How Do You Spend Your Life Dollars?

by Stephen Mills on July 9, 2010

“The cost of a thing is the amount of what I call life, which is required to be exchanged for it immediately or in the long run.” — Henry Thoreau

The medium of trade in a modern economy is overwhelmingly currency.  In the U.S. it is U.S. dollars.  We use terms like “spending money” and “making money”, but that isn’t really what we are doing.  What the overwhelming number of us are actually doing is trading our time for goods or services now or in the future (by saving).  Some of us trade a lot of time for a small amount of stuff and some of us trade a little time for a lot of stuff.  What you are really giving up in return for that stuff is a part of your life, which you can measure in time.

A typical person probably does not have an accurate picture their real earnings or their real spending in those terms.  If you are thinking of buying a $1,000 large flat-screen TV, it might be good to know how much of your life it will cost you, and as you will see below you can’t just use your alleged hourly rate and do the math.  It’s more complicated.

Aside from not really knowing how much we earn and spend in terms of our time, earning and spending hardly seem real anymore.  It’s become very abstract.  You can get your paycheck direct deposited and pay your bills automatically.  We don’t actually see money coming in and money going out.  I work and my money automatically goes into my bank account.  I don’t ever see it.  I call my debit card my “magic” card.  I give people my magic card and they give me stuff.

Calculate Your Real Earnings

I’m going to use round numbers for simplicity.  If you make $50,000 a year and work a 40-hour week, then your hourly rate is approximately $25 per hour.  You might think that $1,000 TV will cost you 40 hours of your life and you can pay for it in a week.  Actually no.  Let’s look at things a bit closer.  Please don’t be tempted to quibble over the numbers; they are just there to illustrate the point.  You can do your own calculations.

You probably spend more than 40 hours a week working because you have other time invested in your work week like commuting and getting ready.  If you spend 1.5 hour per day on your commute and 0.5 hours per day getting ready for work, you are actually spending 50 hours a week getting paid for 40 hours a week.  That drops your hourly rate from $25 to $20 ($1,000 per week / 50 hours).

Nobody I know keeps all their money away from the government.  Let’s say in total your payroll taxes (income, Social Security, Medicare) take 15% of your income.  Your hourly rate is now $17 per hour ($850 per week / 50 hours).

If you spend $200 a week on child-care that you wouldn’t have to spend if you didn’t work, your hourly rate is now $13 ($650 per week / 50 hours).  If you drive 150 miles a week and it costs a total of $0.40 per mile in total vehicle costs, that is another $60 per week.  It costs an average of about $30 dollars a week extra in food to eat at work and on the run.  Your are now down to about $11 an hour.  There could be other costs.  You may be paying for house and lawn care that you would do yourself if you didn’t work.  This could easily chew up another $1 per hour and bring you down to $10.

Whatever your income and your time, it’s well worth the effort and probably will be quite an eye-opening to actually sit down and calculate your true hourly earnings.  Gross dollars per month or year are just too abstract and don’t give you a useful picture for the purpose suggested here.

Calculate Your True Costs

So that $1,000 TV that you thought would you 40 hours of life actually would consume 100 hours of your life. (at $10 per hour).  That’s 100 hours of your life, not some bits stored on a computer somewhere.

What about that $25,000 car that will likely cost $30,000 when you add interest and payments?  That requires 3,000 hours of your life.  If you have to have a car and can choose between the $15,000 model and the $25,000 model, keep in mind that more expensive model will require 1,000 extra hours of your life.   That’s a better way to decide than the difference in monthly payments made in magic money.  That 1,000 hours isn’t going to just take 5 months either.  That would assume you were only paying for the extra nice part of the car and nothing else.  Most of your life is already being consumed by shelter, food, clothing, and everything else.  That nice car is going to slice parts of your life away for many years to come.  Is it worth it?

When you buy that $100,000 home that will really cost you $175,000 over the life of the mortgage, you can now see that it will consume 17,500 hours of your precious life. That’s not even the true cost because taxes, insurance, and maintenance add a lot more.  If you rent and your share is $500 a month, then you know that you are spending 50 hours a month out of your life just to pay the rent.

How You Spend Your Life

None of this leads to any particular conclusion as to what you should or should not do.  Everyone’s situation, needs, and desires are different.  I do think a good use of a small part of your life would be to go through this exercise to find out how much of your life is required to obtain various goods and services.  You should be making informed decisions about how you use your most precious resource.  When you commit to an expense, big or small, you are trading part of your life for it.  You will never get that life back so don’t trade it casually.

