Wanting to change your life, versus taking action to change it are two different things. Most want change, but I question how change will come if the same actions are repeated. Time is the most precious resource available, but the masses exchange it for money. At some point most of us don’t have the choice and are forced into labor, call it the modern day indentured servant plan. Yet instead of living below our means, having a high savings rate and buying our financial freedom; we stay in debt by choosing to trade that time back, in the most foolish deals. This is a formula I created and use for myself when evaluating purchases:
X=Dollars spent multiplied by Y=Item, Divide it by your hourly wage = T, T= Ratio exchange rate for the hours it took you to work and buy this item/service.
Range:
Good deal <1.0,
Break-even=1.0,
Bad Deal>1.0
Example:
X=Hourly Wage $15.00
Y=Lunch*one person=$15.00
T=??? Good deal or Bad???
Find T=
T= $15.00 * Lunch (1)/$15.00
T=1.0
This means you broke even financially, not a bad deal, but not a good one either.
Good investment:
Lunch takes an hour to make and a “healthy” one, it cost you $15.00 and you make $30.00 net an hour. You have now $15.00 left over and your T=0.5; factor in any opportunity cost left over from the hour and applied to be more productive, this deal gets even better.
This formula gives you a base and can be applied to more complex calculations, the main point is to get you to change your view from seeing dollars exchanged for money and realize currency represents time and experience.
You want to be able to have time/money surplus after your deal. After all, if you continue to make bad deals, how will you ever buy your freedom? Whether a business owner and/or if you’re an hourly or salaried employee, you have an hourly wage, find it and your T#.
Measure good deals vs. bad, each person’s wages are different and therefore, the level of deals considered good and bad made will vary. Myself, I always do my best to remember the best thing money can buy is freedom and treat household income as business revenue, minus it from operating cost, to get net profit. Remember friends; you can also increase revenue by reducing operating costs, e.g., shopping; most just focus on increasing revenue. Hope this post helps, let me know your thoughts and strategies to reach financial freedom.
JOURNEY OF A MADMAN 