Time is Money: How Many Hours Did You Work to Buy That?

It’s cool when readers make comments that prompt you to create a post on a certain point, no matter how brief.

Recently, on my post 5 Rules for Achieving Debt-Free Living, a simple yet valuable point was made in one of the comments:

“Look at what you want and figure out how many hours (post-tax!) you will have to work to earn it. Do you want it badly enough to buy it?”

It’s something I have thought about before. These days, I think in terms of maximizing the income minus expense gap, investing intelligently, and the concept of time is money.  This approach is one I actively thought about as a teenager, when I realized that for me to spend $9 to see a 2.5 hour movie and enjoy popcorn and a soda, it would take me that long at work just to do that. It got me thinking about how maybe I didn’t need to get the popcorn and soda, and maybe should just get one or the other:)

But as adults, it helps to remember that calculation from back in the day. I had a few friends who, upon getting their first jobs out of undergrad studies, purchased new cars. Not just new cars, but nice new cars. This was a while ago, and these people were buying $25,000 cars. Keep in mind, their salaries were in the range of $25,000 as well. Pre-tax.

These guys spent a lot of time working just for a car.

So, let’s do the math.

  1. $25,000 salary, divided by 250 working days, = $100 per day.
  2. $100 per day, divided by 8 hours, = $12.50 per hour.
  3. $12.50 per hour, multiplied by 75% – to account for tax – = $9.38 per hour post-tax
  4. $25,000 car, divided by $9.38 hourly rate, = 2,665 hours.

They worked 2,665 hours for those cars. When you consider that the calculation above assumes 2,000 working hours per year (when you consider #1 and #2 above), this comes out to 1.33 years of their life that they worked just to pay off a car.

If they just would have purchased a decent used car for much less, it would have made a lot more sense, though it wouldn’t have been “cool”.

The good news is that many years later, both guys are now savers who try to put a way a solid percentage of their income. I have only talked to one about the cars he bought when younger, and he acknowledges that it was totally nuts for him to do that.

Maybe he started to do this type of math exercise and figured it out later!

Question for You: Do you ever think of things in this way, figuring out how much you would have to work in order to pay for something you wish to purchase? This can apply to any big purchases, not just cars.


    • Squirrelers says

      101 Centavos – it sure does help distinguish wants and needs! We can most often make additional money, but we can’t make additional time.

  1. says

    I do this almost obsessively. It’s amazing I buy anything! Sometimes my kids turn to me and say, ‘drop it Mom!’ It’s the big ticket items that are really tough to quantify. Vacations, cars, homes…..it makes me want to go live in the woods and eat berries 😉

    • Squirrelers says

      Molly on Money – Hah! I know what you mean, with costs of those big ticket items. It’s interesting how much we have to work in order to stop working for a while!

  2. says

    Good idea, although I never thought of it in those terms. I usually find what I like and then locate the lowest price for it. If I don’t see the value, I don’t buy it.

    • Squirrelers says

      krantcents – yes, it’s not an automatic response to purchase decisions, to look at how long one has to work to buy something, but it’s a good way to put it in perspective.

  3. says

    I’ve done a couple of nutty car purchases when younger. When you live in a high-tax area like where I do, the post-tax calculations can be especially crushing (especially since purchase prices tend to be higher as well).

    • Squirrelers says

      Invest It Wisely – So, you know what I’m talking about here, it would seem. Looks like you’ve learned well since then. Those post-tax calculations can just be brutal, can’t they?

  4. says

    We are big do it your selfers and periodically I decide it’s worth quoting something out that I normally do on my own but I rarely go for it unless I’m desperate and under a time crunch. I may take 3x as long to tile a floor, but I know it’ll be done right and I have hundreds or thousands of dollars more in my pocket.

    It’s interesting how I don’t have an issue paying $1000 or more a month on childcare, but paying to do home improvements takes an act of god. Remodeling really is expensive. I don’t know how people can afford to farm everything out.

    • Squirrelers says

      First Gen – maybe willingness to spend on specific services depends on our own time and needs? Childcare is necessary to work. A contractor for work around the house is not necessary for work. Perhaps it’s a matter of interests/skills at that point. For me, it would be the service provider route instead of DIY for some things – such as tiling a floor.

