How To Value Your Time and Money?

What is time? Time is our most valuable asset and more importantly time we are fit and healthy. Our health is our wealth and can often be taken for granted. Time can get lost on us in our busy day to day and we can lose sight of what is really important. The gradual nature of time can lull us into a false sense of everlasting life. I remember a clip from Al Gore’s film, An Inconvenient Truth in which he demonstrates a frog jumping into a pot of boiling water. The frog jumps straight back out because it senses the immediate jolt of danger from being boiled alive. When the very same frog jumps into a pot of lukewarm water that is slowly brought to the boil the frog will just sit there and won’t move as the temperature gradually rises to boiling point. This illustration was used to highlight our relative inaction to climate change. We put action & change on the long finger because it is not strikingly apparent in our day to day lives. Does the frog analogy represent us and our approach to time and money? At what point do we take action? I hope this podcast is that jolt to action.  


In Stephen Covey’s book the 7 habits of highly effective people, habit number two is “Begin with the end in mind”. The average life expectancy in Ireland is now roughly 80 years for males and 83 years for females according to the Central Statistics Office. That is 960 months for men and 996 months for women. With each new day comes a fresh twenty-four hours. Of these 24 hours we spend 7 or 8 hours sleeping and roughly the same amount at work, half our waking hours. Two thirds of our day we are either asleep or working. Of the remaining 8 hours of the day we will spend time eating/drinking/preparing meals, commuting or travelling, exercising, beauty/grooming, bathroom related activities, shopping/chores/pets, looking after the needs and wellbeing of others (kids, parents, grandparents, friends), entertainment (Tv, social media, internet, reading etc), community activities and so on. After all is accounted for how much of our time is free time to do as we please? I believe it is not too far a stretch to say that 80 odd years is a length of time that is assumed or hoped for by most of us and therefore we will use this amount of time as an anchor of what a full life typically represents. Of our 960 months we spend roughly 317 months asleep and 145 months at work. That’s 462 months or 38.5 years asleep or working, nearly half our 80 years of time. Say we spend an hour exercising every day, that hour exercising adds up to 40 months or 3 years 4 months. When we breakdown our time in the context of our daily rituals and extrapolate it over our lifetimes it really highlights how precious our time is. It can lead us to ask are we happy with how we are currently spending our time?


Fortunately or unfortunately, a key feature of our design is the known unknown, that is we know there is a time where we will close our eyes for good but we do not know when that will be. We do know life is a one-way trip, no do overs or return journeys. Knowing the finite nature of time and uncertainty of when it will be our time brings me to highlight a best-selling memoir by Bronnie Ware a former palliative carer. In the Top 5 regrets of the dying Bronnie details her experiences of those she cared for in their final months, weeks, and days of their lives. During her career Bronnie compiled a list of their regrets and distilled them into a top 5. These are:


1.       I wish I’d had the courage to live a life true to myself, not the life others expected of me.

2.       I wish I hadn’t worked so hard.

3.       I wish I’d had the courage to express my feelings.

4.       I wish I had stayed in touch with my friends.

5.       I wish that I had let myself be happier.  


It is a sobering reminder of how precious time is but also liberating to be able to recognize and act upon others regrets. Forewarned is forearmed. In my experience many people who have a health scare or brush with death through accident, injury or serious illness tend to see it as a wakeup call and their perspective changes. They see life differently.  


The secret to getting ahead is getting started, that first step. For those working the best way to value our working time is to divide our annual income by the number of hours we work. If we work our contracted hours divide our annual income by our contracted hours. If we work more than our contracted hours divide by our actual hours worked.


An example of calculating your income per hour are John and Mary. John is a public sector worker on an annual salary of €50,000 and is contracted to work 8 hours a day, 5 days a week and works these contracted hours, no more, no less. John’s hourly income based on his contracted 40 hours a week is €26 before tax with 4 weeks holidays per year.


Mary is self-employed on an annual salary of €100,000 double John’s salary. Mary works 12-hour days, 5 days a week for a 60-hour work week. While Mary’s salary is double John’s, Mary’s hourly pay is €35 just 35% more than John before tax with 4 weeks holidays per year. Who would you say is better off? Mary is earning more but also spending four more hours per day at work. John is earning less but spends four hours less per day at work than Mary. The opportunity cost is Mary is earning more money but has less time. John has less money but more time. You can always get more money, but you can’t get more time. Both time and money have a cost.


Another way to measure the value of our time is to use our per hour income after tax when spending money. For the purposes of this example John and Mary are both married, 40 years of age and their spouses work in the home. John’s after tax per hour income is €21. Mary’s after tax per hour income is €23. Mary works 20 more hours per week and pays significantly more tax due to her higher income. Both are excited to purchase a new car at a cost of €15,000. John on a per hour after tax income of €21 will work over four months to fund the purchase of the car. Mary on a per hour after tax income of €23 will have to work two and a half months to pay for the car. Imagine for a moment you are either John or Mary, knowing that each day you go to work for four months or two and a half months respectively you are going to work to pay for the €15,000 car. When we convert spending money into time spent at work to earn that money, how we value our money changes. This can vary significantly depending on how much we like our job too. If we apply this money to time formula, to how we spend our money, we may start adjusting how much and what it is we are spending our money on. Ask yourself when making a purchase, how much time will this cost me?


When we do spend money, we can sometimes determine its value or utility by dividing it’s cost by its use. An example of this is porridge, yes porridge. Say we purchase a 1.5-kilogram bag of porridge and use 40 grams per breakfast. That is 37.5 portions per bag. The bag of porridge costs €0.99 and so each porridge serving costs us €0.03 cents. If we have porridge 5 days a week for 48 working weeks of the year, we will purchase 7 bags of porridge at a total cost of €6.93. Of course, we add in some raisins, nuts, seeds and a little honey but the cost per meal remains low when compared to paying €4-6 for breakfast on the go.


