Back when I was a poor college student some 20+ years ago, every penny counted. I measured the cost of any given expense by its relative value to that of buying pizza at my favorite eatery. It was a simple standard that was easy to understand: a textbook costing $16 was 32 trips Uptown to Bruno’s for a slice of pizza. Was it worth the tradeoff? Did I get the same perceived equivalent value? Okay, a textbook is more of a necessity, but you get the idea.
Nowadays, with actual disposable income to use, I still ask myself if a particular expense is worth it. What is its true value to me? I think during the high flying bull market and abundantly available credit, many people lost that ability. The feeling of entitlement and immediate gratification overpowered the desire to determine the true value of purchases and made the idea of lay-away or waiting to save for an item passé. But as more families are tightening their belts and getting creative with their finances, I think it makes sense to have a financial measuring stick.
I use this concept all the time with my boys. Do you really want to buy one ice cream cone while we’re running errands, or would you rather we spend the same amount and buy a half-gallon so you can have ice cream all week? Half-gallons of ice cream seem to be the most identifiable measurement for them. It’s something they can easily comprehend.
Try it yourself. Instead of pizza or ice cream, look at your expenses compared to an hour of your net take home pay. Once you start prioritizing your expenses this way, you may find that some things you thought you once needed have less expensive alternatives, or aren’t really worth the opportunity cost.
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