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Before we learned how to save money, we blew through money like it was going out of style. The funny thing is, we actually thought we were being thrifty. We wasted money on clothes. We shopped garage sales religiously, and we always bought used. But, while we were taking care of some of the small things, we really screwed the pooch on some of the big stuff.
As we came to terms with the fact that we weren’t saving like we should, we began examining all of our expenses. We both made decent money, so there had to be a reason why we weren’t saving any money. It didn’t take long before we found some big problems with our cash flow.
One of the biggest issues was our debt. In addition to my student loan payments and our mortgage, we were also paying about $700 a month on our two cars. To some of you, that might not seem like a lot. It certainly didn’t phase us at the time, and we could technically “afford” it. But, we soon realized that these cars were costing us in more ways than simple dollars and cents.
Learning that Time is Money
Before we got our finances in order, Holly read a great book called Your Money or Your Life by Vicki Robin and Joe Dominguez. The book helped us to start seeing money in a different way. Rather than thinking of money as simple dollars and cents, we began to consider what it took to earn that money. Instead of seeing just a sticker price, we started thinking in terms of how many hours each individual item actually cost us. This lead us to realize 5 important money values.
1) Time is Money and Vice Versa
When you work for somebody else, you are usually paid for your time. You punch a clock and the amount you make directly correlates with the amount of hours you put in. Even if you’re paid on commission, you are still paid for your time, not for any products that you create. Essentially, you are selling your time for money. Therefore, your time equals money and the amount of money you have and spend represents time you gave up.
2) When You Waste Your Money, You Waste Your Time
Look, you only have so much time on this planet. Nobody is making any more time for you to gobble up. In fact, I’d argue that time is the most valuable thing you have. And, since we’ve already determined that your money represents the time you traded to make it, your money should be considered valuable too.
At the time, $700 represented both a lot of money and time for me. Once I added in insurance, gas, taxes, and repairs, I was spending almost a full third of my take home pay on vehicles every month…and I’m not even a car person! That meant, every month, I was working from the 1st through the 10th just to pay for two cars that we didn’t even like! I was busting my butt, using huge amounts of patience and energy, and for what? Overpriced cars? Wasting my money was bad enough. But, when I realized what that money had cost me in time, it stung even more.
3) We Were Working to Buy Stuff, Not Build Wealth
Even though we were making pretty decent money, we still weren’t able to save. It didn’t make sense. When we finally started to relate to money in terms of time, it became clear that we weren’t working to build wealth. We were working to buy stuff. We were wasting our time to earn money so we could buy stuff we didn’t even want or need. Yuck!
4) Depreciating Assets are the Worst Kinds of Waste
What’s worse than failing to use your time to build wealth? Wasting it on things that lose value, that’s what. At $700 a month, we were spending $8,400 a year on two cars that were quickly losing value. Instead using that money to get ahead and build wealth, we were stuck shelling out thousand of dollars a year for depreciating assets. Oh…my…gawd. That’s some serious hours, just gone. Vanished. Poof…I’m getting sick just thinking about it.
5) Our Spending Reflects Our Values
When we began thinking about purchases in terms of time, we realized that our spending should reflect our values. Our time, our lives, are our most valuable asset. Why should that asset be wasted with out even considering the consequences? Once we understood this concept, we knew we had to make a change.
We quickly paid off our car loans and vowed to drive them into the ground. We decided that we’d never borrow to buy a car ever again. Any cars we bought would be paid for in cash. Then, we made a list of the things that were important to us. Saving for retirement, paying for college, and traveling the world went straight to the top. If we were going to sell our time for money, we were going to make it count! We’d keep those goals in mind every time we thought about a purchase. We would work to live instead of live to work.
Once we learned that our money represented our time, we turned a financial corner corner. This way of thinking instantly put each purchase into perspective. We no longer consider costs in just dollars and cents. We consider how much time it took us to earn that money. Looking at it that way, its easy to say no to overspending.
How do you view money? Do you think about how much time each purchase costs you? Let us know in the comments below!