Obnoxious money: Standard tricks for saving money lead to spending money when your hourly wage/salary is high

One of the standard tricks for saving money is to calculate how many hours of work it takes to pay for the luxury you’re thinking of spending. If eating lunch out is equivalent to two hours of work at the call center, you might decide to brown-bag it instead. (I never understood why so many of my coworkers ate out while on break at our minimum wage job when I was in high school.) Here’s becoming minimalist explaining how we don’t buy things with money, we buy them with time. A related technique is to translate those dollars into something tangible, here’s us talking about the candy bar exchange rate, though as grownups you’ll probably want to use something like cars or computers or weeks of groceries.

Another standard trick is to add up how much your latte factor (which could be any small regular luxury expense, not just lattes) is costing you over the course of a year. At $5/day for 5 days/week for 50 weeks/year, a latte factor could be $1250/year. Here’s the frugal girl discussing this technique in more detail.

The problem with these techniques when you’re making obnoxious amounts of money is that they lead to more spending.  If the cost eating out can be measured in minutes of work instead of hours, then it seems silly to not eat out.  The cost of DH’s recent rabies scare hit home with him when I told him that two emergency room visits = 1 new car, but if we were making more money, even that cost wouldn’t be a big deal– the comparison might be a small fraction of a nicer car or yacht or single private airplane ride.  At a certain point $1250/year seems like nothing– why wouldn’t one spend that on small luxuries?

… so… should we be spending more?  Laura Vanderkam from a few years ago would certainly say yes.  (I don’t know what she’s selling now.)  Use that hourly wage calculation to loosen up on spending, especially if it increases productivity or diminishes stress or saves time.

Indeed, recently I got a glasses exam out-of-network (probably)… $130 for the exam.  The insurance company didn’t make things easy for LensCrafters, so after trying to login to the stupid BC/BS page and being stymied by changing my password and then finally finding my benefits on the university website I discovered I’d only be reimbursed 50% anyway, I decided SCREW IT it’s not worth it.  Even if they should have reimbursed me $65, even for the principal of the thing (which was more important to me back when I had more time), I wasn’t willing to put more time and mental energy into it.

Here’s a tweet from an econ professor:

Susan Dynarski makes $270,000.00 according to the UMichigan website (not as much as many of their other star professors!) and is in the 98% percentile of income for the US.  (I am again reminded of talking with professional colleagues whose families make about 2x Dr. Dynarski’s and how their view of what a vacation is or cleaning person’s duties are is so different from most of the upper middle class’s… when you make over 500K/year and it isn’t going to your mortgage, you have a personal assistant and you rent a chef to go with your Caribbean vacation and your cleaning person will put things away instead of refusing to clean if the house isn’t already uncluttered.  We’re not there.)  (In fairness to Prof. Dynarski, she’s a first-gen college student whose family was in the bottom income quartile growing up.  She’s not out-of-touch.  Even if the comments on that thread… economists, man.)

Is this rational?  Is this necessary?  Should people with higher wages be spending more based on these tricks?  Should we instead find our “enough” as recommended in YMoYL?

I don’t know.

What do you think?  And how do you feel about these kinds of spending tricks?


19 Responses to “Obnoxious money: Standard tricks for saving money lead to spending money when your hourly wage/salary is high”

  1. Comradde PhysioProffe Says:

    Our way of thinking abt spending vs saving (good to be on same page w your spouse!) is that we try to enjoy a lifestyle that is highly likely to be sustainable through retirement & until we die. We definitely don’t want to have to diminish our lifestyle during retirement & so make sure we save plenty now. That fear of future forced frugality is much more our psychological incentive to not spend foolishly now on frivolity than “wow this took me X minutes/hours to earn”.

    • Comradde PhysioProffe Says:

      Also worth pointing out that we are very close to some people who earned VAST amounts of money over their lives (hundreds of millions) & pissed the vast majority of it away over the years instead of saving more & have cash flow issues now in their 70s (altho they do have substantial highly illiquid assets). Definitely don’t want to end up like them!

  2. Debbie M Says:

    I did used to think in terms of boxes of macaroni and cheese, back when they were four for a dollar. That was mildly motivating. And my brother once calculated that he could have bought a car with the amount of money he’d spent on cigarettes–this may have helped motivate him to stay quit after he quit smoking.

    I also calculated my real hourly wage, which actually came out higher than my official hourly wage because I didn’t have to pay for child care, more expensive work clothing, or even transportation (free bus pass!) but I did get insurance. So that wasn’t motivating. It’s not like I could work more hours anyway. Not and get paid for them, not at that job or at that salary somewhere else.

