This is the seventh part of The Simple Dollar Book Club reading of Your Money or Your Life. Want to know more?
I found the exercise in this chapter of Your Money or Your Life to be one of the most amazing things I’ve ever done in terms of really reflecting on what my job was worth – and it made me rethink what I do to earn my money. In fact, I took the basic meat of the exercise, worked with it a bit, and used it as part of my 31 Days series.
The exercise that blew me away is framed as how much are you trading your life energy for? In other words, how much money are you making for the amount of time you work? Interestingly, the initial answer is usually flat-out wrong and radically overvalues how much we sell our life for.
Many people will think “I make $500 a week and work 40 hours, so I make $12.50 an hour,” but that’s just the start of it. Consider:
How much time do you spend commuting, and how much does it cost?
How much money do you spend on your work clothes, and how much time do you spend buying, dressing in, and maintaining it?
How much time do you spend at lunch, and how much extra cash do you spend on it?
How much time and money do you spend on decompressing after work? On escape entertainment? On expensive toys and vacations as a “balm”?
How much time and money do you spend on job-related illnesses – extra colds triggered by stress and so forth?
What about dinner parties and drinks with coworkers and clients?
The list here goes on and on, but those costs (both in terms of time and money) are real. Let’s say you manage to commute in fifteen minutes each way each day and spend $40 a week on your car. That alone changes the equation to $460 a week and 42.5 hours a week. Let’s say you also spend an hour at lunch and, on an average day, spend $4 on lunch. The equation becomes $440 a week and 47.5 hours a week. Let’s say that you spend two hours at night unwinding in front of the television – even assuming you spend no money on this, it changes the equation to $440 a week and 57.5 hours a week. If you go out for drinks with coworkers and clients once a week and burn two hours and $20, you’re down to $420 a week and 59.5 hours a week. These are all very realistic things for an average office worker today – maybe a cost or two doesn’t apply to you, but others are even more expensive than you’re counting.
What does that turn your hourly wage into? It goes from $12.50 an hour over a 40 hour workweek to $7.06 an hour over a workweek just under 60 hours. You go from a solid job to something a McDonald’s employee would scoff at.
The scary part is that the expenses for many employees for their real job is actually far more than what’s noted above. I have a mandatory half hour lunch at work, plus my personal commute each way is about thirty five minutes. That’s an extra hour and a half tossed onto my weekday, which reduces my true hourly wage by 19% just with those two factors alone.
The other exercise in this section is also an eye opener, but it didn’t quite shock me as much as the first one. This challenge is much more straightforward: keep track of every dime you spend and every dime you bring in for one month. The numbers I got at the end weren’t surprising to me, but the process was a real eye-opener. I began to see how much cash was just floating out of my life. More importantly, I began to feel some serious twinges of guilt when I spent money on stuff I didn’t need.
These two exercises are intrinsically connected. After you figure out how much an hour of your life is really worth, it begins to feel very uncomfortable when you spend money frivolously. If you suddenly discover that in fact your time is worth only $9 an hour, then you go to purchase a Wii, you find yourself wondering if buying a Wii, a few accessories, and a couple of games for $450 is really the right move – after all, is more stuff really what you want as the output of fifty hours of your life’s energy?
These exercises really raise some profound questions.
Tomorrow, we’ll jump into the third chapter, “Where Is It All Going?” focusing on the first half of the chapter up to the start of the section entitled “Totaling It All Up.” That portion is on pages 76 through 87 in my paperback version of the book.