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It’s the age old question asked by financial advisors,
“Can you really afford it?” Unfortunately, most Americans,
working as trained professionals in reputable industries,
and filled with an innate sense of entitlement, will
answer that question “Yes. Of course I can afford
it.”
And why not? Certainly after a 40-50 hour exhausting
work week you should be able to afford a decent wardrobe,
your kid’s tuition for summer camp, and a nice family
vacation. So why, when we work so much and so hard,
are Americans in debt? Why do our salaries always
fall short of what we need to survive?
The answer lies in the question. I don’t mean to
sound ambiguous. The fact is, if we base each purchase
we make on the question “Can I really afford this?”
we set ourselves up for budget-breakers. Fortunately,
there is a better question we can ask ourselves that
effectively cleans up our spending habits, and leave
our dignity in tact.
In their 1992 National Bestseller, Your Money
of Your Life, Joe Dominguez and Vicki Robin lay
out nine steps that will transform your relationship
with money and achieve financial independence. In
my experience, step two is enough to break most bad
spending habits. This exercise changes our mind-set
by asking a question we may not have thought before.
The exercise involves the concept of Life Energy.
Life Energy is your time in hours traded for money.
Some of us make an hourly wage. This is not quite
the same as Life Energy, because it only includes
the time you punch in to the time you punch out. It
doesn’t include the hidden hours we give to our employers:
the time required for grooming ourselves, commuting,
cooling down after a hard day, (not to mention the
vacations and entertainment we must have to maintain
our sense of balance.) Nor does our hourly wage reflect
the money we must spend just to have the opportunity
to work for our employer. I’m talking about the expenses
connected with costuming, transportation, meals, and
other job-related costs. To know what your real hourly
wage is, add all the extra job-related hours to your
normal work week, and subtract the job-related expenses
from your pay. Now you know how much you really make
at work. A simple division problem shows you how much
money you earn per hour. This is the amount of money
you trade for your time—your Life Energy. Keep this
number in your head.
Whether or not you find this number satisfactory
(that is considered in another step of the program)
you are now equipped to ask the right question. The
next time you are at the check out counter don’t ask
if you can afford that new “gazingus pin.” Instead,
think of your new hourly wage and ask if this purchase
is worth that amount of your Life Energy. For instance,
let’s say your adjusted hourly wage is $11 per hour.
If your new gazingus pin is $67, that’s equivalent
to over six hours of your life! Is it worth it? This
question can be very sobering for those used to saying
“Sure I can afford it!” All of the sudden, the question
becomes, “Do I really want to sacrifice that much
of my life for this?”
Add to this question the subject of debt and buying
on credit. If you are making your purchase on a credit
card you are automatically paying a premium for time.
And if you are struggling to pay off debts, you must
realize that you won’t even have the opportunity to
work the six hours to pay for your gazingus pin for
several days, weeks or even years. By then it may
be up to ten, fifteen or even thirty hours of Life
Energy. All for this gazingus pin. Is it worth it?
Do you love this gazingus pin so much that five years
from now, when you’ve paid your credit card down enough
to reconcile this purchase, you won’t mind throwing
thirty hours in at work for it? Is your job so enjoyable?
Kind of puts paid employment into perspective, doesn’t
it? It also transforms our all-American sense of entitlement.
If we look at time as money, maybe we’ll be a little
less cavalier and a little more cautious about where
we throw it.
About the Author
Emma Snow is a writer who specializes in financial
planning. She has worked in the financial industry
for over eight years. Currently Emma works on a Finance
and Investing site at http://www.finance-investing.com
and Investing Partners http://www.investing-partners.com
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