try measuring expenses in working hours

Your own successful business, high wages, good investment returns, a generous inheritance – all this can undoubtedly serve as an excellent accelerator on the path to financial freedom, when you don’t have to worry about money, your savings more than cover your expenses and you can easily afford don’t work. But, firstly, it is not always possible to earn more in one way or another. Secondly, if you spend more than you earn, then even monthly income of tens of thousands of euros will not help you achieve financial freedom.

Therefore, whatever one may say, expenses are one of the important components of wealth and independence, which should always be under control. Although denying yourself something is usually not very pleasant, because we all deserve the best. However, if you convert the refusal not into the feeling that you are not getting something, but into the purchase of your personal freedom and independence, then perhaps the next time you save on something, you will experience completely different feelings and emotions that you will like it!

How much do you earn per hour

If at first glance this may seem like simple arithmetic, upon closer examination it turns out that not everyone can always accurately calculate their hourly wage, since the schedule may not be standardized, work responsibilities may go beyond working hours, and indeed many can boast that, after leaving the workspace, they allow themselves to completely disconnect from work? Even the journey to work itself takes up a certain amount of time, which, although not related to your direct work responsibilities, is nevertheless an expenditure of your personal time, for which you do not receive additional money, which means it is also paid from your salary.

If you divide your monthly salary by the sum of all the hours indirectly and directly related to your work, the final result will probably surprise you and perhaps disappoint you. But the initial purpose of our calculation is still different, although a detailed breakdown of your working hours and their payment is a useful experience that can once again remind you of the value of personal time.

But if we nevertheless simplify and unify the calculation of hourly wages, then, based on official and average market values, it could look like this.

As a rule, officially working days last eight hours. On average, there are 21 working days per month, that is, 168 hours. For ease of calculation, we will write off the vacation to the account of all those overtime and indirect expenses. This results in approximately 2,016 working hours per year.

The national average salary in the third quarter of last year was 1,959 euros gross. That is, net workers received on average 1,563 euros when the income tax rate was still 20%.

Total monthly net salary 1563 / 168 working hours per month = 9.3 euros per hour.

Costs in hours

Having received your figure in euros per hour, you have an interesting opportunity to consider your expenses not in terms of money, but in working hours.

For example, if you decide to have a cup of coffee with dessert in a cozy cafe, then it will cost you, say, 8 euros. In order to pay this expense, you need to work 52 minutes. Seems like a perfectly acceptable exchange.

But if you like to indulge yourself in this pastime every workday, then you will spend a little more than one month a year at work solely for this habit. More precisely, it will cost you 27 working days per year.

But if we take larger one-time expenses as an example, even more interesting results can be expected.

Buying a personal car is one of the largest expenses in a household budget. However, car prices can vary greatly, while a car for 30 or 60 thousand euros performs the same function – both cars take you from point A to point B.

Comfort and convenience, aesthetic appearance, emotional component, etc. – what distinguishes them by price. However, are you ready, receiving an average salary, to work 3226 hours or 403 days, or 19 months just to have a car 30 thousand more expensive under your window?

Lost profit

The situation gets even more interesting if we add to our calculations the unrealized profit that would have been expected if the money had not been spent and invested.

After all, even 5% per annum – a more than realistic, affordable and low-risk percentage on the market – can change the overall picture even more dramatically.

8 euros not spent in a cafe at an annual rate of 5% turns into 13.03 euros over ten years, and into 34.58 euros over thirty years. Yes, not impressive. But not having coffee with dessert is not a big sacrifice.

If you continue the habit of going to a cafe every working day for ten or thirty years, then you will potentially miss the opportunity to save more than 25 thousand and about 134 thousand, respectively.

To be fair, it should be noted that inflation will also take its toll during this period. But in this case, it is quite difficult to accurately calculate the real value of savings in ten and thirty years, since inflation will affect not only the real value of the savings, but also the price of coffee and dessert, which will also rise in price due to inflation, which means that every This missed coffee break will allow you to save more money.

If we take the same 30 thousand that we did not spend by buying a cheaper car, then we can get more accurate figures.

Saved 30 thousand at a rate of 5% per annum over ten years will turn into 48,867, and over thirty years into 129,658 euros. If we take into account the average inflation for these periods of 2%, then even here the purchasing power of savings in today’s money will be about 40 thousand in ten years, and in thirty years it will more than double – to 72 thousand euros.

If we translate this into hours spent at work, then if you buy a car for 30 thousand cheaper and invest this amount at 5%, even taking into account inflation of 2% per year, over ten years this will save you 2 years and two months of working time or same 3 years and 10 months for thirty years. Yes, you sacrificed comfort, speed or something else by choosing a cheaper car, but in return you received several free years at your personal disposal.

Strengthening the effect

Please note that this result is not caused by giving up the car, but only by saving 30 thousand when purchasing a cheaper vehicle. At the same time, giving up one-time gatherings in a cafe will not make you financially independent, but it will deprive you of pleasant moments. If we are talking about the habit of going to a cafe every day, then, at first glance, a small expense over the years turns into tens of thousands of euros not saved.

Throughout life, anyone has many opportunities to save on other expenses. When, where and under what circumstances this is reasonable – everyone decides for himself. But if saving in the form of an amount of money, especially a small one, does not always seem like something significant and important, then translating this into hours, months or years spent at work, and even multiplied by lost opportunities in the form of additional interest, you can come to interesting results that will be an excellent motivator to at least think about your expenses and, at maximum, reconsider them.

Getting out of debt, achieving financial independence, or retiring years earlier is a very real scenario that starts with being smart about your spending.