A Way To Reduce Spending - Think About The Number Of Hours You Will Need To Work For Stuff

by golbguru on May 1, 2007

Here is a quick money hack. If you compulsively feel like buying stuff when go window shopping, then this might work for you. Whenever you want to buy something, make it a habit of thinking in terms of the number of hours you will have to work in order to earn money equal to the cost price of the thing you want to buy. For example, assume that you earn $5 per hour (minimum wage in some states, on the lower end). Now, suppose you want to buy yourself a $5 smoothie just to satisfy your sugar craving. Instead of thinking about the cost of the smoothie in terms of the dollar amount, tell yourself that it requires one full hour of work to buy that smoothie. That will surely make some of you think twice.

To further illustrate the point, and to get some interesting numbers, I ran this ‘hours-of-work‘ thinking through some hypothetical people earning different salaries per hour - minimum wage workers ($6.25/hour), graduate assistants ($15/hour), high school teachers ($25 per hour), and doctors ($70/hour). For these folks, a few typical expenses (with approximate costs) are considered and the cost in terms of ‘number of hours work’ is calculated. Here are the numbers:

equivalent hours of work required to buy stuff

Note that the numbers are rough measures - just to give you an idea. You could probably refine them to include interest costs (if you borrow for expenses like car, house, etc.).

It’s amusing to imagine what will happen if your new car dealer tells you that you have to work at the dealership for 3360 hours (about 1 year and 7 months, with full time employment) if you want to buy that new car….that surely sounds a bit *too much* than say, $400 per month. :)

This line of thought will work more effectively for large ticket items, although it will generally work for any expense.

By the way, the next time when you are in an introspective mood, get your calculator (or excel sheet) and think about how many work hours you have traded to buy stuff that you really didn’t need. You might have a learning moment at the end of the exercise.

Have you used any similar mind games to reduce spending? Does thinking about costs in terms of anything else (other than hours of work) makes you think twice before pulling out your credit card?

Money, Matter and More Musings

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{ 18 comments… read them below or add one }

1 shawna 05.01.07 at 9:15 am

I do this, and it actually works for me. It really helps me distinguish needs from wants for sure. Great post!

2 F2O 05.01.07 at 9:17 am

Ha, my fiance has been doing this for the past year or so. She campares things to how many people we can invite to the wedding. Like the Ipod I got her for Vday = 2 more people we “could” have invited.

3 Maria 05.01.07 at 11:38 am

This is definitely sobering. I’ll have to try this. Great post!

4 Joe 05.01.07 at 2:42 pm

So when my doctor was pulling an all nighter he was just looking to get a new plasma TV? Scary. :)

5 bigbuddha 05.01.07 at 2:46 pm

This really is a very very good technique to avoid those impulse shopping pitfalls, it’s generally those little purchases over time that kill your budget.

Thinking about the actual cost, ie hours of labour it takes to purchase something, really does put things into perspective.

Good post.

6 oneway 05.01.07 at 7:35 pm

thanks for the reality check :)

7 golbguru 05.01.07 at 7:47 pm

Shawna, Maria, BigBuddha, and Oneway: Thanks. :) It’s worth trying it out.

F2O: Yeah..that’s what I am talking about. I friend of mine weighs all his expenses in terms of “number of hot-and-spicy-McChicken-sandwiches”. He doesn’t really buy all the sandwiches, but he once justified not buying an iPod with “dude I can buy an year’s worth of hot and spicy McChicken sandwiches with that kind of money” …works for him. :)

Joe: Yeah..each of your teeth must mean some electronic bling-bling to your dentist. ;)

BigBuddha (love the name)
: It’s a bit difficult to have a convincing argument for small purchases with this line of thinking, but yeah it will give some perspective.

8 J.D. 05.01.07 at 8:42 pm

This is essentially the concept espoused in Your Money or Your Life. It’s a powerful technique if you learn to apply it to your life. My wife quantifies things in terms of “Starbucks”. So, for example, a movie costs about two Starbucks. A new pair of shoes is ten Starbucks. It makes her think about the cost of things more clearly.

9 Sam 05.02.07 at 4:34 am

Somewhat related. My mom taught me to price clothes by the number of times I would wear the item. For example, I might wear a good black suit that costs $300 36 times (3 times a month) in a year for a cost of $8.30 a wear. Or I might buy what I think is a cool or trendy top on super-sale for $30 and only end up wearing it once for a cost of $30 a wear. The better buy is the suit at $300. The only catch to the above is the cost of dry-cleaning, but its still a good exercise.

10 sjw 05.02.07 at 4:38 am

Another thing to keep in mind is that you want to be doing this with post-tax dollars, not your salary.

11 Jenn @ Frugal Upstate 05.02.07 at 6:30 am

This is also a great way to teach kids about the value of money! You can either use their allowance. “Hey, that toy, video game, candy etc costs 2 weeks allowance” or if you pay a standard fee per job (as Amy D. recommends in the Tightwad Gazette-back in the 80’s she did $.50 a job for her young kids) you can say “Is that little plastic toy really worth washing the car 5 times?”

12 Blain Reinkensmeyer 05.02.07 at 6:54 am

Talk about opening the eyes, thanks for this Golb!

13 LAMoneyGuy 05.02.07 at 7:16 am

I actually calculate it based on net, rather than gross pay. It’s more restrictive, but also more realistic. I can’t spend FICO!

14 FHA Expert 05.03.07 at 8:22 am

I’m glad to finally see some other people thinking this way. One of my econ teachers in high school explained buying decisions this way and I’ve always been a little tigher with my money when I say–”Would I work 45 minutes for this?”

Brandon

15 saving advice 05.03.07 at 8:13 pm

This is a nice little money trick. Basically, if you can find something that will make you stop a minute and consider the purchase, then you usually will be able to decide whether that purchases really need it or not. What will work best for each person is a bit different, but this is certainly one way of doing it. The main thing is to make yourself stop and really consider the purchase instead of just buying it on impulse.

16 Andrew 02.17.08 at 10:19 am

Interesting!
$70/hour for doctors x10hour/day = $700/day
x 6 days/week x 50 weeks/year (1day off/week, 2 weeks vacation) = 210K /year
patient after patient with no stop

open/close a pool for a season:
$800/2hours
what would be the wage per hour?

is driving from customer to customer a work?

17 Jennifer Reed 03.09.10 at 8:35 pm

Saving money in not a tough task if you are using http://www.managem7.com for managing your fiances. with the help of this money management application you an manage your finances by setting a budget, categorizing and tracking your expenses and spend within the set budget limit.

18 Max G 07.30.12 at 7:29 pm

I’m actually in a business where I get paid on per hourly bases. I think of my time spend in exact same way. I never thought about thinking of expenses that way but I will try

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