When you look at the price of an item, do you ever consider how much time or work it would take to earn the amount needed to pay for it? If you think about it, many of us did this as kids when we wanted to save up for something. We would figure out how many yards we would need to mow, or how many cars we would need to wash, in order to earn enough money to buy the thing we desired. The same principle can apply here, just in adult form! This is just one of the many tactics we can use to help us decide if an item is worth purchasing. Today's tip is:
Look at an item's price in terms of the time it would take to earn that amount.
A basic formula is: Cost of item ÷ hourly wage = hours needed to buy item
(For those who are paid salary, you will first need to calculate your hourly wage. The formula is: salary during each pay period ÷ hours each pay period = hourly wage. You'll only need to do this once if you write it down. Then plug that number into the formula above.)
For example, if your income is $10 per hour, and you want to buy something that is $30, you can see that it would take you three hours to "earn" that item. If you make $20 per hour, it would take you one and a half hours. Those shiny baubles on the store shelves just might lose their luster when you look at them this way! You might be pushing around a day's wages in that shopping cart! For big ticket items, you might see that it would take several days, weeks, or even months to earn what it would take to pay for something. Is it worth it?
(Just to be clear, I am talking about buying something with money that has already been earned, NOT buying something with the plan to pay it off later because you can "just work x amount of hours". That mentality will land you deep in debt! I'm also not suggesting that something is never "worth it". Not all money is meant to be saved- some of it is meant to be enjoyed. We should enjoy the fruits of our labor, not just toil to build our bank accounts and nothing else. But just like money, time is limited, and so we must steward it well. What is "worth it" is going to look different for everyone.)
For those of us who are homemakers and don't earn an income, we have to consider our husbands. They toil at work all day for their wage, so we must be very careful with how we steward it. This realization alone personally makes me spend less!
What about you? Do you think you might use this tactic when considering future purchases? Will you ask yourself, "Is this item worth my time?" next time you go shopping?
Kelsey, when we stop and think about our purchases with this formula in mind, it makes us think doesn't it! Hmmm ... this would be a good habit to develop and include as part of a frugal mindset.
ReplyDeletePatsi, looking at purchases from this perspective can certainly make a person think twice! Our time is precious!
DeleteThis is a very good/important point of spending money! I'm glad you reminded me of this. Especially for the husband's sake. Once my daughter's co-workers for a summer job took her out to lunch when she was going back to college. It was an expensive meal for workers who made minimum wage and I felt bad, because, at that time I specifically thought of how many hours they would've had to work to treat my daughter. andrea
ReplyDeleteIt really puts things in a different perspective, doesn't it? There is definitely a cost that goes beyond the price tag. You were very considerate to think of your daughter's co-workers!
DeleteThis is kind of an expansion of the Vickie principle! I also apply it when paying someone to do a job for me. Assuming it is a job I can physically do but HATE to do, I ask myself whether it it worth MY hourly wage to NOT do that job. Often not, which gives incentive to just do it. Sometimes it is. Lol (Sorry about the anon. posting - Google won’t recognize me these days).
ReplyDeleteYes, that's true! It can certainly give us that motivation we need to push through a task we may not like. It can go the other way, too, like you said. I heard a man say that he would rather spend all day at his job (that he liked) earning a wage to pay someone to do a job he didn't like, than to spend the same amount of time doing a job he hated, even though it would save him that money. Fair enough, I thought. So each person and each situation will look different. It's a trade one way or the other.
DeleteThank you for commenting even though Google isn't cooperating for you! I always enjoy hearing from my readers.
I was talking to my husband today, about the increasing price of food and if it would be more expensive currently to make bread at home or to buy it.
ReplyDeleteWe came to the conclusion, that with the price of flour, water, sugar, salt, yeast and electricity, making bread at home will still be €1 less.
So, it's just a matter of doing the math, right?
:)