Updated on 10.09.07

This is the ninth part of The Simple Dollar Book Club reading of Your Money or Your Life. Want to know more?

If the “real hourly wage” calculation earlier in the book wasn’t tangible enough for you, this portion of the book makes it incredibly tangible.

In that earlier example, I used a straw man that makes \$12.50 an hour over a 40 hour workweek. However, when you actually look at that person’s life, that person actually makes \$7.06 an hour over a workweek just under 60 hours.

What’s the point? Let’s say that person has a taste for video games and picks up a new game for his Wii for \$50. On the surface, that person will say, “Well, I worked 4 hours at \$12.50 an hour to earn the money, so I’m trading four hours of my life for the game.” In reality, though, the trade is much more painful. Given the person’s true wage at \$7.06 an hour, that video game actually cost him more than 7 hours of his life.

It gets scarier when you look at a truly big purchase. Let’s say our straw man buys a car for \$10,000. To own that car, he must give away 1,416 hours of his life. Every time he fills up his 12 gallon tank at \$2.70 a gallon, he trades four and a half hours of his life for the gas.

What about a trip to Vegas? He goes on a weekend trip with some pals and burns \$2,000. Just to pay for that weekend of fun, he loses 283 hours of his life.

When you start thinking of things in terms of the hours of your life wasted to pay for them (using that real hourly wage you calculated earlier), a lot of consumer goods start to seem like a real waste of money. Was that one weekend in Vegas worth seven weeks’ worth of eight hour work days?

Try doing this in your own life. Figure up your true hourly wage, then take the cost of one of the most frivolous things in your house and divide it by that wage. That’s how many hours of your life you spent paying for that item. Go through several items like this and ask yourself is that item really worth all of those lost hours working?

I know for me it isn’t, and that simple fact has become a life-changer in terms of my relationship with my money.

Tomorrow, we’ll dig into the fourth chapter, entitled “How Much Is Enough? The Nature of Fulfillment.” This is a very thought-provoking chapter, so we’re going to start off slow, surprisingly slow. We’ll read the fourth chapter up until the “Question 1” heading, which appears on pages 109 through 112 in my paperback version of the book.

1. chris says:

I’ve always enjoyed the concept of true hourly wage. It justifies the feeling I always had that working a 4-10 schedule (4 days a week 10 hours a day) was superior if only for the 2 hours a week i save commuting.

I have found it interesting that a person who considers himself underpaid and complains about the condition will not hesitate to waste money on a lottery ticket or eat dinner out every other night. In other words, there is more concern about money coming in than there is about money going out. This section of the book demonstrates that it only makes good sense to spend in a deliberate manner.

3. kman says:

This way of thinking about time and money can suck the joy out of life IMO. There are very few things I would trade for my time.

Think of it this way. Every thing you buy costs a certain amount of your time. Let’s change the context slightly. A computer will cost me say 50 hrs of my life. Now would you shorten your life by 50hrs to have that computer? Put in those terms makes it bit more clear where this idea leads. I’d say most people would not shorten their lives for a computer.

Thinking about what you buy is an excellent idea. But money is to serve us, not the other way round. Money is for us to use for our needs, for others, and for enjoying. Summing up my life in units of money just doesn’t fit me personally. I think taken to extremes this thinking leads to being a miser.

4. trb says:

This section of the book got me focused on my ‘going out with the guys’ activities. Beer at home tastes just as good as one at the bar, and costs me half an hour less. Tickets to the baseball game run me an hour or two of work-life-energy, plus the hours there, plus the hours of transit – and suddenly I realize that it’s not worth it. I get more out of my time being at home reading or working on a project, and I get more of my life to spend on other things I really care about. I think I whipped my sports fixation with this one little thought exercise. Eating at chain restaurants is disappearing too – for the extra life energy, I’m not getting any extra memories.

