A few weeks ago, I blogged about considering the cost-per-use for items that you buy. As most of you know, with the cost-per-use concept, you take the purchase price of an item, and divide it by how many times you think you will use it. For example, when I buy a pair of black flats for work, I will likely wear them 3 times per week, for 2 years. So (52 weeks) x (2 years) x (3 wears per week) = 312 times before I buy a new pair. If my shoes cost me $75, that’s about $0.24 per use.
Another way to help you determine whether something is worth buying or not, is to figure out how many hours you will have to work to purchase that item. It can be a serious eye opener. I used this approach a lot when I was a teenager making $8 an hour. When I realized I would have to work two full days in order to pay for a university application fee, I asked for my hours to be increased. And when I broke a heel on a pair of boots, I calculated that it would cost me 12.5 hours of work just to replace them – so I spent the equivalent of one hour of work getting them repaired instead.
Today, I use the same method when I’m thinking about buying a big-ticket item. For example, in 2011 I worked approximately 60 hours each week (60 hours x 52 weeks = 3,120 hours total). I earned around $80,000, which means my hourly salary (before tax and deductions) was $25.64. After tax, my true hourly wage was around $18. So when it came time to making the decision to get adult braces, the $6,980 price tag meant that I would have to work 387 hours just to pay for them – or nearly 6.5 weeks. Yikes.
I go out for lunch with co-workers almost every Friday. This costs me around $10. After taxes, my true hourly wage is around $23. Which means I have to work less than 30 minutes to pay for that meal. To me, it’s worth it.
My mortgage is $1,070 per month, which ends up being about 46.5 hours – or less than 1 week of work for me, after taxes. That’s also worth it.
Then there was a gorgeous dress I saw online at Anthropologie, but it was $300. And as much as I loved it, I couldn’t justify the 13 hours of work it would cost to pay for a dress.
You get the idea. Obviously this method, much like the cost-per-use method, has its pros and cons. But I really do find it helpful to break down how many hours I have to work for something to see if it’s worth it.
So the next time you have a few minutes, take into consideration your wants vs. needs. How much of what you are spending on a regular basis is on needs – like groceries, rent, insurance, and utilities? And how many hours are you actually working each week just to pay for the stuff that you want?
Asking yourself these questions is important, and taking the time to calculate how many hours you have to work to afford something is a really great exercise in the value of a dollar. A dinner out with friends every week might not seem like a big splurge, but if you’re making minimum wage, or you can’t pay your bills, or you are drowning in debt, or you’re working overtime just to make ends meet (so that you can continue buying stuff), maybe it’s a good time to evaluate what you can truly afford.
Is the lifestyle you’ve built for yourself worth the hours you put in?