The Simple Dollar (7 page)

I wound up not taking that nonsensical fast food job. I simply didn’t go to the interview. But the point is still obvious. I was running in place. I didn’t have enough money.

How could this possibly happen? I held a college degree and had a fulltime salaried position that earned me over $45,000 a year. On top of that, my wife also held a fulltime position. At the time, we were living in an apartment and didn’t have any children.

I thought I was just doing something a little bit wrong and that my future self would take care of it. After all, my friends seemed to have many of the same trappings of lifestyle that I had.

What I didn’t realize is that many of my friends were in worse financial situations that I was. A few of them were well on their way to eventual personal bankruptcy, and others are still mired in an enormous pile of debt.

All of them were trapped in jobs that were incredibly mentally and emotionally demanding. They were tied to work that never left them—a laptop or Blackberry always at their sides, a cell phone ringing regularly with new things to handle via text and phone calls, a schedule that never seemed to have room for anything more than occasionally collapsing in an exhausted heap.

They, like myself, were running in place. For all the effort we were putting forth in our lives, we were not making any progress toward the things we had always dreamed about. Our kingdoms for a flat panel television, indeed.

Life was much simpler for my parents. When I was young, my mother stayed at home and handled the multitude of household chores while my father worked outside the home, alternating between factory work and small-scale commercial fishing. One income was enough, and even then, my father always seemed to have plenty of time to spend with me, teaching me how to garden, how to ride a bike, how to throw a baseball, and all of those other classic elements of fatherhood.

Today, this simply wouldn’t work. According to the Bureau of Labor Statistics, the average fulltime worker in the United States works more than eight hours a day.
¹
Not per weekday—every day, including weekends and holidays. That’s over fifty six hours per week, on average. In married households, both partners are often working. This leaves less and less time for household chores, leisure time, parenting, and adequate rest.

To put it simply, work is more demanding and more intrusive into our personal lives than ever before.

At the same time that work hours are increasing, our
real wage
is decreasing. Real wage simply refers to the income of the average American adjusted for inflation—after all, a dollar today doesn’t buy what it did thirty years ago. The Labor Research Association reports that the real wage of the average American
dropped
8.2% from 1964 to 2004.
²

Over that same period, people have begun to pay for services that were once nonexistent that are now considered standard. Cell phones, cable bills, and Internet access are all new additions to the bills of an average household. In addition, the real costs (again, adjusted for inflation) of housing and higher education have risen substantially over the past forty years.

In short, we work more and get less for our efforts.

Quite often, people comfort themselves from these harsh realities by admiring their annual salary. “I’m bringing home $40,000 a year, so I’m doing fine,” goes the logic. For a long time, I was guilty of the same thinking.

However, the truth is that your salary is a very poor indicator of how much money you’re actually earning and able to spend. In many cases, that $40,000 a year job is actually bringing home
less than minimum wage
when you break it down to the amount actually earned per hour.

In the book
Your Money or Your Life
, Joe Dominguez and Vicki Robin encourage people to calculate their true hourly wage. The calculation itself is simple—divide how much you earn in a year by the number of hours you work in a year.
³

But when you dig a little deeper, the amount you earn in a year is quite a bit less than you think. How much fuel and auto maintenance do you purchase for your commute—or perhaps you have a car solely for the purpose of getting to work? Do you buy clothes specifically for work? Do you go out for meals and drinks and other events with coworkers mostly for work purposes and foot the bill yourself? Do you eat out for lunch when you could otherwise eat leftovers at home? Do you buy “escape entertaiment”—go out to movies, buy DVDs, take trips, ride your motorcycle, and so forth—to take the edge off of your stress? Do you pay taxes at a level higher than others simply because of your higher income? All of these costs over a year should be deducted from your annual salary.

What about the hours spent on business trips? What about the time spent going to work-related social events? What about the time dropped every day on your commute? What about the time you burn working from home—or even thinking about your stressful job? Don’t forget the time shopping for work-related items, such as work clothes. What about the phone calls and other interrupting communications that your job inserts into your life? What about the time you spend each evening vegetating as you “unwind” from your stressful day? All of this time should be added on to the time you actually spend at work.

When you calculate your hourly wage with the adjusted salary divided by the adjusted time commitments, your true income level can be really shocking.

My $45,000-a-year job actually earned me just slightly over minimum wage when the true costs were used.

Quite often, as our salaries go up, so do our responsibilities. We’re working from home in the evenings and sometimes running into work to take care of things. We go on business trips, falling asleep in an uncomfortable bed to the noise of the news on the hotel television.

These responsibilities take away from the very things that we’re working for. We work long evenings and go on business trips so that we can afford a nice home, one that we don’t have the time to enjoy. We get second jobs to provide for our children—but our children are home with a babysitter.

Whenever we choose to work, we sacrifice other things: time with our loved ones, time for our hobbies and passions, time to help others, and time for ourselves. The solution for reclaiming that time is simple: Reduce our material needs and cut down strongly on our material wants. Our reward for that choice is not misery—it’s a much richer life, full of the time we need to be involved in the things most important to us.