Another example of this is tea, we purchase an 80-bag box of tea for €3.69, that’s under five cent per tea bag. Throw in some boiling water and milk and let say it costs €0.15 for a cuppa calm. Compare that to €2.50 for a takeout tea. The rubber really hits the road when we begin to multiply the cost by the number of times we get breakfast or tea on the go. It adds up quickly. But Ken, my tea brings me such joy. I’m not here to crush life’s little enjoyments but to propose that we meet halfway. Instead of it being a daily ritual, we substitute it for a home brewed tea and treat ourselves on a Friday or the weekend to a takeout tea. This approach of replacing our daily ritual with a home brewed substitute allows us the best of both worlds. We win financially but also eagerly await our treat tea. It’s well documented that something we have every day becomes normal, but we get excited in anticipation of something we have less frequently, a treat.


Last but not least you head down to your local shop to purchase a few drinks to have with a home cooked meal that evening. You discover the local shop has priced your beer of choice at €5 instead of the usual €2 and your favorite bottle of wine is now €25, usually €11. In shock we exit the shop in disbelief saying to ourselves we couldn’t justify spending €50 on five beers and a bottle of red when it would usually be €21. We head next door to the pub to discuss the shocking prices in the shop and happily pay the shops prices in the pub…


These are of course over simplified examples. There are many other variables we navigate when spending money. What I hope to demonstrate are the opportunity costs of our spending decisions. An opportunity cost is the loss of other alternatives when one alternative is chosen. It’s not to remove a habit but to replace or substitute it with something else. As Abraham Lincoln once said: “It has been my experience that folks who have no vices, have very few virtues.” When building wealth, we need to be conscious of our spending. What seems like a small savings on many small things can quickly add up over time. It is important to look at wasting money the same way we would look at wasting food. The goal here is not to penny pinch for the sake of it. Money saved over the course of a year could mean you spend more on holidays or match tickets etc. Remember, price is what you pay value is what you get.


From a financial planners viewpoint there are essentially three life stages, the saving stage which typically takes place from years 21 to 65, the spending stage from 65 to 85 (often referred to as the go go, slow go and no go years) and later life from 85 to 100. Enjoying today and planning for tomorrow need not be at tug of war with each other. Our desire to live entirely for today and worry about the future tomorrow will inevitably result in poor financial wellbeing. Life will happen to you rather than for you. You only live once, who knows what the future holds, I could be dead tomorrow, I don’t know where all my money goes are some of the statements we tell ourselves to justify not taking personal responsibility. Do your future self a favor and start taking control of your financial life today. The longer we postpone taking action the more costly and risky it becomes. We often build up daunting tasks in our head when in reality it is much easier than we thought after the fact. Asking ourselves to delay instant or short-term gratification for delayed, long-term gratification is a hard cycle to break but you can do it. Breaking this cycle and forming the right financial habits is fundamental to our wealth prosperity. Short, medium, and long-term goals are the answer. Goals focus the mind and narrow our aims. Aim big, miss big, aim small, miss small. There are typically three types of goals and they are usually interlinked, personal, professional and financial. We will have an episode on goals in Series 1.


I’d like to sum up much of what money, time and life is about with a fable called the Mexican Fisherman. An American businessman stands on the pier of a small Mexican fishing village when a small boat with a fisherman docks. Inside the small boat are several large yellow fin tuna. The businessman compliments the fisherman on his catch.


How long did it take out to catch them, asks the businessman? Only a little while the fisherman replies. Why don’t you stay out longer and catch more fish, asks the businessman? I have enough to support my family’s needs says the fisherman. But what do you do with the rest of your time? I sleep late, fish a little, play with my children, take a siesta with my wife, stroll into the village each evening where I sip wine and play the guitar with friends. I have a full and busy life says the fisherman. The businessman scoffs and declares he was a Harvard MBA and could help you. You should spend more time fishing and with the proceeds you could buy a bigger boat and with the proceeds from the bigger boat you could buy several boats and eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the consumers, eventually opening your won factory. You would control the product, processing and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then LA and eventually New York where you will run your expanding enterprise. But how long will this all take asked the fisherman? 15-20 years said the businessman. But what then asked the fisherman? That’s the best part. When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you would make millions says the businessman. Millions? Then what asks the fisherman? The businessman says slowly, then you would retire. Move to a small coastal fishing village where you would sleep late, fish late, play with you kids, take a siesta with your wife, stroll to the village in the evenings where you could sip wine and play guitar with your friends….


There are holes in each side of this fable’s story but the overarching questions are:


How happy are we with how we currently spend our time?

How do we want to spend our time and why?

How much is enough to allow us spend our time doing what we enjoy?


In summary, your time is precious, make it count. Minimize the regrets. We spend our time working, to earn the money we spend. Using the money to time formula, we can be more conscious of how much time it will cost us. I appreciate this episode is somewhat abstract when it comes to personal financial education. Part of what the podcast hopes to achieve is to provide different ways of looking at money in the hope of triggering some positive change in our money behaviors. In next weeks episode we discuss goals, more specifically financial goals.


This week’s book recommendations are The Alchemist: A fable about following your dream by Paulo Coelho and The Monk who sold his Ferrari: A spiritual fable about fulfilling your dreams and reaching your destiny by Robin Sharma. Both books are full of timeless wisdom. This week’s movie recommendations are the 2006 biographical film The Pursuit of Happiness which follows a rollercoaster year in the life of Chris Gardner, played by Will Smith and Doctor Strange the Marvel comic book superhero. A very successful egotistical surgeon is desperate to find a fix for his hands after they are crushed in an accident.

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For personal financial planning advice email or call (01) 539 2670.