  5. Squirrelers says

    Ramona – you know, it’s interesting how much people will work just for a certain brand name. By going with a lower status brand name, they could save more money and actually have more money….which is the point in the first place instead of pretending to have money, right?

  6. says

    We always think about the cost per usage of fun things. Like, if we buy a DVD in all likelihood it will only be watched once. (unless it is a totally awesome movie like the social network). So that would be $20.00 for one usage. In the alternative, if we buy a $20.00 board game, that we may play once a year for the next ten years, then the cost per usage is only $2.00. I’m not sure if that is a great factor to consider or not, but it is along the same line of reasoning that your discussing. Is it worth working 2,600 hours for a car? Probably not (at least not in our personal finance set).

  7. Squirrelers says

    Deidre – Thanks for visiting! Perhaps it’s the self-employed aspect that brings to light just how hard one really has to work to buy a specific item. When salaried, the exact work isn’t tied to exact projects, so I can see how it would then be easier to look at it differently. Back to the self-employed angle – the time spent chasing down accounts receiveable and waiting for receipt of cash could make that feeling magnified, I could see that. It makes sense.

  8. says

    That’s a good way to think about it, Squirrelers- hours of work. Doing that for smaller purchases though, in my experience, can be dangerous (e.g. $100-$200 worth of goods). I find I used to convince myself things were only “3 hours of work” when I shouldn’t have been buying it at all.

    Great post- got me thinking!

  9. says

    @ Squirrelers – yes the accounts receivable angle always comes into play and has changed how I look and react to budgetary concerns. For example, I obviously do not get paid if I take a vacation. So that vacation really costs me 2-3X what it would if I had a salaried job. I do not often go on vacation for this reason as it just really does not make sense on many levels. A 5,000 vacation could potentially cost me 20K or more depending on the time away from work and lost billing opportunities.
    Having said that, I love being self employed but you do have to change how things are viewed :)

    • Squirrelers says

      Deidre – yes, when $5k turns into a $20k expense when all is factored in, I can see how that’s a disincentive to take vacations! While I’m salaried right now, it makes to me how the self-employed route offers different perspectives.

  10. says

    I had one other thought to why I don’t necessarily do the cost/benefit analysis vs my salary. In most cases, if you annualize my salary, I make more per hour than most contractors BUT, giving them money to work on stuff doesn’t actually allow me to earn more. I am paid a salary, not an hourly wage. If I decide I want to work 80 hours/week, my pay actually doesn’t change….at least not until a promotion.

  11. says

    It’s a great way to look at purchases. I just purchased a new sofa (haven’t owned one in a few years) and based on this calculation, it will take me 70 hours to work it off. Good thing I’ve been saving my money for “large purchases” such as this. However, I think I agree with Young and Thrifty that I wouldn’t want to use this strategy towards smaller purchases, it might make me buy more. 😉

    • Squirrelers says

      Little House – I agree with you and Y&T on the smaller purchase concept the more I think about it. If it costs 10 minutes of work to buy lunch outside, that’s probably not a huge disincentive. When the hours get to the higher levels, like the 70 you mentioned, it changes the equation a bit!

  12. says

    I’ve never thought of it this way, but this post certainly makes me wonder! When I think of purchases in terms of hours worked, even that used car I bought seems like a lot! :)

    • Squirrelers says

      Money Cone – you know, that used car probably cost a lot less hours of work than a comparable new car would have cost you!

  13. says

    I have to agree with First Gen American that being paid on salary does make it harder to relate to hourly calculations. But then again, I might be choosing to not think this way for the same reason I don’t look at the nutrition label on the box of Girl Scout cookies. If you don’t know, it can’t hurt, right?

    I actually liked how the car dealer told us the total amount we would be paying (with interest) if we let our car loan go the full five years. It didn’t stop us from buying, but it’s giving us good motivation to pay it off faster.

