Saving money is all about mindful spending. For that reason, I like the idea of pricing items according to time.
How does it work? Simple. You want to buy new toy. Instead of thinking about its cost in terms of dollars, you price it according to a more precious resource: your time. Essentially, you consider how many hours of work it would take for you to buy that toy.
This can be a depressing exercise if, say, you don’t have a job. But that’s sort of the idea. It helps you spend within your means. And there are other advantages to this method:
• It offers another way to think about the value something.
• It makes you think about the link between time and money.
It’s easy to get on board with this concept. But watch out for the ironic way this metric can backfire, like it did for me. I’ll get into that in a bit. But first, lets talk about how to start pricing items according to time, if you’ve never done it before.
How to Price Items According To Your Time
This concept boils down to one simple factor: How much money do you earn per hour?
I think you can handle figuring this out yourself. (If not, use this handy calculator.) But keep in mind–you might want to adjust for taxes. It’s entirely up to you, but personally, I prefer to use my take-home pay, because that’s what I budget with in general.
From there, all you have to do is convert dollars according to your hourly rate, and that’s easy. The $100 boots you’ve been contemplating? If you make $25 an hour, you’ll work them off in four hours. Is that worth it or not? You decide.
Hack time: there’s actually a genius browser extension that will automatically do this for you, when you shop online. It’s called Time Is Money. You download it, add your wage info, and next time you’re on a shopping site, it’ll tell you how much items cost in terms of hours. Check it out:
Yep, 15 minutes for all those glorious, four-star socks.
It’s even kind of depressing fun to see how much random items you’ve already purchased cost you. My beautiful knife block? That only took me two hours to buy! My cat’s ultrasound? Yeah…I had to work almost two days to pay for that.
As helpful as it can be to price items by hours worked, this method backfired in an odd way for me. This isn’t to say we should stop using this tactic, but it’s important to at least be aware of this issue, in case you make the same mistake. Here’s what I’m talking about…
Small Purchases Became More Tempting
Yes, this metric actually made me more prone to spend on certain things. I didn’t even realize I was doing this until a reader commented on it. We were discussing the concept, and they mentioned that it doesn’t work for them, because they just spend more. That’s when I realized:
“Oh, snap. I’ve done the same thing.”
Amazon is tempting enough as it is, but seeing that certain items only take 10-15 minutes of my time makes it even worse. What’s ten minutes? I spend more time than that watching cat videos on YouTube. Cat videos I’ve already seen! Totally unrelated, but if you’re having a bad day, just watch this:
Okay, cats….cats…where was I? Oh right–spending money. It’s more tempting for me to buy something that takes 10 minutes than it is to buy something that’s six or seven bucks. Those socks, for example? Don’t really need them. I saw them, in dollars, as an Amazon add-on item. I didn’t even think to buy them. But when I converted them to hours worked, even for this post, I thought:
“What? They’re only 15 minutes? I should just get them.”
Silly brain. When I think about it, I certainly don’t value money more than my time. Still, $6 seems like more than 10 minutes to my crazy brain. And we all know money often has more to do with mindset than it does practical sense.
By all means, use the price by time method. Just be mindful of the cracks, should they apply to you.
Other Factors to Consider
Similarly, there are a couple of other ways this method doesn’t 100% work for me. When I price an item by time, I’m less prone to buy it if it’s a “need” versus a want. For example, our vacuum recently broke. I did some research and found a great deal on a reasonably priced model. But it’ll take eight hours of my time to buy that damn vacuum. Who wants to spend an entire day working for a vacuum? Not me. That’s why I keep putting it off. And now I’m drowning in pet hair.
I also found that big purchases just don’t make a difference for me with this method. I want to take a trip to Japan this year, and it’s going to cost me two weeks’ worth of work. I’m not even sure what to do with this information. Even if I had to work for a month, six months or, hell, a year–it would be worth it to travel. Maybe the concept doesn’t work as well for expenses that we truly love. Maybe it’s better for the things we’re on the fence about.
Again, I’m not knocking the concept itself. It’s great! But I do think it helps to know how it might not always work. Once you’re aware of those issues, they’re easy enough to work around.
I’d like to know what your experience is pricing items according to time. Have you tried it? If so, how did it work out for you? How did it influence your spending decisions?
Managing your money is like going to the dentist or standing in line at the DMV. Nobody wants to do it, but at some point, it’s inevitable: you need to clean your teeth, renew your license, and manage your money like a grown-up.
Yep, it makes me desire to spend more on small things. With getting paid a salary, I would go to the restroom for 5 minutes. That was easily enough money to grab a vending machine snack on the way back to my desk. But I always remember my desire for ‘early retirement’ so that curbs any temptation.
Ah, travel… the perfectly acceptable achilles heel of every PF blogger.
Lol, it’s so true! Save, earn, travel.
Yep, it helps to remember you’ve got priorities and your money has a purpose. Thinking in terms of trade-offs is what ultimately helps me make better spending decisions, I think.
Yes, I only do this for big purchases though. Applying this method to smaller purchases can definitely be a disaster as everything can seem affordable!
Yeah, I’ve kind of started doing it for only expensive stuff, too. And I kind of just haphazardly do it in my head. I do still use the browser extension just because it’s kind of fun, haha.
Your blog is actually where I first read about the concept! I mean, I always KIND OF did it, but that post rounds up a lot of good strategies for thinking more mindfully about spending. Great stuff!
(For anyone listening, check it out: http://www.makingsenseofcents.com/2014/03/do-you-value-items-in-terms-of-hours-worked.html)
This method only works if you first budget your hours like you do your dollars.
Determine the allocation of hours spent for housing/transportation/etc.
How many ‘hours’ of discretionary income are left?
That’s what you get to spend over the year. (Or if you know your budget well, just convert dollars to hours for the spending lines.)
It’s a bit deflating to realize just how much of your working year is already spent for you! (Like your tax breakeven date, or your own personal ‘black friday’, etc.)
This is a great point, and one I didn’t even think about. Not all hours are available for discretionary spending, just like not all of your income is. Thanks for bringing it up!
I find this method works the most on me with an item from the want column, simply because all those 15 minutes can quickly add up to hours. I use this method more to determine if a diy project is worth my time. I figure out how long a project will take and how much money I will save doing it and what my “wage” would equal. If it takes me 2 hours to do it and I save $100, then my wage is $50/hour. The results are sometimes surprising. For example, fertilizing our lawn ourselves only saved us $5/year. Which worked out to less than a dollar an hour “wage”. We quit wasting our time doing that and hired it out. Amazingly, sometimes the smallest stuff, like washing and reusing ziplock bags or repourposing items net the highest “wages”. I find it to be a helpful financial measuring tool.
Oooh, thanks for bringing up the DIY thing–yep, that’s another great way to use this method. It can help put into perspective some of the “frugal” things you do that might not be worth the time or effort. And yes, it can definitely help you decide when it’s worth it to pay for help!
My hourly wage is so high that this rule isn’t really useful except as a way to get me to spend, which, arguably, might be something worth doing, as the first commenter notes.
Also I enjoy my work, which means I tend to think of the wage in terms of a price on opportunity costs rather than oh no I have to work 5 hours to afford this etc. When I was doing just above minimum wage in high school though, I never did understand why people would go out to eat for lunch– didn’t they realize that lunch out = two hours of calling people to ask personal questions about their lives?