By Matthew M. Glatt, CPA – Founder and CEO of FLP Financial Group, LLC
I tell my clients frequently: Your time is money. But do you really understand the power of that concept? Do you want the ability to live the same lifestyle you’ve established for yourself in retirement? If so, being conscious of how much your time is worth can help you understand how much each dollar means to your future. Unfortunately, we all have limited time to generate income to fund our retirement. A secure financial future depends on spending our time and income wisely.
How Do You Spend Your Money?
What do you spend your money on? For most of us the big items include housing, utilities, a car payment, student loan debt, groceries, dining out, and insurance. How many hours do you need to work to be able to purchase these things or pay these bills? When you start to think about your expenses in terms of hours worked, it is easier to evaluate your spending habits.
Take a look at your finances and how much you earn an hour, then calculate how many hours it will take to pay for each bill or product purchased. How many hours does it take you to pay your car loan every month? If you make $25 an hour, after you account for paying federal, state, medicare, and social security taxes, you actually make closer to $19 an hour.
Let’s say your car payment is $500 per month. That means it takes you a little over 26 hours of work every month to pay your car payment. Is your car worth that much of your time? Consider this personal challenge as a way for you to think differently about your spending and the ways you save. Instead of thinking, “My interest on debt costs me $150 per month,” start thinking in terms of hours of work. One month of interest equals 8 hours of your time. Is that how you want to spend your precious hours?
The Value of Your Time
This line of thinking then begs the reverse question, are mundane activities like mowing your lawn truly worth your time? Does it make financial sense to pay someone else to mow your lawn? If you pay someone just $30 to mow your lawn, in theory, this means you have 2 hours of your life back.
The problem is that most of us don’t work more hours because we’ve freed up the time normally spent mowing the lawn. Even the wealthy should be conscious of the money they spend by justifying the cost as a way to put hours back into their days. Although switching to this mindset can take some time to get used to, it is helpful when making decisions about which costs to incur.
When you consider the cost of your spending both in the time you have to work to pay for something and the alternatives available, you may be able to cut spending that doesn’t make you happy and free up time to do more of what you love.
Resources You Can Count On
Want to put this concept into action but don’t know where to start? My team and I at FLP Financial are ready to help. We will work with you to evaluate your spending habits and we can model the potential impact of different savings rates over time to clearly illustrate how even small increases in savings can help you move closer to your long-term goals.
Reach out to schedule a consultation with me at [email protected] or call the FLP Financial office at (844) FLP-PLAN. Want to learn more? Download our Back 2 Basics ebook for tips to improve your financial well-being, reduce debt, and increase your net worth. Your time is money, use it wisely.