    • Squirrelers says

      Lindy Mint – you know, I just had a box of cookies come home today. Actually, several boxes of girl scout cookies. I have to order them here at home:) Hopefully I can avoid them, because I have looked at the nutrition data, and it’s no substitute for fruit – that’s for sure:)

  14. says

    I like it! I frequently compare the time with cost. Occasionally, that type of thinking drives me to spend more at one grocery store, instead of rushing around to get the cheapest price on every item. I like the “specific” idea of calculating my hourly value and then using that as a benchmark for financial decisions.

    • Squirrelers says

      Barb – Yes, there are transaction costs, if you will, to going from store to store hunting for low prices. The cost is in time. I get what you’re saying!

  15. says

    Holy Jebus! That puts things into perspective. Is working over a year to pay off a car alone worth it? I wonder how many years it takes to pay for a home. Now you have me breaking out my calculator.

    • Squirrelers says

      Sandy – that’s what I like about bringing math into the equation, and looking at such things a bit differently. The orginal comment from the prior post (5 Rules for Debt Free Living) was aligned with my way of thinking, and I thought it would be good to illustrate with real examples. It even makes me stop, after thinking about what those guys did with cars. And yes, it puts into perspective the cost of a house. Why work years longer just for some structure that’s a little fancier than a perfectly comfortable one.

  16. says

    I do factor in the amount of time working to buy an item when making purchasing decisions. That frequently convinces me not to do it. That could convince you to eat out, for example, but I compare that with the cost of eating in instead.

    When I owned a house, I frequently paid contractors for tasks I wasn’t good at or didn’t want to do, as their hourly rate is lower. Sure, I could have mowed the lawn myself, but I didn’t want to spend the whole weekend working on the house. Time off is valuable to me as well. Now that I rent, I save money and don’t have to do any of those tasks.

    • Squirrelers says

      Jennifer – it seems like we see these things similarly. Why spend time to save a few dollars when your own wage is worth a lot more, and you could pay specialists? It’s a question worth asking each time.

  17. says

    Interesting post. Many times before purchasing an item, I would think, how many hours do I have to work to afford this. But I think some of the comments above also made sense, it’s important to think about what is the item worth to you. For example, an item may cost you 10 hours of work to afford it but it may have 1,000 hours of usage time and that is definitely worth it.

    • Squirrelers says

      Sean – that’s actually a really good point If your time investment upfront provides a high return in terms of useage time or even time savings, it might be worth it. It’s a factor worth considering.

  18. says

    I am in the middle of reading the book Your Money or Your Life and hours per purchase is a big part of their financial improvement theory. I haven’t used it too much, because I rarely make excessive purchases and I do a lot of my own car maintenance and home improvements.

    I will say that as I have gotten older and more sucessful, time is becoming more precious than money.

    • Squirrelers says

      Bret – interesting, I haven’t read that book. Makes sense that others advocate it. I totally know what you mean about how as one gets older, time becomes more precious than money. We can make more money, but can’t make more time.

  19. says

    Interesting post!

    I made a similar calculation when I brought my car to California and it couldn’t pass smog testing… I ended up with an off lease car (this was right when I started working, so I unfortunately had to finance it). I captured the last 4 years of a 7 year/100,000 mile warranty – and because maintenance wasn’t an issue anymore, I knew I would save money.

    However, like Ramona said, I could have gotten a cheaper car. That said, I don’t have a place, even now, to work on a car (like Bret!) so sacrifices have to be made! Your argument is good… but I caution against making the calculations without considering the costs (and savings) of the alternatives… in this case leasing, buying used, borrowing, using a service like ZipCar, or any other number of scenarios.

    Thanks for the post!


    • Squirrelers says

      Paul – you do make good points. There are always alternatives to consider when making such decisions. If one option seems quite expensive in terms of your time, it doesn’t mean that other choices are any less expensive when considering all factors.

  20. says

    I find myself thinking this way when i’m wanting to buy something that I don’t necessarily need. It gets rather depressing sometimes. I guess this thought process is pretty quick for someone like bill gates?

  21. says

    I love your idea, and this make me starting to learn how to manage my money on the stuff I need. I hope I can buy some of my time back..

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