Why You Are Saving Money Wrong?

Let us consider this, have you ever gone to a store to buy just 1 item only to come out of the shopping mall with a trolley full of items. 

As your stroll through the aisle, you're checking the snacks, the beers, the kitchen gadgets that you don't really need but you just add them to the trolley cart because why not it looks nice.

Then as your walking around the mall, you see that shiny new iPhone on display on the window display and you recall all your friends talking about the latest iPhone and using it, this subconsciously makes you feel you need it too, in order to keep up with them. After all, it's shining bright like a diamond.

In reality, the new iPhone probably only loads 2 seconds faster and your existing iPhone looks perfectly fine and good.

Consider this: money or item?

Rather than spending $1,000 on an iPhone consider this:

Would you rather:

• Be paid $1,000.
• Or spend $1,000 on an iPhone.

At this moment, you will realise it is much better to have the money than the iPhone. You sleep better at night, your existing iPhone works perfectly as good, and the new iPhone could probably become junk a year or 2 later on when another brand new iPhone comes out.

Pause and look at your belongings

• How many of those things would you rather have cash for instead?

It's a simple yet powerful question that will put your money decisions into perspective. It will also help you develop a clearer relationship between money and value.

Value in terms of your time

There is this really good book called "Your Money or Your Life" by Vicki Robin and Joseph R. Dominguez. It brings perspective to the value of an item in the quantifiable measure of how much time you need to spend working to earn that desired item that you wish to purchase.

Everyday is a bank account, and time is our currency. No one is rich, no one is poor, we've got 24 hours each. - Christopher Rice

Question to ask yourself?

• How much time is something worth?

Let's say you want to buy a phone worth $1,000, how many hours would you need to work from your day job to own that item.

According to the U. S. Department of Housing and Urban Development, the median income in 2021 is $79,900. If we take the median income $79,900 and divide it by the average number of working hours of 2,080 hours.

• $79,900/ $2,080=$38 per hour (not accounting for tax deductions)

This is just an example. You can adjust this to your own rate.

What this means is that you would need:

• $1,000/$38=26 hours

To basically afford that new phone you would need to work for 26 hours or about 3–4 working days to afford the new phone.

Knowing this helps you consider is it worth it?

This is especially much harder if you rely on shift work rather than a fixed salary. It probably isn't the best feeling in the world to think about your time and money this way, since we only have a limited amount of time to make money. However, this is the cold hard truth.

For most people, you are in fact trading your time for money. 

For me, this realization was a pivotal moment for me to learn to value my time and not waste a moment of it.

Conclusion

When you consider how many hours you need to spend to buy something, this lets you consider how much you value your time versus the item.

"Time is the most valuable thing a man can spend." 

- Theophrastus

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