Woman hand putting money coin into piggy for saving money (Picture: Getty Images)
Thinking about time as money is nothing new, but not all of us apply this logic when shopping for items.
This about that top you can’t live with out or that great pair of boots, and think about it in terms of your hourly or daily wage.
If it equates to half a day at work – maybe even a few days – is it still worth it?
Thinking about how long you’d have to work to afford an item is what we’re calling ‘weight-weighting’ – and it could be the hack to curb your unnecessary spending, or at the very least get you to think more thoroughly about the true cost of impulse buys.
Alice Tapper, financial expert at Go Fund Yourself, who also working with Monzo, says: ‘The challenge we face is that it’s very difficult for our brains to conceptualise the real value of money.
‘When you consider the time you need to work to afford an item, it becomes a bit easier.
‘Like our money, our time is limited, so by translating the cost of an item into hours or days of work, you get a better understanding of the trade-offs involved in the decision, which can help you figure out if the item is worth the time you spent working for it.’
This way of thinking can be helpful for understanding where your spending may not align with the value of your time, helping create more mindful spending decisions.
Hosts of a podcast, Primadonnas of the Gutter, also used this technique in a video they shared recently, which showed how to shop with ‘time as currency’.
Alice says this isn’t the most popular mode of thinking about money, but its simplicity has value, adding: ‘Everyone’s time has a price and so it’s something we can all use, no matter what we earn.’
It does have some drawbacks to keep in mind, however.
‘It can become overly simplistic – it doesn’t always take into account other factors that might influence the value of a purchase, such as long-term benefits or emotional satisfaction,’ Alice says.
‘It’s also important to remember that there are some things we spend our money on where there aren’t immediate benefits to be had.
‘And, there’s a small risk that it could lead to an unhealthy attitude towards work…making you feel like you need to work more hours to afford the things you want.’
Like with all things, it’s best to apply this approach with balance in mind. It won’t work on big spends or things you need, but it can prove useful for the purchases you could live without.
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How can you figure out your annual or daily pay?
If you’re on an annual salary and want to use this way of thinking, you can calculate your hourly or daily rate by following these steps:
Find your gross annual salary (that’s your salary before taxes and deductions).
Determine the number of hours you work per week, and multiply this by the number of weeks you work per year. This will give you the total number of hours you work annually. If you want a shortcut, there are around 252 working days this year which assuming you work an 8 hour day is 2016 hours a year.
You can then divide your annual salary by the total number of hours worked to get your hourly rate.
Multiply your hourly rate by the number of hours in a typical workday to determine your daily rate.
Once you’ve worked out your hourly or daily rate, you can use this information to estimate the value of potential purchases.
When it comes to the money you’re definitely not looking to spend, Alice says to make sure it’s accruing a decent level of interest, such as Monzo’s Savings Pots which have 3.46% interest.
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