Income Versus Expense

If I were to ask how much you make an hour, what would your answer be? You might sit down and do a little calculation, dividing your annual salary by around 2,000 (that's 50 weeks a year at 40 hours a week) -- but you would be way off base for several reasons.

First, you're not including any unpaid hours that you work. Every extra second of your life that you spend at the office is worth something -- it all counts. Most self-employed people already understand this concept (when I'm deciding on an hourly rate as a Professional Organizer and Coach, I have to take into consideration all the unbillable hours spent doing marketing, bookkeeping, and administrative activities, too -- what I quote the client is not what I actually "make" an hour.) But it's often harder to see how this applies to your life when you work for someone else. Every time you come in early or stay late to "help out," those hours should go into your calculation. And if you're putting in 80 hours a week instead of 40, you're actually earning half as much an hour as you think you are.

You also probably think of your career solely in terms of the income it nets you -- but that job actually costs you money, as well. Of course, you might remember to subtract your income taxes, FICA, health insurance payments, and other standard deductions from your salary first. But we often forget all the "hidden" costs that detract from our earning power. While these expenses might seem tangential, they are directly related to your employment -- if you didn't have to work, you wouldn't incur these expenses:

• the cost of gas and car maintenance (or public transportation) to get you to and from work -- as well as the hours spent sitting in traffic when you could be home enjoying your life

• the cost of your all those expensive and professional "work clothes" that you have to buy in order to earn that very impressive living

• the cost of eating out while at the office -- either because you forgot to pack a sandwich or because it's expected that you will join in on networking lunches and dinners
  

• the cost of the briefcases, padfolios, day-timers, PDA's, and other office supplies you need for your job (and that your boss doesn't provide for you!)
  

• the cost of the service people you hire (housekeepers, lawn care, pool maintenance, etc.) to keep your home in order -- because you work so many hours that you no longer have the time, energy, or inclination to take care of these chores yourself
  

• the cost of the fast-food, quick-fix, prepackaged meals you buy for dinner (even though they are not terribly healthy and certainly more expensive than making something from scratch) -- because you're too tired to cook after a long, hard day at work
  

• the cost of the medical bills you pay treating "lifestyle" diseases that occur because of too much stress, poor nutrition, and lack of exercise (since you just can't seem to find the time to go to the gym when you're so busy working)
  

• the cost of the things you buy or do as "reward" for working so hard -- overcompensating for the fact that you have very little free time away from the office by "treating" yourself to expensive electronics and cars and recreational toys
  

• the cost of the things you buy or do to decompress from work (like alcohol, chocolate, restaurant meals, and expensive vacations that allow you to "escape" from the stress) -- as well as the cost of the hours spent crashed in front of the TV in the evening because you're so exhausted, when you could be playing with your kids or starting a new hobby or writing the great American novel

All of these time and money drains take away from your "hourly rate." If you were to add up these expenses and subtract them from your yearly salary, THEN figure how much 60 minutes of your time is worth, you're probably making less than minimum wage (most people find that they really earn about $5 to $8 an hour.) The point here is that so much of the money you earn at work goes to pay for nothing more than work-related expenses. Think about how much more affordably you could live if you didn't have to work, and financial freedom seems even more feasible in the long run!

Spending Your Life Away

This is also designed to give you a realistic idea of how much of your "life energy" each dollar you spend costs you, what portion of your life you will have to give up to pay for the items you buy. Every purchase costs not only money, but time time it takes to earn that money -- and time is a much more precious and finite resource than cash! The only way to become truly conscious of how much your "stuff" costs you is to be aware of the energy you're expending to pay for it. With this fresh perspective, you can decide if a purchase is really worth the life energy you will be trading for it. Let's say that your hour is worth $8, and you buy a $300,000 house -- it will take you nearly 37,500 hours (4 years of your life working 24 hours a day) to pay off that purchase. Staggering! You spend $600 on a television -- that will take 75 hours of your life to pay off. Is a TV worth that much of your life? Could you do something more valuable with that 75 hours than simply pay off your boob tube?

When you begin looking at your expenses in this way, you tend to be a bit more discriminating about what you are willing to "sell your soul" for! "Your Money Or Your Life" suggests that you ask yourself a few simple (or not so simple) questions about each purchase:

• "Did I receive fulfillment, satisfaction, and value in proportion to life energy spent?" (if you won't get enough joy out of this purchase to make up for the chunk of your life that paying it off requires, skip it)

• "Is this expenditure of life energy in alignment with my values and life purpose?" (if spending time with your kids is a priority, but you plan to give up a tremendous amount of time paying for a purchase that will actually take you away from them, you may not be making a value-centered decision)

• "How might this expenditure change if I didn't have to work for a living?" (would you still need the designer clothes, flashy car, and regular table at that high-end restaurant if you weren't trying to impress clients?)

 This book is about getting you to a point where you don't have to work, at least not full time and not if you don't want to (and the entire second half lays out a plan for reducing your costs and maximizing your passive income so that can happen.)  And this is a great carrot -- being able to let go of unnecessary expenses because you don't have to work anymore!