    It also was not motivating to see how much sooner I could retire if I didn’t make a purchase, ha ha! (By which I mean, how much 4% of that per year would let me spend per month. Oh four cents. Yay.)

    In your case, since I think you would like financial independence and/or moving to Paradise and you cannot yet afford these, there’s no reason to think you should be spending more now. You may err slightly in the depriving-yourself direction just from old habits, but not a crazy amount.

  3. moom Says:

    I’m struggling with getting the bus when it’s not convenient vs. taxi/Uber (I don’t drive). Our city introduced a new bus system this week that makes getting to work harder for me. Getting a taxi seems too luxurious… except when I really can’t make it on time with the bus. But really it isn’t a lot of money for me. We have a 15 year old car that my wife drives – other people spend a lot on new cars, so maybe I should spend on taxis when I feel like it? We’re in the top 5% of the household income and wealth distribution here in Australia according to the official statistics (it’s less than would put you in the top 5% in the US).

    • nicoleandmaggie Says:

      I don’t know how to do that cost-benefit analysis! Two econ phds, you’d think we’d be able to figure something like that out (and one could, if one knew your shadow wage and the disutility from the bus in addition to the time costs), but in reality it isn’t just about numbers and it’s hard to measure intangibles. I mean, you can see what the bus will cost you every year, you can compare the time saved to your wage rate, but is that enough to convince you one way or the other?

  4. middle_class Says:

    I think finding your “enough” is best BUT that is highly subjective and subject to increases, especially if you have wealthier friends or following aspirational types via social media.

    All i can say is that you should remember that your wage does not take into account all thr expenses related to working. For me, this was one of the most important takeaway from YMOYL.
    Plus it is not true that every hour you spend doing a task (say, changing the oil on your car) would have been spent working or doing something career-related. Is false equivalency the economic term?

    • nicoleandmaggie Says:

      Absolutely. In theory the shadow wage should take into account all of that including utility and disutility of what you’re considering.

      And it’s true that there isn’t necessarily a constant wage rate because we can’t be constantly productive… there’s diminishing marginal productivity along with diminishing marginal utility.

  5. SP Says:

    I can’t work overtime and increase my salary, so my “hourly” wage is kind of meaningless when I’m deciding how to live my life. I could put more effort into my career, and perhaps have some impact on a future wage. Maybe. But not necessarily.

    This also happens when we are regularly forking out a large sum for childcare. Everything else seems inconsequential in comparison. But of course, it all adds up!

  6. Matt Healy Says:

    To me the most important metric is percent of after tax income going to things that cannot easily be cut if need be. If rent, utilities, mortgage, health insurance, car payment, etc., are taking a big chunk of income then it’s difficult to handle any financial shocks. If you eat out a lot, and suddenly money is tight, you can just stop.

    DW and I are fortunate enough that we can have a comfortable home for a much smaller percent of income than most US households.

    So long as we keep saving according to our plan, and can easily pay the bills, we have the huge luxury of being able to not think much about small purchases on a daily basis.

    Of course, many people don’t have enough to pay for very basic housing and cars. But if one has a choice, a moderate degree of frugality about the big stuff can go a long way.

  7. rose Says:

    I think it is important to keep aware of how climate change (which is real) will be changing food and water availability, will be increasing refugees from early impacted areas, and increasing all other costs as well as all the on-going normal inflation when looking at living until between 90-100 while ‘retiring between … say 60 and 70 depending on health and other unknowns. Some people are already looking at being unemployable from age 50.
    The implications about ‘necessary savings’ are huge. Particularly if the current party in control is actually able to do what they have said they intend to do, which is cutting social security and medicare increasing costs for seniors while decreasing coverage in order to give even more breaks to rich corporations and individuals/families who provide black money for the political party of their choice (that which lets them be even richer and more powerful).
    Short term thinking and planning has really ugly long-term consequences … if not for the current senior generation absolutely for their grand and great-grand children. What is the world really going to look like in 20 years?
    I want to eat chocolate.

  8. C Says:

    I’m going through an Ariana Grande phase… as in, “I see it, I like it, I want it, I got it.” When I told my very frugal DH this I think he got really worried. BUT. This is all in the context of maintaining a net savings rate (not counting mortgage principle payments [other than extra lump sum payments specifically intended for principle]) of 54%. I figure… if my savings rate is north of 50%… and it’s not likely to affect that savings rate enough to cause it to drop below… really, the money part is less a concern. I’m trying to be somewhat mindful about sustainability though. Which kind of works for shopping and if we’re talking more than $1K my grad school frugality impulse will rear its head anyway. (But I can get a lot of littler things that add up pretty quickly if I’m not somewhat conscious.)

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