Time Value of Income

Attaching a monetary value to one’s time and energy, particularly in a work situation, is not uncommon.  Most people know how much money they earn per hour.  On several occasions in my life I have taken jobs that paid around $7.50 per hour.   That’s pretty black and white.  1 hour of my time and energy at work was worth $7.50.  On the other hand, salaried positions are slightly less black and white in terms of time value.  My first salaried position paid $28,000 per year.  The value of an hour of time in a salaried position depends on the number of hours worked during a particular year.  If, for example, in my salaried position, I worked 40 hours per week for 50 weeks, I would accrue 2,000 hours per year, and my hourly rate would be about $14 per hour.  In that case, 1 hour of my time and energy at work would be worth $14.  If however, I worked an extra hour per day for the same number of weeks, I would accrue 2,400 hours per year and my hourly rate would drop to $11.66.  In that case, 1 hour of my time and energy at work would be worth $11.66.

As I said, most people, even those who are salaried, have figured out how much money they earn per hour, but just in case you haven’t, or haven’t done it in a while, we’re going to take some time and go through this together.  But then, we are going to take it one step further.  I’m going to ask you to determine your wage by minute.  Most people have never done this exercise. However, the information that we learn by doing the wage by hour and the wage by minute exercise will be very useful in the exercises that will follow.

Please note, some of these figures that you come up with might not be totally accurate, don’t get hung up on that. The information will still be beneficial and the figures will be close enough for our purposes.  I’ll refer back to this exercise and some of the numbers we figure out here in later posts and exercises.

Okay, so here we go.

Wage by hour:

Begin by figuring out how much money you earn per hour.  For the purposes of this exercise, we will only use our “gross earnings.”

• If you earn an hourly wage, like $10 per hour, then this is easy.  Your time value for this exercise will be $10/hour.
• If you are salaried, then we recommend, for simplicity that you divide your yearly salary by 2 and then drop the zeros.  So it looks like this:

Example:

$24,000 per year divided by 2 = $12,000, then drop the last three numbers and you get $12.

Wage by minute:

This is a computation that very few people undertake.  But when we get ready to look at the time value of our  expenses, knowing our wage by minute can actually be very beneficial.

To figure out your Wage by minute, take your hourly wage and divide it by 60:

$10 per hour divided by 60 (minutes) = approx. 17 cents per minute.

 

So hang on to this information.  We’ll use it in some of the upcoming posts!

 

 

 

Perceptions of Income – Gross v Net

We need to take a moment to discuss your gross income versus your net income.   In case you don’t know, your “gross” income is the full amount of a source of income (like your paycheck) before taxes or any other deductions are taken out.  After they take the taxes and deductions out of your source of income, you receive what remains and this is referred to as “net” income.  As an example.  If your hourly wage is $10 per hour and you work 40 hours during the week, your gross pay is $400.  But when you receive your paycheck, you notice that it is only $350. That is because they have taken out all of the taxes.  The gross pay was $400, the net pay was $350. Pretty straightforward, right?

Okay, so this is where a lot of programs leave this information.  There is money that is “taken out” of your paycheck and you should know the difference between “gross” and “net.”  But there’s some important information that is being left out, and in my efforts to eliminate our tendency to DISCOUNT the value of anything, we need to look at this just a little bit longer and perhaps from a slightly different perspective.

First, it is very important that when we look at our hourly wage or salary that we give it the total value.  For instance, in the example above, you earned the full $400 and we want to recognize the full amount.  But what happens is we tend to focus only on the net income because that is what you are going to use to pay your bills.  There is a tendency to think of the money we didn’t receive as being “taken out” – which is only part of what happens.  That money is taken out, but it is used to pay for something.  That is to say that you are actually spending that money.  You are spending that money on a lot of things.  Some of it goes to pay for roads, police, military, libraries, schools.  Maybe some of it goes to pay for your health insurance or a retirement account.  Maybe some of it goes to child support.  Wherever this money goes, it is you that is spending it and we want to recognize that it is our money that is leaving our possession.

The point of this discussion is not to argue whether your tax money is being spent well, or what is fair or right, or who is to blame for anything.  The point is to illustrate that the money between “gross” and “net” is money that is spent on goods and services.  It is money that you earned and we do not want to DISCOUNT the value of those resources by not acknowledging them.   So, yes, the money is “taken out” but then it is paid to someone else.  It is not something that is happening to you, it is a process in which you are actively participating.

