During a given day, I spend time on a lot of things.
I usually spend quite a bit of time doing things to earn an income – writing posts, sending emails, doing research.
I spend some time doing household tasks, which generally don’t earn much money but don’t cost much, either.
I spend some time engaging in personal tasks, such as eating and hygiene, which have some costs associated.
I also spend time engaging in hobbies and entertainment, which can vary a lot in costs.
The same is true for almost every employed person. You spend some time working – earning money – and the rest of your time revolves around expenses.
Now, as I’ve said many times, my fundamental rule of personal finance is to spend less than you earn, which breaks down to two pieces: spend less and earn more.
There’s a fundamental connection between those pieces and how we spend our time.
Time spent working – or preparing for work – is how we earn money. We can either devote more of our time to this to increase our earnings or we can find ways to earn more for each hour we invest.
Time spent on personal tasks and on pleasure is how we spend an awful lot of our money. Again, we can either devote less of our time to this to decrease our spending or we can find ways to maximize pleasure while minimizing our spending.
A lot of personal finance simply comes down to how we choose to spend our time.
Naturally, very few of us want to devote more and more and more time to work. Not only is work often not wholly enjoyable, but it also directly steals time from the other parts of our life – personal tasks, household tasks, pleasure, and sleep. We mostly want “bang for the buck” here – we want to be able to maximize what we earn for the time we spend.
Similarly, most of us want to maximize our enjoyment of the free time we have (or maybe even expand it a little). Again, we want “bang for the buck” – most of us want to maximize our enjoyment of life for minimal cost.
(In between those two, of course, we also have the costs for the maintenance of our lives – food, electricity, rent/mortgage, and so on – which we also want to maximize in terms of “bang for the buck.”)
In terms of both work and free time, “bang for the buck” inherently includes time. We want to have the highest possible hourly wage we can earn. We also want to be right at the peak of our fulfillment curve in terms of our free time.
This is why career advice is such a powerful part of personal finance. It’s all about maximizing the “bang for the buck” in terms of your work. If there’s a good way to increase your wages or increase your work skills at a relatively low cost, then you should take them.
Similarly, this is why frugality advice is a powerful part of personal finance. It’s all about maximizing the “bang for the buck” in terms of your personal and pleasure time. If there’s a good way to keep a high level of enjoyment of your free time at a lower cost, then you should take advantage of it.
Investment advice only really matters when you have a healthy gap between spending and earning. Until you have a big gap and you’ve maintained it for a while and used it to eliminate your worst debts, investment advice is useless. However, the longer you maintain that gap, the more important investment advice becomes.
So, what’s the message here?
Making your life more efficient in terms of the money you earn per hour and the money you spend per hour is invaluable. Seeking out methods to increase your income are always good. Seeking out methods to reduce your household and life maintenance costs are also good. Finding hobbies and pleasurable activities that have a low cost per hour of enjoyment are also good.
All of those steps work together to make it much easier to spend less than you earn. If you’re earning more per hour and spending less per hour, then it’s going to be easier to make ends meet and have money left over at the end of the day.
Spending less than you earn is the fundamental key to virtually every personal finance goal. It allows you to build an emergency fund. It allows you to start paying down your debts – and eventually pay all of them off. It allows you to start saving for every dream in your head.
It all comes down to finding efficiency. Look for ways to work smarter and to improve your skills at work at a reasonable cost. Seek out a mentor and emulate the appearance and performance of those in the job you wish you had. Look for ways to minimize your regular bills – energy, food, water, rent, and so on. Re-evaluate your hobbies and how you spend your free time and look for ways to get as much enjoyment as possible out of your free time while minimizing your spending.
The hours of your day are valuable. Try to spend them a little smarter and you’ll see a difference in your bank account.