If you’re part of the FIRE (Financial Independence Retire Early) community, then you know how important the savings rate is. It is the foundation of being able to retire early and sets the framework for living intentionally.
Not familiar with why it is foundational? Get started down the FI rabbit hole with Pete from Mr. Money Mustache. The Shockingly Simple Math Behind Early Retirement
Don’t see the connection between money and living intentionally? While we don’t like to talk about money, it plays a big role in our lives. We spend 40+ hours of our week working for it, hours on the road commuting, and countless hours stressing about it in our free time. Despite all this time and effort put in, many still live paycheck to paycheck.
Yes, there are a lot of other factors BUT living paycheck to paycheck is a choice. You can choose to live more intentionally and working to increase your income, decrease your spending, or both!
Living intentionally means understanding your values and letting them be your guiding principles in life. Do you really need to spend money on X, Y, or Z? It is about knowing your values and understanding where you want your dollars to go.
Hack #1: Think about each purchase in terms of how many hours worked
This is one of my wife’s favorite ways to think about purchases. It is an easy way to get perspective on the effort that was required to
Let’s say she finds something for $30. It seems cheap enough to not really second guess it…. But depending on how much you make an hour it could really vary. Some numbers to think about:
- $10/ hour: 3-hours of work for that one item
- $20/ hour: 1.5-hours of work for that one item
- $30/ hour: 1-hour of work for that one item
- $60/ hour: 30-mins of work for that one item
The two questions you have to ask are is the purchase aligned with my values AND do I think it is working X amount of hours for.
Another example. In this case a big-ticket item. Let’s say an iPhone at $999. Yes, there are low monthly payments but don’t let that fool you. The total is still $999 and more in some cases if they’re charging interest. We’ll round up to $1,000 to keep the math cleaner.
- $10/ hour: 100 hours (2.5 weeks of work)
- $20/ hour: 50 hours (1.25 weeks of work)
- $30/ hour: 33 hours (4.16 days of work)
- $60/ hour: 17 hours (2.13 days of work)
Hopefully, this helps you not get fulled by the $41.62 monthly payment and gives you a better framework for thinking about how you spend your money.
Hack #2: Give Yourself 72 Hours
In a lot of ways, we’re in an instant gratification world. We’re wired for it. Back in the day when we lived in the wild things weren’t certain. Resources were scarce and you never knew when your next meal would come. With such uncertainty, you had to worry about surviving NOW vs. thinking about the longer term and planning for the future.
Instant gratification is a behavior that many industries have leveraged. Your attention, your money, are all important factors in their success. So they continue to deliver experiences that give into that innate nature.
But we don’t live in that same uncertain world. We can plan for the future. Sure, you never know what is going to happen but we have enough security to plan for the future.
So, give yourself 72-hours. You see something that you must have? Something that gets you excited? Great!
You can buy it!
If…
It aligns with your values AND you wait 72 hours. It gives you enough time to let the excitement wear off and think about it in more of a more practical way.
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