31 Days to Fix Your Finances - Day 8

Yesterday, we worked out exactly how the hours you spend at work break down into three areas: your living expenses, your debts, and your dreams. Since this was only a thumbnail sketch, today we’re going to look more carefully at the breakdown in living expenses.

Let’s get started. Take out a sheet of paper and start another list. This time, we’re listing every expense you have in a given year that do not directly relate to your employment. We’re not going to worry about amounts yet, just a list of all of the things that we spend money on in a given month. Here’s a sampling of the expenses that I listed when I did this exercise:

> Rent
> Electricity
> Telephone
> Cable
> Student loans - minimum payment
> Health Insurance
> Car Insurance
> Clothing
> Food
> Entertainment - Books
> Entertainment - Music

Spend some time thinking about this. What do you spend money on each year? House insurance? Christmas gifts? Household items? Car repair? Home decor? Toiletries? Just keep listing things as you think of them. It might be useful to leave this list out somewhere you can see it and add things as you think of them. Don’t worry about amounts yet; we’ll worry about those in a bit.
Now, let’s figure how much you spend on each item in a given year. For the amounts you know on a shorter timeframe, multiply them out. For amounts you don’t know, use some estimation over a shorter timeframe (and estimate on the high side) and multiply it out. The point is to get a rough thumbnail sketch of what you spend in a year on various things. Note that we’re not making any value judgements yet; we’re merely trying to see what’s there.

This will take some time, and during that time, think about each of these expenses a little. Do they bring you joy when you look at them now? Do they really feel essential to your life, or when you think about them, do you feel like you’d be better off if you spent money on the list of goals you created earlier this month?

When you’re done with this list, total up everything. Then calculate 10% of that and add it to the bottom, labeled “incidentals.” Add that into the total. That number is roughly what you spend on your living expenses in a given year. You can divide it by 12 to see how much it is a month, then divide it by 52 to see how much it is in a week.

Now, let’s see how many hours you work in a week just to meet these expenses. Take the weekly amount you just calculated and divide it by your true hourly wage. A typical American usually winds up with a rather large number here.

Spend some time meditating on this - you spend that many hours a week at work just for the expenses you listed. What does that mean? What could you do with your life - with your future - if you trimmed away some of the extra fat? Your debt could be gone - and you could be working towards a better and brighter future for yourself.

31 Days to Fix Your Finances - Day 5

Yesterday, we calculated the actual cost of our employment over a given year - and were surprised to discover how little it actually is. Once you remove all of the work-related expenses, such as the commute, the wardrobe, the extra meals, and the child care, the actual income you get from your job is ominously low.

Today, we’re going to look at our work from a different angle: time. We need to get an accurate picture of how much time you spend in a year chasing the money you make. At first glance, this seems almost automatic, but let’s look at it a bit more closely.

As usual, take out a sheet of paper. Along the top, make a list of each of your employments and, along the far right, write how many hours you actually spend at work (include your lunch break) in a given year. Don’t include vacation time. If you work overtime some of the time, just estimate what an average day looks like, then calculate how many days you work in a year (total days minus holidays and vacation), then multiply the two numbers together.

Now, underneath your time spent at work, list every other activity you do in relation to your work. The list you made yesterday might help, but give the question some thought. List everything that you do that you wouldn’t otherwise do if it wasn’t for your job. For example, if you travel, you can list almost all of your nonworking waking hours. You can list the time it takes to travel to and from work. You can list the time you have to deal with child care. You can list the time you spend shopping for work clothes, or time you spend going out for business dinners, or time you spend doing "optional" training.

For example, here’s my list:
> Child care
> Commute
> Working outside the office
> Business travel
> Business dinners / parties

If you haven’t already, for each of these activities, list the number of hours you spend on them in a year. Put these in next to each item, but over on the right hand side of the page under the time you spend at work in a year. I find that for many of these items, it’s easier to figure out how much you invest in these things each day (like the commute or the child care connection), then multiply it out by the number of days you work in a year.

Now, total all of the numbers on the right. That’s how many hours you actually spend working in a year. Divide it by 52 to get your weekly total, or by 365 to get your daily total (realize that this daily total does include weekends; if you want to exclude them, divide it by 260 to get only weekdays, or by 250 to exclude ten holidays - you may also want to subtract your vacation days from that total, too). For me, this number was a real eye-opener, as I began to realize how much of my time really is taken up by my chase for more money.

Spend some time thinking about this exercise and what it means. You spend all of this time working your tail off and yet you still find yourself in financial trouble. I spend an average of 70 hours a week working just to keep my job. What things could I do if I didn’t have this time investment? What sort of things could I do if I did a low-wage job just down the block? I leave it up to you to draw your own conclusions, but it is a question worth thinking about.

Tomorrow, we’re going to see how much your time is worth - and what that really means.