A few years ago, I started to look at purchases in a different way.
I used to just buy with my credit card and not think twice about having to pay it off. I figured I would do that when I graduated college. Then, after I graduated, things got trickier. My parents were no longer paying my rent, and I had to start paying back my student loans. Oh, and that shiny new Acura TL Type S I bought. Oh, and that $20,000 in credit card debt I found that I had.
It took a couple years and quite a few errors in judgement to get where I am today. Now, when I look at something I’d like to own, eat, or use, I ask myself the following question:
“How many hours do I need to work to pay for that?”
You see, as I grow older and wiser (stop chuckling!), I find that my time is more valuable than my money. However, I can almost equate my time WITH money. I just use my actual hourly rate (what my salary equates to) to determine how many hours, or parts of an hour, I need to work to pay off that candy bar, iPod, or Little Giant ladder. For bigger purchases, I throw in my wife’s hourly rate as well.
There’s a slight flaw in this thinking in that I don’t get paid hourly, and often I can do a few personal things on my work time. Even so, this question has gotten me out of a few superfluous purchases. However, it is also making me a little less exciting and “cheap” (my wife will attest to that).
In summary, try thinking about your purchases in the amount of time you need to spend at that job you hate to pay it off. If you live paycheck-to-paycheck, this is especially important.
Once you have some more money in your pockets, you can start to think like PF Advice and ask whether something is a good investment.