Spending money isn’t just about cash—it's also about time. Knowing how long you need to work for the things you want helps you make smarter financial decisions. Here's how:
Step 1: Understand Your Real Earnings
- Your hourly rate is not your take-home pay. Taxes, pensions, and loans reduce your actual earnings.
- Use an online calculator: Tools like NatWest’s salary calculator can help.
Examples:
- Minimum wage ($6.70/hour): Take home $5.40/hour after taxes.
- Annual salary of $20,000: Earn $9.58/hour but take home $7.93/hour.
Step 2: Calculate Time vs. Purchases???
- Find out how many hours you need to work to afford specific items.
- Example:
- Meal out ($20):
- Minimum wage: Work 3 hours 42 minutes.
- Holiday ($500):
- $20,000 salary: Work 63 hours.
Step 3: Make Smarter Spending Decisions
- Think in time, not money: Is a daily $2.70 latte worth 30 minutes of work?
- Cut costs by evaluating purchases:
- Consider if the time needed to afford something aligns with its value to you.
Step 4: Set a Time Budget
- Decide how much work time you’re willing to "spend" on an item.
- Example:
- New shoes, 3 hours of work:
- Minimum wage: Spend $16.20 ($5.40 × 3).
- $25,000 salary: Spend $28.68 ($9.56 × 3).
Reality check:
- $40 shoes require:
- Minimum wage: 7.5 hours (a full day’s work).
- $25,000 salary: 4.2 hours (half a day).
Benefits of This Approach
- Perspective: Highlights the effort behind every purchase.
- Control: Helps cut non-essential spending.
- Better budgeting: Encourages thoughtful, time-based financial planning.
By treating your money as time, you'll gain a clearer picture of what truly matters—and spend accordingly!