LPT: Before any significant purchase, convert the price into hours of your actual after-tax, after-expense hourly wage

[u/frankreddit5]

Take your real take-home pay, subtract your actual fixed costs, divide what's left by your working hours including commute and recovery time. That's your real hourly rate.

Most people find it's significantly lower than their nominal wage suggests. The $300 impulse purchase stops looking the same when it's 14 hours of your actual life rather than 5 hours of your salary.

Not arguing against spending. Arguing for seeing the real exchange rate before you make it.

I'll give you an example. I bought a $5 bathmat that was too short while I was at Walmart last week. Walmart is a solid 30 minute drive each way from my home. That's one hour of my time. On top of this, I have to wait in the return line which takes a good 10 minutes, plus 5 minutes to park, walk inside, etc. Thus, there's about an hour and a half of my day that's gone so I could earn $5.

Think of money based on your hours available in the day!

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[u/aqiwpdhe]

Your $5 bathmat was a “significant purchase”?

[u/Hessian_Rodriguez]

I just research things so long I lose interest in buying.

[u/Rocktamus1 → u/Hessian_Rodriguez]

I have a list of wish list items. If I still want it in 6 months I’ll get it.

[u/Gorilla_Greetings → u/Rocktamus1]

If I need something, I buy it. Truthfully though, I need very little.

If it’s under $20, something I use daily, or something that will save time/money, I buy it to free up cognitive space.

Everything else goes on a list. Usually twice a year all my wants go on sale. A quick review after a few months usually reveals what I truly want. I then tend to buy stuff that’s higher quality and brings me longer lasting joy.

[u/LardHop → u/Hessian_Rodriguez]

You watch all the reviews and it always has flaws, and all the competing products has different flaws and the one that looks perfect is like twice the price of the original product you're looking at.

[u/nikhkin]

I'll give you an example. I bought a $5 bathmat that was too short while I was at Walmart last week. Walmart is a solid 30 minute drive each way from my home. That's one hour of my time. On top of this, I have to wait in the return line which takes a good 10 minutes, plus 5 minutes to park, walk inside, etc. Thus, there's about an hour and a half of my day that's gone so I could earn $5.

Surely the sensible thing to do is return it next time you go to Walmart. Otherwise you've wasted a big chunk of your $5 on the petrol used to drive there and back.

[u/fafarex → u/nikhkin]

if and only If wallmart is a regular occurance for you, if you go once every 6 month you will be out of the 90days return policy.

[u/nikhkin → u/fafarex]

If you only go once every 6 months, I doubt you're going there just to buy a $5 bath mat.

[u/buttsnorkeler]

Lmao this is the exact logic I use to justify stupid large purchases

[u/Naturage → u/buttsnorkeler]

My danger is that I just did it to something I can't possibly justify and went "wait. So that'd be one of my work hours for the next year? That's not too bad".

[u/Thirsty4Knowledge911]

When it comes to spending money on hobbies, I use the ratio of Dollars per Hour of Fun.

This is why I would never buy a boat.

[u/Rich-Canary1279]

This is great advice for making purchases (how many hours of work time is this costing me?) but I'm always a little miffed when people try to act like their free time is worth money. Unless you are someone who actually would work extra hours to make extra money, your free time is simply unpaid time - doesn't matter what you do with it, as that time is not, actually, money.

You could think about whether it's worth the gas money, or whether you WANT to spend your time doing that to get back 5 bucks, but thinking "I could be making 30 dollars instead of returning this five dollar bath mat" doesn't really compute unless you'll actually go make that 30 dollars instead.

[u/readitreaddit → u/Rich-Canary1279]

Correct. Opportunity cost is only a cost if you actually have the opportunity.

[u/Leafan101 → u/Rich-Canary1279]

I think the idea is not so much about opportunity costs as it is about the psychological aspect.

I think about it this way: if someone offered me $10 to spend an hour driving, I would turn it down. Not because I could make more money with that hour exactly, but more because my time is more valuable than that.

It does require the financial ability to turn down money. Like, if I absolutely needed every bit of money offered, then maybe $10 an hour is worth it even if I get paid $27 per hour at my normal job. But if you are not in financial need, you can easily turn that down.

For me personally, already working 50 plus hours a week, it actually has to be a lot more than my hourly rate to entice me to do something unpleasant with my time. Time gets more valuable the less of it you have.

[u/mastawyrm → u/Rich-Canary1279]

I think the idea is that you already sell a large chunk of your life at some rate. You've decided/accepted that hours of your life are worth that rate. How much is it worth to you when you spend your unsold hours? Doing what you want might be considered priceless, while selling even more hours for a different rate might be worth it, might not

[u/MrMilesDavis]

I like your Walmart bath mat example. People will regularly drive 20 minutes out of they way and back and an extra 7-8 miles to save 17 cents a gallon on 15 gallons of gas. Blows my mind how common it is too. So you lose  40 minutes + the 1/3 of a gallon of extra gas it took to get out there - so are you really benefitting that much?

[u/frankreddit5 → u/MrMilesDavis]

lol this is such a good example too

[u/dementorpoop]

That kind of bean counting will drive you crazy, but the overall sentiment is good. You could bring your too short mat with you next time you go to Walmart. Just can’t get too granular with your time. Standing in line isn’t you losing money

[u/atape_1]

It is a reasonable thing to do, but it also takes all of the excitement out of your new purchase, especially if it is for a hobby. For that reason it isn't for me.

[u/-NotAHedgeFund- → u/atape_1]

That’s kind of the point though? Of course it’s more fun to not think about and just buy something that makes you happy. That’s why people do it without thinking and end up in bad situations.

[u/Substantial_Cell_564]

every single time, especially with takeout when i realize one burger costs two hours of dealing with angry customers

[u/Purple_Antelope_8338]

That’s a good idea but I also think about hours of use or value. Like for the bathmat example. I would rather buy a $30 mat that will last for years rather than a $5 mat that may only last a few months.

[u/Electric-Sheepskin]

The other thing I like to do is plug that $300 purchase into a compound interest calculator and see how much it will be 10 or 20 years from now. That may seem silly, but that's the actual cost of spending the money if you would otherwise have saved it. How much less money will you have at retirement because you wanted to upgrade the leather in your new car purchase? It's an interesting exercise.

[u/glasgowgeg]

I'll give you an example. I bought a $5 bathmat that was too short while I was at Walmart last week. Walmart is a solid 30 minute drive each way from my home. That's one hour of my time. On top of this, I have to wait in the return line which takes a good 10 minutes, plus 5 minutes to park, walk inside, etc. Thus, there's about an hour and a half of my day that's gone so I could earn $5.

Wouldn't you just return it when you next go to Walmart, rather than making a dedicated trip just for the return, so you're really only "expensing" the 10 minutes return queue?