One Simple Way to Curb Overspending
I don’t really enjoy shopping. Braving the crowds at the mall or trying to find the best deals online is not my idea of a good time. There are however, things I do like to buy, and when I decide to make a purchase of one of these items, I tend to go a little overboard. Books, movies, and tools are my weaknesses when it comes to shopping. Some people like to buy clothes. Others crave purses or shoes. My purchasing drug of choice is books. I’ve managed to curb my spending when it comes to my other vices, but books remain my weakness. I purchase more books than I can read and justify the expense to myself and my wife by saying, “It’s not like they’ll go bad. I’ll read them someday!” This is not sound logic.
People tell me to avoid shopping and the temptation will not be as great, but the reality is that shopping is a necessity. Even if we are not buying books or movies we still have to go out and purchase food, toiletries, and other household necessities. It needs to be said, books are everywhere. The temptation to buy glossy covered, bold titled stories is almost overwhelming.
Consumers are exposed to thousands of brand messages and advertisements daily. From television to the internet, on our phones and in the publications we read, advertising dominates our senses and entices us to buy, buy, BUY! Are we doomed to overspend when we see the sales flyers or markdown prices at the mall? Thankfully the answer is no. I have one trick that I use on a daily basis that keeps my spending to a minimum and helps me put some perspective into my purchases.
Of course as I’ve gotten older I have come up with all kinds of tricks and tips to curb my spending. I use cash for everything other than the major purchase. I never use my credit card unless it’s absolutely the only way to purchase the item I need. I’ve learned to distinguish between NEEDS and WANTS. None of these compares to the next trick however. I calculated what my hourly pay rate was.
That’s it! I figured out how much I make an hour at my job. By calculating my hourly rate I am able to place a value on my purchases as an expression of hours worked. For example, if you make $41,600 a year after taxes, you would be making about $20 an hour. This means that every time you want to make a purchase you would calculate how many hours you would have to work to pay for the purchase. If you want to go to the movies and eat popcorn and pop with your significant other it’s going to cost you about $80. That’s four hours of work to pay for a two hour movie. Is that worth it for you? If so, watch the movie and enjoy the popcorn! If you’re thinking that four hours work is not worth a two hour movie then perhaps you should not be spending your hard earned cash at the theatre.
This trick works best for me because it gives me a real life perspective point to start from. In the past I would justify the spending by saying, “I’ll cover the cost later” or “I’ll do without something tomorrow.” This never happened and my budget would constantly come back busted. Let me tell you, doing without ketchup and cheese for two weeks because I went to the movies the week before was not always a good feeling. Often, the movie wouldn’t even be that good and I was still going without some other thing thinking to myself, “That movie wasn’t worth not having salsa, cheese, or sour cream on these nachos.”
Now I ask myself, “Is this movie going to be worth working four hours?” It might be if the movie promises to be epic and your coworkers are fun to work with. It might not be if you hate your job and your coworkers are terrible people. At least this way you have something tangible to compare the cost to.
How to calculate your hourly rate
40 hour a week x 52 weeks a year = 2080 hours worked
Take your net salary (after taxes) and divide it by 2080
$41,600 / 2080 = $20 an hour
Now that you know your hourly rate of pay you can calculate how many hours you have to work to pay for any purchase.
A $100 dinner? Five hours of work.
A new outfit for $120? Six hours work.
What about a $1000 weekend trip to Toronto? 50 hours or 6.25 days!
Really puts things into perspective doesn’t it? Now this isn’t groundbreaking news and I’m sure someone else out there has thought of this idea, but when you actually figure out what you make an hour and measure all your purchase against that amount it makes you think about spending the money. Working this out has really made me rethink my book purchases and I no longer spend several hundred dollars a year on books that I only hope to read someday. For the longest time I had my hourly rate written on a piece of paper in my wallet so that every time I went to get money I would see it.
So, next time you’re planning a night out, or deciding to make that impulse purchase, take a minute to calculate how much time you’re going to have to put in at the office to pay off whatever widget you want this time. It’ll soon become a habit and it will shock you how many things no longer feel like they’re worth it.