A few years ago I went through sort of a financial awakening. I hit bottom one day when my check card was declined for a $5 fast food purchase and I had no cash and no available credit to pay for the meal. It was the culmination of years of overspending, lack of savings and general apathy towards finances.
That fateful day, and the days that followed, I had a mindset shift in how I thought about money. I give a lot of the credit to the book, Your Money or Your Life, which I still keep around and read today. In fact, the book was recently updated with revised statistics and new testimonials. The key takeaway from the book for me was the concept of life energy, and how much of it we are willing to exchange for material items.
What is Life Energy?
Life energy might literally be defined as the remaining amount of life (days, hours, minutes, seconds) that we have remaining on Earth. It’s a morbid idea to try to predict the day of our own demise, but sticking to general life expectancies we can assume I have another 40-50 years. Much of that time will be spent working to earn money, so in essence I am exchanging a large portion of that remaining energy for money. To carry this idea out further, I then exchange the money (that I exchanged life energy to acquire) to purchase things.
Intellectually, I guess I’ve always known this is the way life works, but it wasn’t until that rock-bottom moment that I recognized the new CD in my car’s player (purchased a day or two before) cost me an hour of life energy. At the time I was earning around $20.00 an hour. Back out the costs of my commute, my clothing, meals out, etc, etc. and I was actually earning about $15 an hour at the time – the cost of the CD. So I gave up an hour of my life for something that I probably listened to a few times and then added to the collection of dusty CDs gathering at home.
How Much Is Your Time Worth?
Of course, there are many things for which I will gladly exchange my life energy. I’ve grown quite spoiled by heating and air conditioning, for one, and obviously there are other basic needs that must be met such as food, shelter, clothing, etc. But the idea of converting the cost of something to the “life energy cost” has really made me a more frugal shopper.
Consider the cost of a new car. These days new car prices are averaging around $20,000. Assuming your real wage was $15 per hour, it would take 1,333 working hours to pay for this vehicle (not including taxes, financing costs, etc.). That’s nearly 166 working days to cover the costs of the new vehicle.
Since most of us only work five days a week, it would take over 33 weeks of solid work to pay for your new vehicle. That doesn’t sound like much? Think about all that has happened at your job over the last 33 weeks. Now imagine that 100% of the money earned for all those meetings, late nights, phone calls, early mornings and moments of sheer mind-numbing boredom experienced over the last eight months was sitting in your driveway. Seems like a pretty significant exchange now, doesn’t it?
I’m not advocating that you go around converting everything you buy to hours of life energy (well, maybe I am). However, if you really want a sobering look at your spending patterns take some time to calculate your “real hourly wage;” not what your pay stub says you earn, but the amount you actually earn after the expense of going to work is subtracted. Now keep that number in the back of your head the next time you go shopping. A new purse might now cost 2 hours of life energy. $100 for a night out on the town might have seemed cheap last week, but this week it looks like half a day of work.
Going forward, the things you spend money on now say something about how you value your time. If you frivilously spend on things that don’t add value to your life, then you probably don’t place much value on your remaining life energy. If you take time to research major expenditures, seeking value and quality from your purchase, then welcome to the frugal club.