5. Helen says:

I have one little issue with the ‘trading money for life’ thing. That is, I enjoy my work. It is creative and stimulating, and I like helping people learn to draw. There are elements of drudgery doing site maintenance, but overall, I like doing it and would have a big gap in my life if I didn’t.

It seems to me that ‘your money or your life’ makes the assumption that work is always a negative thing.

Helen

What is even scarier is if you put one of those purchases on your credit card you can’t pay off at the end of the month.

I like kman’s comment though. I wonder if there is a heuristic for the gaining of a life experience compared to saving money for that life experience. trb said he wouldn’t go to a ball game cause it is too expensive for what he does. However if the game provides you with a great life experience then why not? Guess it is a really personal choice and pends on your goals.

Goes back to budgeting and how to figure in your entertainment budget compared to your purchase items budget I guess.

7. Dawn says:

I like to look at this in a simple context. I choose to work to live, rather than live to work. Picking this path means I have to be conscious of my financial choices. This means taking a breath and thinking about those money matters, rather than letting loose with impulsive decisions. For me it seems to be all about walking that middle path … it’s kind of a sweet journey … cause most people are either in the fast or slow lane.

8. GeekMan says:

Please forgive the length of this comment.

I’ve read many of the books recommended on this site, based on Trent’s recommendations, and after reading this book in full I’ve found it to be the _least_ helpful of the personal finance books Trent has recommended. Perhaps my situation or outlook on life is different than most, but I agree with kman that thinking about money in the way this book espouses, money as life energy instead of money, can destroy the joy one has in living. Money is a tool, a means to an end, not the end in and of itself and I completely disagree with the premise that everyone is working for a dying.

Yes, you are trading your time to make money now, but how else will you become financially independent and thus able to do the things that make you happy? Most, if not all, of the examples in the book are of people who are unhappy with their careers and/or life and perhaps this book is helpful for them. But what about the people who actually enjoy what they’re doing now, whether or not they are making good money? How does calculating their “true hourly wage” actually help them?

Later in the book they “redefine” work as “any productive or purposeful activity.” This sounds well and good on the surface, but In this sense, going to the bathroom would be defined as work, as would eating, talking, driving, sleeping, making love, reading, walking, shopping and even taking a shower. Come to think of it, that would mean that you would need to include any of those activities that take place on a workday in your “true hourly wage” calculations, which would remove any usefulness of that number.

I’m not saying people should ever spend more than they earn, going into debt is pure folly. What I AM saying though, is that my thoughts are that this book twists things in such a way as to make the reader feel that no matter what they do for their career, they’re wasting their money and time unless they are living their dream job and never waste a second doing something they don’t love, love, LOVE doing.

Where in this Straw Man example of the “true hourly wage” is the compound interest of someone’s savings money calculated? Where is their job’s 401K match calculation, or health insurance? What about the close friendships they’ve made with their coworkers? Conversely, where’s the calculation of the joy a guy might have when taking a non-paid day off of work and spending \$400 on baseball tickets, some mementos and dinner for himself and his son? If we extrapolate the type of money = life energy thinking of the book further, then what is really being said is that those who earn a high “true hourly wage” can partake of all the experiences life has to offer, whereas someone like your Straw Man would be best off staying at home in bed unless they’re going to, coming from or actually at, work. And honestly, where is the value in that?

9. This concept is roughly what I use when making spending decisions. It can also spur you to increase your income so more purchases become worth it in terms of hours.

10. Susy says:

My husband and I use this the other way around in our business lives. Since we own a business and it’s just the two of us, every job we bring in makes money, but it takes up our time. Sometimes we turn down jobs because in reality we don’t need more money, it’s not worth it to us to spend 20 hours on a project. We’d rather take 2 days to go hiking instead.

11. elmo says:

I think the book is looking at only one side of things. If going to a baseball game makes you happy then I think your hourly income has increased because it gave you your lfe energy back. It was not really spending. Thinking of it this way will reverse that thought of having destroyed your enjoyment of life. It is exchanging money for life energy. and if that allowed you to have quality family time together then that exchange could be worth it.