Isn’t that a better way to look at spending?  You waste a $1,000 on something you didn’t use and you think so what, I can afford it.  When you realize you wasted part of your life on it, it takes on a different meaning.  Even if you love what you do and you don’t consider it work, you still must choose how to spend or save it.  Why would you casually waste it?  Don’t lock yourself into the Golden Handcuffs.  It really sucks to get 30 or 40 years down the road and realize you traded your life for a bunch of stuff or experiences you didn’t enjoy.  You don’t get to go back and do it over.

My attitude about how I spend has definitely changed.  Realizing when you give someone a dollar you are giving them some of your life is a big step towards more awareness.  It’s truly a different way to look at it.  When you are young, it can seems like you have an eternity to figure things out and get it right.  You don’t and it will go by faster than you would ever imagine.  Spend wisely my friend and thanks for spending a small part of your life on my blog.

What do YOU think?  Leave a comment and join the conversation.

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Resources - August 2010 | Learn This
September 10, 2010 at 4:06 am

{ 35 comments… read them below or add one }

Jonny July 10, 2010 at 6:30 am

Mate, nice way to look at the actual costs of living. I did a similar thing when I was deciding on jobs by breaking it down to an hourly rate and the factoring in all the extras before working out which was the better job, statistically.
Jonny´s last [type] ..Preposterously Positive- 5 Benefits From Maintaining A Positive Outlook On Life

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Stephen Mills July 11, 2010 at 10:33 am

Hi Jonny, I don’t think I’m quite ready for Walden Pond, but the life cost of all this stuff I have has certainly been on my mind lately. Thanks for the comment. :-)

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John D. Buerger, CFP® July 10, 2010 at 3:27 pm

This is great, Stephen.

One of the exercises I put people through (as a financial planner) is what I call the “Cash Flow Hydrant” where we break down expenses into four parts: (1) taxes (25%), Obligatory expenses (50%), Control expenses (15%) and Future expenses (10%).

What these percentages point out is that most people only have control over 15% of their income in how it is spent. The obligatory expenses (home, utilities and all other past obligations) eat up half of every hour of your income producing life. The government takes their share before you see it … and everyone SHOULD be saving 10% of their gross income to cover future expenses (like college, retirement, etc).

If I make $40 per hour gross … I only have $6 per hour to apply to all those expenses over which I have control (including food, clothing and entertainment – all of which are expenses that are not mandatory to make right now). That means that $1000 TV will cost me 167 hours of work (or more than 4 weeks STRAIGHT of doing a 40-hour-per-week job) … and that’s if I am paid pretty well ($40/hour).

Now think of the people who make $20 per hour who buy TV’s, boats and nice cars with plastic and you have a much better understanding of why we are where we are in the world today.
John D. Buerger, CFP®´s last [type] ..Money and Sex

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Stephen Mills July 11, 2010 at 10:36 am

Absolutely John. I can’t believe the cars and homes of some of the people I know and who I know have far less income than I do. They can’t possibly be saving anything and have handcuffed themselves to slaving away to pay for it. Thanks for the information and taking the time to share it.

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Ryan Landgraff July 10, 2010 at 5:28 pm

I agree wholeheartedly. We often focus too much on price and forget the other details.

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Stephen Mills July 11, 2010 at 10:31 am

Thanks for taking the time to comment Ryan.

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Grampa Ken for change July 11, 2010 at 9:49 am

That’s a very nice explanation about the true cost of buying things Stephen, and good reasons to simplify our consuming lifestyles. Henry Thoreau was thinking along these lines way back when; “The cost of a thing is the amount of what I call life, which is required to be exchanged for it immediately or in the long run.” -
Grampa Ken for change´s last [type] ..Life Happiness Tips

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Stephen Mills July 11, 2010 at 10:30 am

Thanks for that lovely quote Grampa Ken. I liked it so much I added it to the beginning of the article!

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Grampa Ken for change July 11, 2010 at 10:40 am

Well thanks Stephen.
Grampa Ken for change´s last [type] ..Life Happiness Tips

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Nea | Self Improvement Saga July 11, 2010 at 11:10 am

This is a very interesting way of calculating the detailed cost of your purchases and what they take from your life.

