Converting Dollars Into Hours

Today I want to discuss a powerful saving tip to help you spend less: converting dollars into hours! What do I mean by that? Instead of looking at prices in dollars, look at them in terms of the number of hours you would have to work to pay for them. This technique is super simple yet extremely eye-opening with regards to how you spend your money. It’s helped me make better spending decisions over and over.

My favorite aspect of personal finance is without a doubt the psychological aspect. When you think about it, that’s really where it all begins. You can have a fantastic financial plan, a beautiful budget and awesome apps, but none of it is of any use unless you reshape the way you think about money to make better decisions. I think you will agree that this technique allows you to do just that.

So How Does It Work?

Converting Dollars Into Hours

  1. First you need to figure out your net hourly pay (how much you make per hour after deductions). This should be fairly straight forward: take your last paycheck, and divide your net pay by the number of hours you worked. If you want to make this calculation even more realistic, you can include the time you spend commuting to work as well – after all, if you weren’t working you wouldn’t be spending all that time in traffic.
  2. Then, next time you’re at the store looking at something you want, quickly convert the dollar amount on the price tag into the number of hours you will have to work to pay for it (notice the use of the word “want”; needing something is different). This will help you determine right away whether or not you really want that item.

Let’s Run A Few Numbers

Bob takes home $720 a week for 40 hours of work:  $720/$40 = $18 per hour. Bob walks into a store and sees brand new running shoes he likes. He already owns a couple pairs of running shoes, but he would look so good in those new ones! “$200”, he thinks, “That’s not too bad”. Then he takes a minute to consider: “$200/$18, that’s about 11 hours of work! Maybe I can keep running in the shoes I bought a couple months ago.”

That’s a really simple example, but imagine applying that to his car purchase. Bob’s trying to decide whether he should purchase the base model or pay “just a bit more”, as the dealer puts it, to upgrade to the sport package. Sure, $28,600 doesn’t look like much more than $25,000 when the dealer presents the difference on the basis of monthly payments, but what if Bob takes a step back and performs the same check he did with the shoes? $3,600/$18 comes to 200 hours! That’s more than a full month of work!

Ultimately the decision will be based on your specific situation. Continuing with Bob as an example, maybe he loves his job and is already saving plenty for his other goals so he still goes with the sport package. But maybe Bob hates his job and wishes he could have more time off so he decides that the base model will do just fine. In fact, maybe last year’s model would do even better!

The Takeaway: Saving Dollars to Save Hours

What I really want to leave you with is this: think about the amount of time Bob could shave off of his working years if he applied this concept to every buying decision going forward. A few days saved here and there quickly add up to years, especially when factoring in the future value of that money and the double impact of a higher saving rate.

If you’re feeling uncomfortable with the idea of performing this check when you go shopping, I don’t blame you at all. In fact, it can be a pretty depressing realization to see how much of our lives we need to give up in order to purchase certain things. Hopefully, even if you don’t decide to regularly use this tip, having read about it will be enough to give you pause next time you see something you want, but don’t really need.

Thanks for reading, and if you’ve tried converting dollars into hours after reading this post, I would love to hear about it in the comments below!

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