Everybody wants to retire early, right?
This is my dream: that we’ll be financially independent by 55, allowing us to work as much or as little as we want, to volunteer, to travel, and to spend our spare time playing outdoors.
I get really excited to think about this and often wonder if and how we can get there sooner.
The Quest for Financial Freedom
One of my favorite books is Your Money or Your Life. It’s basically a how-to-guide for financial independence, but instead of focusing on investments and retirement accounts, it emphasizes aligning your money to your values. But until now, I’d never actually done any of the activities from the book—I’d just read them and thought: hey that seems like a good idea; maybe I should do that someday.
So now, several years after buying the book, I finally did one of the activities. And although it’s not even the first activity in the book, I calculated my real living wage. The real living wage is the hourly rate you earn at work, but with all the extra time and money associated with work removed, like commuting or a really bad coffee-and-pastry habit.
Here’s what the process looks like if I use numbers from my life around 2008.
So even though my gross pay rate was nearly $17 per hour, all the expenses (time and money) associated with work brought that number down to a much less exciting $7.85. And that doesn’t even include taxes, which seem like they should also be in there somewhere, but aren’t one of the adjustments in the book.
Bleh! You and Your Math are So Boring!!
So what? Well, the actual wage is a springboard for all sorts of thoughts, like:
- Oh shit, I’m only making that much?!?! Happily, 2014 looks a lot better than 2007 because of a better salary and a shorter commute, but my “actual” wage still turns out to be only about 60% of my gross pay.
- I work at least one hour every month just for coffee!?!? Yes, yes I do. It’s funny to think that one Tuesday a month, I’m spending 2-3 pm working just so that I can drink coffee. That’s probably not likely to change anytime soon, but at least I can be conscious about it and change things that are really out of whack.
- How do I make that number better? Yay—more math! But this is where math get’s interesting: when I cut my commute in half in 2008, it was like I got a $5,600 raise because I got 10 hours and a pile of cash back every week.
And that’s the point: Maybe you don’t love financial math as much as I do, but if you’ve read this far, I bet you value of your time more than money.
What do you think is the best way to align your money with your values?