I think another important thing to look at is whether or not you love your work. If you love what you do to make money, then you won’t feel like you’re wasting moments of your life when spending that money. And if you make sure that you’re purchasing things that add to your joy–even better. For me, that is the ultimate goal–to live, work, and spend in such a way that I never feel like I’m wasting a thing.
Nea | Self Improvement Saga´s last [type] ..Top 6 Ways to Build Self Respect and Improve Low Self Esteem

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Stephen Mills July 11, 2010 at 8:15 pm

Hi Nea, how much you enjoy your work is certainly an important factor. But nonetheless even if you love your work, very few people would do exactly what they are doing if they were suddenly independently wealthy. And whether you love it or not, you should spend it wisely.

“For me, that is the ultimate goal–to live, work, and spend in such a way that I never feel like I’m wasting a thing.”

That is a wonderful way to put it. I totally agree. Thanks for your comments.

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Get Happy Life November 13, 2010 at 6:25 am

Nea, I disagree with you at some point. Spending 8 hours per day at work is also spending your lifetime. So if we tend to preserve as much as possible of your limited time on Earth, we should tend NOT to work in conventional terms. The art of living is one to get free from the financial chains and do literally what he wants with his time, without pressure, stress or exhauster.
Get Happy Life´s last [type] ..What it Takes to Become Rich

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Zeenat{Positive Provocations} July 11, 2010 at 11:53 am

Oh wow Stephen, I never thought about life cost this way. This is such a real way of looking at it. I have been looking at cost since i started life simplification…but this way of thinking is so much easier to decipher in totality what truly does and does not matter..and seriously how much you’re willing to spend on it.
Thank you fro sharing your awesome insight!
Much Love,
Z~

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Stephen Mills July 11, 2010 at 8:18 pm

Hello Zeenat! I don’t mind spending, but I’m very conscious now about whether I’m spending on things that are truly valuable to me. I don’t want to trade my life for something not worthy of it. Thanks for stopping by :-)

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Get Happy Life November 13, 2010 at 6:22 am

I am always very cautious about that either because I would feel stupid if I traded a portion of my lifetime on junk (who wouldn’t?)
Get Happy Life´s last [type] ..Don’t Be in Rush – Ever

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Sibyl - alternaview July 11, 2010 at 2:03 pm

Interesting post and a very good point. I think we should all be well aware of what our actual hourly rate is so that we can make informed decisions. For me, this really drove the point home to choose wisely how I spend my time and what I focus on. As you mentioned, time is limited and a valuable resource and what we do with it really matters. If we can spend it in ways that will help move us forward and develop perspectives that we need, then we really set ourselves up to live in a great way. And, understanding your hourly rate really can help you make better decisions. Thanks for that suggestion. I thought this was a very interesting and helpful approach.

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Stephen Mills July 11, 2010 at 9:45 pm

Hello Sibyl and thanks for that very thoughtful comment. Because the electronic money you spend is so disconnected from the time you spend earning it, this is a very difficult thing to put in practice. But it is well worth the time to establish the habit.

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Jonathan - Advanced Life Skills July 11, 2010 at 5:44 pm

Stephen, this is one of the most REAL things I have ever read. If we had to ask: “How much of my life will I have to give up to own this” it would have a serious impact on our spending habits (at least I hope it would). This was excellent my friend.
Jonathan – Advanced Life Skills´s last [type] ..How to Turn Stress Into Success

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Stephen Mills July 11, 2010 at 9:42 pm

Thank you so much Jonathan. I think it would have a serious impact if people could make it a habit. It’s so easy to get caught up in the spending moment though, it’s a hard to establish the habit of being aware of what we are giving up.

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Robin Easton July 11, 2010 at 6:04 pm

Dear Stephen, I think this line REALLY made me stop and think, or rather FEEL the whole impact of the rest of the post:

“My attitude about how I spend has definitely changed. Realizing when you give someone a dollar you are giving them some of your life is a big step towards more awareness.”

THAT is powerful and really can help us decide what is of value to us, and is it necessary, and of equal value to our very own life. Wow!!

Thank you much my friend,
Robin!!
Robin Easton´s last [type] ..Have You Become Your Dream

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Stephen Mills July 11, 2010 at 9:40 pm

Hello Robin :-)

It’s hard to not get caught up in the abstract nature of currency, but if we can stop and think about our precious life, at least we can make more aware decisions. Thanks for stopping by :-)

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Financial Samurai July 11, 2010 at 7:38 pm

I love thinking in pre tax income i.e. how much money in pre tax income do I need to afford the item after tax.