12. Leslie says:

I think the point of this part of the program is to spur those who spend without thinking and are not truly content/balanced or fully alive. The idea is to take a look at your work in relation to your entire life and decide if your work and spending are aligned with your values/priorities.
First let me say I have read this book in whole twice and refer to it from time to time. It makes real sense to me to learn how money fits in your life and how to use it as a tool. Maybe more of a paintbrush then a hammer in terms of a tool that helps you create the life you would like.
I am thankful I have a job I love with good benefits and decent pay. It would be better pay with a masters degree but the cost to my quality of life right now makes me hold off on getting one. This section of the book is the one I have always declined to do in detail because the plus/minus part and the nitty gritty detail was too time consuming-I’d rather hang in the back yard or be in my sewing room but I have always used this section in that I constantly assess if I’m happy in my work for the costs involved. I commute a distance right now but am really happy at work so I make the trade of time and money.

13. bacall says:

Although I have a bachelor’s degree, I chose to waitress at a local cafe, rather than get a “real” job. Why? I have a 2.5 mile roundtrip commute, I average \$16.83/hr minus the \$1.06 I pay for a great meal at the restaurant. I enjoy a flexible schedule, and am able to volunteer as a mentor at my daughter’s school. In my former real job, I calculated my true hourly wage to be \$9.25 hour. Since my husband’s job provides us benefits, I’m sticking with my waitressing gig for now!

14. rhbee says:

It seems to me that most of us have discovered in this chapter why the authors didn’t call the book, Your Money or Your Life Energy. I actually found myself angrier and angrier as I read. First of all the term “life energy” is clearly a concept the authors are selling. My wife once convince me to go with her to an Amway convention. Testimony to the wonders of tiered marketing strategies that yield the greatest in “life styles” ensued. This chapter reminded me of that but the comments above reminded me of something else. Financially Independent people can think for themselves and choose what they want to do with their lives. I really liked geekman’s and susy’s perspectives. And I agree with all of you that are saying it isn’t about “life energy”, it is about Life.

15. Trading working hours vs. spending on ‘good to have’ stuff is very nice perspective. Defenitely helps one to focus. But there are intangible gains from time and money well spent and experience (personal or otherwise) and gut feel can serve as a guide. Thanks Trent and all, for the perspectives.

16. smgirl says:

what a horrible way to think of things. It just seems to suck all the joy out of life. In our household, we work because we have to but we do enjoy our jobs, we make sure that we put 15% of our money aside and have been doing this for many years. The rest we pay our bills and then spend any way we want without feeling guilty or resentful, if you are gonna stress about every single dollar, it sucks all the fun out of life. What good is working hard if all you are gonna do is worry about tomorrow? How about taking some great trips, enjoying dinners out with friends, going to movies and treating yourself to some great things. Once you have already put money aside and paid the bills, you should be able to enjoy the rest. We always pay our bills and credit cards in full every month since that is first before the fun stuff. Coming home to a lovely home, i built with work, makes me happy to be working.

17. Jennifer says:

I am surprised at how many commenters did not like this book or its perspective. It was one of the best (if not the best)financial books I have ever read (and I’ve read a lot!).

I don’t find it depressing to calculate how much something will cost me in life energy. It is simply a way to quantify how much enjoyment something will bring me and help me make a decision as to whether it is worth the expense.

I think that this is really important because in today’s society, people don’t seem to know what they can and can’t afford. They look at their neighbors and see them driving a new car and think that it must be okay for them too. Or they think that if they can pay their minimum credit card balances each month then they are okay. I really think that people today have a very difficult time deciding on what they can afford.

Figuring out what something will cost you in life energy is a good way to decide if you really want to make that expense, even if you have the money.

Thanks for recommending the book Trent. I think it is a must read.