I’m sure that many of you are like me and are always looking for a trick or tip to help you stick to your budget. Well here is a little frugal money saving trick that I use to help me make better spending decisions and I think it can help you too!
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It’s so easy to be swayed by things even if you think you’ve got a good handle on wants vs. needs!
I learned this simple trick long ago from one of my favorite frugal living books, Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence by Vicki Robin & Joe Dominguez. It’s not your typical frugal living book! This book was originally published in 1992 so I’ve been using this technique for a long time! (There’s a revised version of the book available if you’re interested and I’m sure many libraries carry it).
The trick is that before you buy something… and that something could be dinner out, a new dress, a decor item or even a house, you have to calculate (and think about) the amount of work it takes for you to be able to spend that money. Then you need to decide whether it’s worth it to you to go ahead and make that purchase.
This is a great simple trick to help figure out the real worth of something! (Of course, there are always other variables to consider but this gives you a good starting point)
Here’s how it works:
1. The first part of this technique is to calculate how much you make per hour. If you’re paid hourly then that part is easy for you. If you get paid monthly, weekly etc., then you will have to calculate your hourly wage. (YMOYL goes further into figuring out your “real wage” where you minus the expenses incurred from your job)
2. Divide the price of any item you want to purchase by your hourly wage
3. What you are left with is the number of hours you need to work to pay for that item
4. Is it worth it?
For example:
1. You want to go out to dinner and it usually costs you $40
2. You’ve figured out that you average $10/hour in pay
3. So you divide your hourly wage into the price of the item. In this case, $40 ÷ 10 = you would have to work 4 hours to pay for that dinner out.
4. Is that worth it to you? For some people it will be and for some people it won’t. Everyone is at different stages in life and everyone has different goals.
There might be other factors that you will want to consider when making your decision, but for the most part, this is a eye opener about the real cost of something! It’s a great reminder that you actually do have to work for the things that you buy. I think it makes that number more concrete and tangible. $40 isn’t just $40…it’s 4 hours of work, 4 hours of life energy in this example.
A simple trick like this can potentially save you lots of money because after you use this technique for a while, your mind set regarding how you spend money will change! You will really see money in a whole new light!
I can vouch that this will lead you to making much better spending decisions!
You might also be interested in: 10 Ways You Can Save $100 This Month
I was just explaining this to one of my daughters the other day! It is a good trick and it works!
Don’t forget…if that dinner out, isn’t delivered and you have to drive (in our case quite a few miles in the country) to pick it up, add travel costs, ie; time and gas… well, you could have stayed home and made supper in the amount of time it takes… 5 nights in a row for the cost of food alone!
Don’t think I ever read that book…I have a good friend to thank for that trick!
Oh it’s a good book to read! Try to get the revised version because the 90’s one has out of date info. It is a good trick!
This is the same method I used to teach my 5 yr old the cost of something he wanted. I told him how many hours dad had to work for us live in our house, then how many hours after that he worked to buy our food. I didn’t go into great detail, just the few basics like gas for the car, ect. THEN what was left we could have fun with.
We figured out how many hours dad had to work to buy the toy he wanted. Most of the time my 5 yr old would rather have dad home than the toy. 🙂
That was about 17 yrs ago now. He’s 21 & has paid for a car, a truck & is now buying his 1st house. Self-control & waiting for what you want is such a big part of budgeting. This is such a great way to help our kids learn this lesson early on.