Wealth & Happiness Is about Threading the Needle Between Time and Money
Truly wealthy people can finance their dream while having enough time to actually live it
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Whatever you want to do in life, you need a way to finance that activity. Nothing is free. Even activities that cost no money require you to pay in an even more valuable resource; time.
You’ve heard the expression “time is money.” But in reality, it’s the reverse “money is time.” We need money to pay for things, but how do we get money? We trade our time with our employers in exchange for money.
The actual cost of what we spend money on is not measured in dollars. It’s measured in the seconds, minutes, hours, and days of our life we have to trade to finance our purchases.
The difficulty in finding “balance” in life is that the primary way to obtain money is by trading in our time.
The person who uses money to finance a happy life is the person who maximizes the amount of money they spend on things they value while minimizing the amount of time they had to give in exchange.
Here are some practical ways to do just that.
Start by figuring out your hourly take-home pay.
Figure out how much of your life you trade for the things you buy.
Evaluate how much of your time you exchange for what makes you happy.
Spend less on what does not make you happy.
Increase your hourly-take home pay and spend it on building passive wealth and what makes you happy.
Let’s dig into the details.
How to calculate your hourly take-home pay
Hourly-take-home-pay is a simple concept; it refers to how much money you clear after taxes and deductions for every hour you work.
Here is how to calculate it in 2 simple steps.
Add up your total monthly take-home pay (your gross income minus taxes and other deductions.)
Divide it by the number of hours you worked that month.
I will take this one step further and include your commute time in your calculation for your hours worked.
If you work 40 hours per week and you have a 30-minute commute to and from work, you really work 45 hours per week.
If you clear $4,500 per month and work 180 hours, your hourly take-home pay would be $25 per hour.
Figure out how much of your life you trade for the things you buy
This requires you to take two actions.
Track your spending down to the penny.
Divide the cost of every purchase by your hourly take-home pay
If your car payment is $600 per month and your hourly take-home pay is $25, then you have to give up 24 hours or an entire day of your life every month to cover the payment—which does not include the cost of insurance, gas, parking or maintenance.
Do this for every purchase you make throughout the month.
(make sure you “enable macros” and note it only works in Excel)
Evaluate how much of your time you exchange for what makes you happy
When I track my expenses, I like to categorize every purchase into one of three categories:
Big 3—Housing, transportation, and food.
“Stuff”—Things we buy that don’t make us happier, wealthier, smarter, or more productive.
“Values”—Things or experiences that DO make us happier, wealthier, smarter, or more productive.
Track your spending for a month and tally up how much of your time you exchange for “values.”
Ask yourself, are you happy with the amount of time you trade-in for values vs. “Stuff” or the Big 3?
The name of the game for using money to finance a happy life is slowly shifting a higher percentage of your spending to values.
There are a few ways to do that. The simplest and most immediate change you can have is to start spending less on “Stuff.” Once you track your spending, you can identify the waste and begin cutting it out of your budget.
For many of us, the big problem is that our Big-3 spending takes up such a large portion of our budget that it’s tough to spend a significant amount more on values.
If your rent takes up two-thirds of your budget, then you won’t be able to do accomplish a whole lot by cutting out “Stuff.”
That leaves you with two options.
Reduce the amount you spend on the Big-3 (this article details some tips on how to accomplish that.)
Increase your hourly take-home pay.
Some tips on increasing your hourly take-home pay
#1— Banish your morning commute
If your commute to and from work is 30-minutes, that adds roughly 20 hours to the time you spend working each month. The worst part is that you don’t get paid for these 20-hours (but you do spend on gas.)
In the post-pandemic work environment having the option to work from home is table stakes for any job that can be done remotely. Working from home brings your commute down to zero and immediately increases your hourly take-home pay.
Remember, if you clear $4,500 per month and worked 180 hours that month—including your commute— your hourly take-home pay would be $25 per hour.
If you cut out 20 hours of commute time, your hourly take-home pay will increase to $28.13.
The $600 car payment that used to cost you 24 hours of your life every month now costs you just 21 hours. In fact, if you’re working from home, full-time, you may not even need that car at all.
How does a $0 car payment sound?
That won’t be the reality for everyone (especially those with school-age kids), but it will for some.
#2—Invest the extra time in creating a side hustle with scalable income
Once your morning commute is gone, you’ve just freed up a few hours per day that can be spent building a second income stream.
If you can use that time to create scalable income, you can dramatically increase your hourly take-home pay over time.
When I started writing about personal finance in 2018, it was basically a second job. I spent hours writing articles, and each month I would make a few bucks for my effort. It was a labor of love, but it was not an efficient use of my time from a dollars in vs. time spent perspective.
In 2021, I added two streams of scalable income.
Starting my Substack newsletter.
These are products. If you have a product, you can run advertisements and make money without needing to spend the same heavy hours that was required to build the product in the first place.
If you can find scalable income, AKA a product, and sell that product as a side hustle, eventually, you have the potential to vastly increase your hourly-take-home pay.
Time that you used to spend commuting to work and not getting paid, is replaced with time building a side business.
If you invest the profits of that side business into either further growing your business or into assets like index funds that build passive wealth, you put yourself on an accelerated track to Financial Freedom, AKA spending your time and money doing whatever makes you happy.
This article is for informational and entertainment purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.