Do you live to work, or do you work to live?

The ease with which you can borrow money to buy the things you want may make it seem as though you really
can have your cake and eat it, too. With a flourish of the credit card, it often seems as though you can have the things you want today, while your “future self” will deal with the bills.

But, as you saw earlier, our lives are more random than we think. By the time your “future self” gets around to paying off those credit card bills, your job could be downsized, rendering you unable to pay our bills at all and
desperate
to find more work. On the other hand, a friend might offer you an amazing job—your
dream
job—at his new small business, but you can’t take that risk because of your big pile of bills.

Your future self isn’t reliable. The challenges and opportunities you’ll have in six months are likely ones you can’t see right now. However, every time you buy something frivolous and wasteful, the one thing you do ensure is that your future self will have fewer options. Your future self will be in complete panic mode during any downsizing. Your future self will have to watch your dream job float on by.

The life you dream of is just around the corner. It’s up to you whether or not you’ll be able to take advantage of it.

How can you be sure that you’ll be able to take advantage of the opportunities you’ll have tomorrow? The answer is simple: Live a better life today.

Instead of upgrading your television, hold off for a while and pay off your debts first. A great opportunity might come along in the meantime.

Instead of eating out every night, start preparing a few meals at home. You might discover that it’s actually easy, or fun, to cook at home—and suddenly your credit card bills become lighter.

Instead of stopping at Starbucks, make your own pot of coffee. Take the $5 you save each day and put it in the bank. At the end of the year, you’ve got $1,800 in cash—enough for a nice car down payment.

Instead of going shopping with your friends, invite them over and go through your closet, trading items with your friends. You have a fresh new wardrobe and several fun evenings without racking up bills.

The choices you make today have profound effects on your life tomorrow. The more you spend today, the more restricted your choices tomorrow. The less you spend today, the more choices you have tomorrow—a new career, a new relationship, a new life. Every time you choose to spend frivolously today, you shut off some of the great opportunities life has in store for you.

Here are five simple things you can start doing immediately to stop running to stand still and start running to move forward:

1. Issue yourself a thirty-day challenge to cut all nonessential spending in your life.
   For one month, if it’s not a requirement in your life, don’t spend money on it. Buying food to prepare at home is fine—eating out is not. Hanging out with friends is fine—spending money while shopping with friends is not. See if you can make it thirty days with this type of perspective. As you’re going along, ask yourself if you really do miss the things you’re going without. You’ll find that, indeed, you do miss some of them—but many of them will surprisingly fade into the woodwork. At the end of the thirty days, just bring back the things you genuinely missed.
   
2. Make a list of the responsibilities in your life that you feel you’re overlooking.
   Perhaps it’s your marriage. Maybe it’s your children. Other possibilities might be your religious or spiritual life, your friendships, your charities, your home, or your health. You’ll soon see that you have more things on your plate than you have time for, and you might feel guilty or disheartened. Don’t be. Go through each of these items and address them head on. Find ways to combine these things—perhaps start an exercise program
   with
   your kids or take the whole family to a charity activity once a month.
   
3. Calculate your true hourly wage.
   As mentioned previously, your true hourly wage is the income you bring in each year
   minus
   the extra costs associated with your job (the cost of gas, car maintenance, wardrobe, food, and so on) divided by the number of hours worked
   plus
   the extra hours devoted to work-related activities (the commute, traveling, work-related dinners and social events, and so on). That resulting number might just shock you—you might just find that your exhausting job isn’t really earning you as much as
   you thought it was and that a much easier job might earn you nearly as much while also giving you other opportunities and benefits that will improve your life (getting a degree or a certification, flexible scheduling, more interesting work).
   
4. Find ways to minimize the extra time and financial costs of your job.
   Start a carpool or try public transportation. Move toward a more adaptable work wardrobe (if you need to, leap ahead and see
   Chapter 8
   , “Frugality as Framework,” for more details on this idea). Ask about flexible work hours or telecommuting opportunities. Order salads when you go out for work-related dinners—if you’re still hungry, eat at home afterward. A few simple routine changes can reduce the costs of your job quite a bit, both in terms of time and finance.
   
5. Unwind with mindless tasks, not vegetation.
   One of the most powerful changes I made in my own life was simply filling my after-work “unwind” time with mindless tasks instead of pure vegetation. Rather than flopping in front of the television for a half an hour after work to unwind, I’d just turn on the radio quite loudly and engage in some of the mindless activities that need to be accomplished. I’d sort the mail, clean the refrigerator, empty the dishwasher, mow the lawn instead of hiring someone to do it for me, and so on. When I was finished, I’d feel even more refreshed than if I had just vegetated for that half an hour, plus I now had an extra half an hour to spend on an activity genuinely important to me—my children, my friends, or my hobbies.