It’s the best way to save!
Financial Samurai´s last [type] ..Even Lebron Doesn’t Listen To President Obama

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Stephen Mills July 11, 2010 at 9:36 pm

Hi Financial Samurai. Thanks for your comment. Tax is certainly a significant factor that needs to be accounted for in the equation!

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B @ logos coaching July 12, 2010 at 2:56 am

A really great post Stephen. Not only the way of working out how much life we exchange for an item but how little is actually made per hour when all the factors are taken into account! Reminds me about that story of the humble fisherman resting on the beach with his family and the business man on holiday comes along and tells him that if he did xyz with his fishing business he could be wealthy. The punch line being that the business man says ‘then you can retire and fish and sit on the beach all day’ and the fisherman says ‘I already do that’ :)
B @ logos coaching´s last [type] ..Chanel- Christian Dior- Armani Prive and You

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Mike King July 13, 2010 at 7:54 pm

Quite an interesting piece Stephen. I definitely agree with analyzing the time more importantly than the dollar value. I like the breakdown you’ve down, as it equates them in a practical way.
Mike King´s last [type] ..Resources – 2010 June

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Yobaba July 17, 2010 at 8:11 pm

An interesting “take” on earning, spending, saving and ‘life’, too, I suppose. And many interesting comments. Stephen, you said “I do think a good use of a small part of your life would be to go through this exercise to find out how much of your life is required to obtain various goods and services. You should be making informed decisions about how you use your most precious resource. When you commit to an expense, big or small, you are trading part of your life for it. You will never get that life back so don’t trade it casually.” The more I read and re-read those sentences and think about what it is that they are actually telling ME, the more uncomfortable I get, and I will tell you why, as near as I can put it into words. We have lived very simple lives for the past 40 years, long before it was a fad to “simplify”. We’ve only traded in our cars when they weren’t worth the upkeep anymore; we live in the same house we purchased as newlyweds – it’s not very big, but it’s big enough and we were able to raise three great kids here (and are doing Nana & Papa daycare for three of the six grandkids here, too). We have never ‘splurged’ on anything – not because we’ve never made a lot of money – but how much money do you really need to take care of essentials? (As Cheryl Crow said, it’s not getting what you want, it’s wanting what you’ve got.) If I have to worry about how many hours I am “giving up” every time I go out to buy a banana split or a t-bone steak I am going to make myself miserable. The saying “you can’t take it with you” applies to time as well as dollars. So what if I have to or am willing to work a few extra hours/days to get something ‘extravagant’ that I really want? At the end of my life it won’t matter anyway – I won’t be able to take any of my saved cash or trinkets with me, and I’m pretty sure the same thing can be said for any hours or days I have ‘saved’ by not wasting time trading minutes for donuts. I may not have said this very well, but I think your emphasis on ‘time is money’ smacks a little too much of two things to me: 1) keeping score and 2) reducing the quality and value of my life to a certain number of dollars rather than deeds. How very, very sad.

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Get Happy Life November 13, 2010 at 6:20 am

You know, this way of thinking about money has been on my mind for a long time, but I didn’t have the courage to tell my friends about it, thinking that I am insane or something.
Get Happy Life´s last [type] ..Helping Your Relatives – With Money or Not

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krishnamohan September 13, 2012 at 6:21 am

I have blogged my experience here!

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krishnamohan September 13, 2012 at 6:22 am
Bea September 28, 2012 at 7:26 pm

I fully agree with your way of thinking Stephen – I have the same observations about spending money and collecting too much clutter – for many months now. I believe too much stuff just weights us down to the point of suffocation. I did move to a new house recently and took maybe only half of my belongings with me. I just took with me what I really love or need and it feels great! Since I moved, I have been renovating and decorating my new house very carefully with what I already have. Less cluttered house means less cleaning, more room to breath, more joy as every single thing I own now, it is the one I love or need. Now I am thinking about getting myself a job that will not require me to sacrifice my whole life for – emotionally, spiritually, or in any other way.

Thanks for a wonderful blog! Beata

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Heart rhythm disorder´s last [type] ..Welcome to SuddenLife

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