Budgeting

Here’s a Really Weird But Effective Way to Stop Yourself from Overspending

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Jeff Cuellar

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Doesn’t it seem like Singapore is always conspiring to make you broke? I mean, the cost of living is ridiculous, wages can’t keep up with inflation, and of course, CPF takes its 20% cut from every paycheck.

Once you’ve finished paying all your monthly bills and loan repayments, what you have left is safe right?

Well… that depends on you.

Listen, I know it’s tough as hell to resist spending hundreds of dollars to buy that nice Tissot watch or Coach handbag you see from on display at the mall. You deserve to buy it. But should you?

Well, before you swipe your debit card on such a purchase, try thinking about such a purchase in terms of hours, not dollars. Then ask yourself if the purchase is really worth it.

 

Think About Your Purchases in Terms of Hours, Not Dollars

You’re probably thinking, “What the hell does he mean by hours, not dollars?”

Well, I mean just that.

When you’re looking at the menu of an expensive restaurant or at the price tag of a designer handbag, think about its cost in terms of hours, not dollars.

 

Calculate the Hourly Cost of Your Purchases

At your job, chances are that you collect a monthly paycheck right?

Let’s say that you make $3,000 a month. Now, take away the 20% cut CPF takes out and you’re left with $2,400 to use towards bills and savings.

Of that $2,400, let’s say you use about $1,200 for bills and necessary expenses like groceries.

That leaves you with $1,200 left over to use however you see fit.

Now, divide that $1,200 by the number of hours you work monthly. Let’s just use the Singapore average of 44 hours a week and multiply by 4 weeks, which is 176 hours.

$1,200 (left over cash) / 176 (number of hours worked for the month) = $6.82 (your “hourly” cost to make a purchase)

 

Putting Your Hourly Cost into Perspective

As you can see from the example above, once your expenses have been accounted for and your remaining cash divided by the total number of hours you worked – the average equates to $6.82 an hour.

That’s your hourly wage after bills and expenses have been factored. Only $6.82 an hour!

Here are a few realizations to put that number into perspective:

  1. That $8 McDonald’s Big Mac combo you want for lunch will cost you an hour of work to pay for.
  2. That $70 dinner for two at Sakae Sushi will cost you seven hours of work to pay for.
  3. That $200 Braun & Buffel wallet you want will cost you about 29 hours of work to pay for.
  4. That $450 Coach handbag you’re drooling over will cost you about 66 hours of work to pay for.
  5. That $700 iPad Air you just have to buy this month will cost you about 103 hours of work to pay for.

When you look at a purchase from a labor cost perspective, doesn’t it make you think twice about whether a product is actually worth the expense?

 

Truth Time About Your Overspending Habit

One of the biggest reasons why you might have a problem with overspending is because you think you have more cash available than you really do each paycheck.

Here’s the truth. You’re not starting out with $3,000 a month. You’re not even starting out with $2,400 a month.

You’re really starting out with $1,200 a month after bills and necessary purchases have been taken into account.

Once you realize that and find out your “real” hourly wage. It becomes easier to recognize just how precious your money is – and reject unwise purchases.

Then again, that depends on how much a purchase is worth to you. If you’re willing to trade 2 ½ week’s worth of labor for an iPad Air, then that’s your decision.

But at least you’re making a decision based on the hourly cost, not the dollar cost. And that just might be powerful enough to keep you from overspending. 

 

What are some other ways that can keep you from overspending? Share your thoughts with us on Facebook! For even more useful information on everything personal finance, visit MoneySmart today!

 

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Jeff Cuellar

I'm known by many titles: copywriter, published author, literary connoisseur, ex- U.S. Army intelligence analyst, and Champion of Capua.

  • Wolfie

    thanks for sharing, it does put my spending into perspective..
    however doesnt mean that I am earning $500 an hour allows me to splurge it on a $500 handbag.. if I don’t know how to fully utilise it, isnt it not wise to buy it?
    Still I think there are more ways to relate how much we spend vs why we spend.
    I don’t earn $500 an hour, but spending that $800 on an automatic robot sweeper does maximise the time I have with my loved ones.