How Calculating Your Hourly Wage Can Free Up 91 More Hours

When you buy something or spend money on anything, you should calculate it by how much time it cost you – not by how much money it costs. By adjusting your currency from money to time, I think you’ll be able to make much better spending decisions.

How to Calculate Your Hourly Worth

If you want to start spending the currency of time instead of money, you’ll need to set an hourly worth.

How much is an hour worth to you? It may be your hourly wage, or it might be another arbitrary number.

To calculate your hourly wage, start with your take home pay. It must be your take home pay since that is actually what you make for the time you give to your company. After taxes are removed, how much money do you bring home an hour? Let’s say the average American brings home $35,000 per year. If that person works 40 hours for 50 weeks (2 weeks of vacation), they work 2000 hours a year.

Thus, in this example, the average American earns $17.50 per hour.

So Why Does it Matter?

Once you know your hourly wage, you are now prepared to spend time – not money. You’ll also have the tools you need to start making wise money decisions.

Example #1 – Buying Furniture

Let’s say you go into a furniture store to buy a new table (just like I did this week). The table costs $1,200 plus $150 per chair. The end price for four chairs and a table is $1,800.

The question becomes – would I work almost 103 hours to buy that table and chairs? (It’s actually more when you calculate the tax on $1,800, but I think you get the point.)

Let’s frame it this way. You go for a job interview, and you get to the point where you start negotiating your salary.

The boss says if you work two and a half weeks, he’ll give you a new set of table and chairs.

Would you do it?

If yes, then buy the table and chairs. If no, then don’t buy it.

In the case of my family, we decided not to buy the table and chairs new. Instead, we’re watching garage sales and checking on Craigslist. With a $200 budget for table and chairs, it will only take 11.5 hours worth of work to buy a used table and chairs.

The end result is that I’ll have an extra 91 hours of my life to spend on something more meaningful.

Example #2 – Couponing / Savvy Shopping

My wife and I have been trying to decide how much we’ll get into couponing. We’ve asked the question – is it worth the extra time?

Let’s say on average we could save $20 a week on groceries and it takes 5 hours to prepare, research, and visit multiple stores. This clearly wouldn’t make sense because the return is much less than the hourly wage value. But, if we could double the savings and cut the time in half, then it might be worth it.

When we were ordering our homeschool products, we didn’t know if we should just order everything in one bundle (which was the easiest) or take the time to do extra shopping (and spend time). In the end, we decided to take the most expensive books and try and find cheaper options online. In a couple of hours, we were able to save about $60 on the books. This clearly would be an advantageous way to spend our time if we earned the average American income listed above.

Example #3 – Outsourcing

Let’s say there is a job around home that you don’t really enjoy. Let’s use cutting the grass, as an example (a job I actually quite enjoy). Assuming it takes you an hour to cut the grass, should you hire someone else to do it or do it yourself? If a neighbor wants to do it for $10, then you’re better off paying him because your hourly wage is $17.50. If the neighbor would do it for $20, then you need to decide if you’d rather spend an hour and 15 minutes working to save an hour of cutting the grass.

Obviously, there is a point where all this math breaks down as we all have leisure time and time off the clock, but I think it’s valuable to ask if you want to spend your time on the items you’re buying, or if you wish you could spend less money and have more time in return for your spending savings.

Do you usually think about it as spending time or spending money?

Comments

Joe Jackson says

July 11, 2012 at 8:44 AM

Great insight into the relationship of time and money. This is true value.
Good stuff!
Joe

- Craig Ford says
  
  July 11, 2012 at 6:56 PM
  
  Thanks.
  
Lance @ Money Life and More says

July 11, 2012 at 6:43 PM

Something to consider though, if you work salary you don’t have the option to work more hours to get more money so don’t justify purchases with “well I just have to work 10 extra hours” because it won’t work if you don’t get paid for them. You’ll just be using future hours and going into time debt

- Craig Ford says
  
  July 11, 2012 at 6:55 PM
  
  Lance,
  I completely agree that people on salary can’t work more (for the same company) to buy more :).
  Even if a person works for a salary they should know their time value so they can make wise spending choices.
  Thanks for the comment.