Tuesday, March 29, 2011

IMO: Live by Your Hourly Wage

Wouldn't life be easier if we could make all our decisions by what the cost was? Well, I kind of think we can (with conditions, of course).

Some may balk at reducing life's decisions to dollars and cents; but, many times, we already do this. For example, if you are buying a car, you figure out what you can afford. If you're planning a trip, you save up for it after figuring out how much it's going to cost. I would argue that many of us could use this methodology a little more in our lives.

Let's set up the criteria for the following examples. Doug makes $30,000 a year, which works out to $14.42 gross per hour/24 cents gross per minute. We'll call the per minute rate Per Minute Value (or PMV). 

My theory is that I want to come out ahead most of the time and that my time is valuable; in fact, using the example criteria, my time is worth 24 cents a minute. This value, by the way, is a lot more than one can earn in many other third world countries. So the questions I would always have to ask myself is, "Is what I'm doing worth my time? Will the outcome of what I'm doing be worth my invested time?" It doesn't work for every situation; however, I find it a great starting point for deliberation.

Example #1 - Watching an hour-long TV drama

Okay, let's do the math. For the sake of argument, the show is 60 minutes; so the PMV is $14.42. Was the show you just watched worth that much to you in enjoyment? In other words, would you pay $14.42 to watch that show (on top of what you're already paying for cable access)?

Example #2 - Working on my online store

Let's say I work on stuff for my online store (site, blogging, tweeting, marketing, creation) and I spend 14 hours on it for the week. That would result in a PMV of $201.88. Was it/will it be worth it? If it's the beginning of your online business, you can expect start-up costs. But if it's Year 3 and you've only sold one item, maybe you need to think about if this is still worth doing. If you're really happy, so be it. But I would re-examine why you started this in the first place and if there's anything you can do to change your results.

Example #3 - Working out at home for 30 minutes 3 times a week

Two words - heck yea! You spent $21.63 of your PMV and, aside from saving money not paying the gym, you're most likely adding years and quality to your life. I definitely think you come out ahead on this one.

Again, you may not be able to apply this to every situation in your life; in fact, I recommend that you don't. It's important not to over-value yourself when doing this. But this can be a very useful tool in the evaluation toolbox when examining life's choices.

A reminder to yourself and others to make "right now" count! Available at http://www.zazzle.com/dougeshirts .

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