How to prevent impulsive purchases by converting your money into time in your mind. When you think about buying something, think about how much you should work to afford that item. Then think again if you are willing to spend that time to get the desired item.
There are some things that are pretty much essentials to survive, but by these useless things in my examples, I mean things that for you, are just that. Useless.
How to calculate your times worth
When calculating how much your time is worth, you don’t just take your hourly salary for what is written on your job contract. You should calculate it by the actual amount you will get to your bank account divided by the working hours you spend to achieve that amount.
Things that will lower your hours’ worth are taxes, insurances, health care payments etc. This varies inon different countries, but the actual amount you get to your bank account from the work you did is the amount your time is really worth.
I have a post that is highly relevant to this topic. It is about how to think of money as time to use it smarter. You can read it here.
How to prevent impulsive purchases?
There are a few ways to prevent impulsive, sometimes useless money-consuming purchases. Some of these might work only on certain products and certain people, but hopefully some of these can save you from spending your hard-earned money and time on something useless.
1. Sleep over it
Sometimes all it takes to realize you don’t really need the item is a good night’s sleep. If the purchase you were about to make is bigger, you might want to wait maybe a week, until you make the purchase. Think over whether it will be useful and improve your life’s quality enough to be worth all that time and money.
2. Borrow or rent if possible
If you want to buy a brand new hot tub, maybe it’s better to just rent one for the beginning. Or even better, if your friend happens to have one, borrow it if possible.
You could also ask them if it was a good purchase, and how much it needs maintenance and effort to keep clean. If you still, after borrowing it and knowing the work it will require, you slept over it and you still want it, go ahead.
3. Will it bring value of its worth?
Will the item you are looking for, actually bring as much value to your life as it is worth. If your hourly salary after taxes and other costs is 15 dollars, eating a 10-dollar pizza might be worth 40 minutes of work. At least if you compare how long it would take you to make a similar pizza.
Let’s take the hot tub example again. I’m not familiar with how expensive hot tubs are, but after a quick google session, lets say it costs you 5000 dollars if you don’t take the cheapest option. If we assume it will last you five years, and on average you will use it every other week. You will be using the hot tub on average for one hour at a time.
You would spend during that 5-year period with these calculations around 130 hours in the hot tub. Divide those 5000 dollars with the 130 hours spent on it. The hourly cost of the hot tub is over 38 dollars. On top of the initial cost of 5000 dollars, there are other expenses. These might be water, cleaning, new filters, etc.
26 weeks x 5 years x 1 hour at a time = 130 hours
5000 dollars / 130 hours = 38,46 dollars per hour + maintenance
So, we might even see as high an hourly price as 50 dollars. If you based on these calculations, think it will be worth 50 dollars to spend on a hot tub per hour, go ahead and buy it. You might also be using it almost daily, and then the price would fall even more, and be more worth buying your own than renting it from someone occasionally.
So, on average, you would have to work around three hours in your job, to afford one hour of hot tub in your home. This is just one example; you can use this method of calculation to almost anything you wish to buy and see if it’s worth is.
As you can tell, I’m not a big fan of buying hot tubs myself. However, some people might find it worth the money. When ever thinking of buying something not essential, think about whether it will be worth the money.
I’m not saying to sleep over 25 cent lollipops, but on bigger things that might have an impact on your personal finances. Think about how many times you could rent the hot tub for the price of a new one. Or just make a deal with your friend that you bring the drinks, and he brings the hot tub. Whatever works for you.
Even if the things seemed essential, but you would need them only once or twice over the past few years, it may be a better option to just rent or borrow the items. There is no need for me to buy a cement company, if all I need is to make a new floor for my garage.
If you are interested, I have other posts about saving money. You can find them here.