost of Your Spending
Have you ever considered the true Time-Cost of your spending? Most of you will say no and that is okay and not at all unexpected, we aren’t all Accountants here 😉
But – it doesn’t hurt to have a rough idea of your Time-Cost in the back of your mind so you can be conscious of the hourly costs of the things you are bringing home, that is, how many hours you will have to work in order to pay for them. It’s also a great tool to use to help you reconsider unnecessary spending when you are looking at what that item will cost you in Time vs Dollars!
The simplest way to calculate the Time-Cost of your Spending is to grab your most recent Payslip and note your hourly rate. If you get paid a range of different rates and loadings, take your Gross Pay on your last payslip and divide it by the numbers of hours you worked on that payslip so you can get an average hourly rate.
I.e. You are were paid $400 (Before Tax) this pay and you worked 20 hours. Your Hourly Rate Before Tax would be $20 per hour.
So to apply the above example calculation to a real-life scenario, imagine you earn $20 an hour Before Tax, and are in a store deciding whether you should buy something for $40.
$40 is just $40 – who cares? What even is $40… Money comes and goes, right?
Yes, but this time we are going to not just take the dollars into account. We are going to consider the Time-Cost of the purchase, as we said before – that is the hours of work it took to earn that $40 so we can truly make an intentional purchasing decision.
In this example you earned $20 an hour (Before Tax) and at $40 to buy the item, that equates to over 2 hours of work for that purchase.
Before putting that item in your basket or trolley – with the above Time-Cost in mind, consider if this purchase is worth the hours of time you worked to earn that money? The hours you spent away from your family. That Saturday night you missed out on going to that concert last weekend cos you were working? Or time you could have spent doing more enjoyable things?
Consider this example above, and see if that item you are about to buy is worth the equivalent time you would have worked to get the money to pay for it.
You can stretch this question even further by asking yourself, would I be willing to work for two hours to buy this right now? If you had to drop what you were doing, would you go and work for however many hours it would take you at your current pay rate to earn the money to buy that item?
If the answer is no – I could probably do without another pair of jeans cluttering up my closer, then maybe you could put that item back. If your answer is yes – I really want that bike and I will work what I have to to get it then you know that you are making an intentional decision and that purchase is going to be worth all your hard work!
This is a very simplified example, you should also take taxes paid into consideration as in the above example I used a before tax hourly rate where you won’t receive the full $20 per hour as some of it will be payable in tax. However, having a rough idea in mind of your hourly rate and how many hours of your life it is going to take to make a purchase is a step in the right direction in order to make more thoughtful purchasing decisions.
Will you consider the Time-Cost the next time you are shopping? I would love to know if you have used this method before to help curb your spending? Please let me know in the comments 🙂
