It is important to realize how much something is costing you on a regular basis. This more than just the realization that dinner out cost you $15.00 tonight. Occasionally you need to take into account the opportunity cost and time cost of certain habits. It is also important to realize how some habits and choices may be saving more than just money or time. Once you have determined which things are the most important to you, you may find other areas that you can cut back on.
One important thing to look at is how much time something costs you. This means you will figure out the hourly cost for the item. For example, if you stop by and pick up some fast food on the way home for work to save yourself some time, you may spend between seven and eight dollars for the meal. If this were half of your hourly wage or less, then it would be about an even trade-off in time saved if you were single. (Assuming that you can afford to eat out.)
However if you had a family of four and stopped for fast food on the way home from work, you would pay more than twenty dollars for your meal. You can easily prepare a meal in about thirty minutes to an hour. If you make $15.00 an hour, then you would spend more than an hour’s wages in order to save thirty minutes of time in the evening. This may be the motivation you need to stop eating out.
This can be applied to a lot of different activities and things in your life. You may find that the time you spend working to pay for your health club membership is worth it. But you may decide that the time you spend on working to pay for your maid service is not. These are personal choices and the answers will vary for everyone. If you figure out what each activity or habit that you have costs you in amount of time that you have to work, you can begin to weigh which activities are worth spending money or time on.
A similar test can be applied in reverse to determine rather or not your job is worth your time. This is especially true in a two income home or if you are considering taking on a second job or picking up freelance work. You should consider how much the job is going to cost you. Take into account the amount you would spend on professional clothes, commute time, convenience food, child care, gas money and other miscellaneous work related expenses. You may find that you could save more money by staying home and focusing on making your dollar cover more through careful spending.
Each financial choice has affects your finances both positively and negatively. You need to weigh the choice against your priorities and your long-term goals in order to make a responsible financial decision. At times you may be able to afford a great vacation and the memories you make will be worth the expense. You may choose to cut back on eating out and other activities in order to save up for the vacation.
This exercise can help you evaluate your personal habits and see how they fall in line with your goals. Analyzing your entire budget this way will help you stay on track to reach your financial goals. This means that you may choose to skip meals out so that you can save for something more important to you. Or you may decide that the meals out are one of the things that you value and decide to look at other ways to save your time and money to make those things more enjoyable. This can expanded to cover everything from a luxury car, to a timeshare, to the home that you want.