 

On the topic of needs, here’s a great blog from my dear friend Joanne.

What's In It for Me?

I have a motley crew of teacups, all stashed away in the sideboard.  Some are a mismatched group I inherited from my grandmother.  I also got a matched set of cups, saucers and luncheon plates from her but I never felt attachment to them so I donated them to my local thriftstore, where their sale would benefit people in need.  The set was definitely more valuable than the mismatched cups I kept.

These teacups are a part of me, even though I rarely use them.  My grandmother displayed them on shelves by the dining table, little sparks of color and elegance above the plain Midwestern fare we ate.  She knew I liked them, so she left them to me in her will, along with a hand-stitched tulip quilt from her youth in rural Nebraska.  She and I never felt comfortable in each other’s presence—I was the rebellious child and she…

View original post 416 more words

Perceptions of Income

I have found that people typically think of income as the money they earn at work.  However, I’d like to challenge you to think of income as any resource that is coming into your possession.  Some of it might be monetary, but sometimes it’s not.  For instance, we definitely want to recognize if we receive income from our work, but we might also receive income from unemployment or from investments and we want to recognize that as income.  Sometimes it comes in the form of cash, but sometimes it takes different forms.  It might come in the form of food stamps, housing assistance or perhaps educational grants and scholarships, or assistance with our health care costs.  It might come in the form of a loan from a relative, a student loan or a second mortgage – I know, you’re thinking this is debt, and it is, but these are also resources that are coming in to your possession.  Income could also be the money you get during the holidays or on your birthday. Or perhaps that $20 your parents sent to you, just because they love you so much.

In addition to the income that we get in the form of money, I’d like for you to think about the resources that come to you in different forms.  Perhaps your grandmother gives you a sweater – is that income?  Or perhaps your friends watch you children while you go to the doctor – is that income?  Maybe your mom made you a dinner and brought it over to your house – is that income?  Maybe your friends took you out to dinner or bought you a drink – is that income?  Maybe, in our traditional way of looking at income, it doesn’t seem like it.  But these are all ways that resources come into your possession and they definitely have value.  We want to recognize those as well.  Sometimes with these non-cash forms of income or “in-kind” income it is hard to put an exact value on them and it is not necessary that the amount be exact, but we should at least give them an estimate.  At the bare minimum we should be cognizant that we are receiving something of value.

Here are some reasons why this is important:

1. It is important to recognize that resources, both cash and non-cash are constantly coming into our possession; WE DO HAVE MONEY – even if it is not as much as we would like to have at this moment.  (So stop saying you don’t have any!)
2. It is important that we don’t DISCOUNT the value of any of the resources that we receive;
3. It is important to recognize that many of our non-cash resources are valuable and again, we don’t want to DISCOUNT the value of those resources.

 

The Perception of Income as “The Solution”

Earning more income can vanquish all of life’s trials and tribulations – true or false?  There is the tendency among many of my students to believe that earning more income can vanquish all of life’s trials and tribulations.  The notion that “when I make a lot of money, my problems will be solved” is an extremely common one. So how do we get more money?  Well, the only two ways that I know of to get more money are to spend less or find additional income.  That’s easy, right?  Wrong.  Why?  Because spending less and finding additional income take additional time and/or energy, and time and energy, like money, fall high on the list of things people would like to have more of, not less.  Ay, there’s the rub!  So the real question then is, how do we get more money without having to expend any additional time and/or energy?  And the answer is…more money is not the answer.  While I do agree that in certain circumstances more income can be beneficial, sometimes money can create more problems than it solves.  If earning more income was a cure-all, then seventy-eight percent of former NFL players wouldn’t be bankrupt or under severe financial stress just two years into retirement.  And the majority of lottery winners wouldn’t be right back where they started financially speaking within five years of winning the lottery. While financial health may begin with an increase in income, it does not guarantee sustained financial health.  Financial health is sustained through the creation and maintenance of assets.

 

 

The Perception of Money

A key concept in Meaningful Consumerism and improving your financial health and  is to understand our perceptions of money and how money operates as a component of our financial health.  However, most people who I work with tell me that they don’t have any money, don’t have enough money, can’t save money, don’t know how to budget their money, and/or feel stressed about money.

So before we can really get any deeper into the discussion on financial health, I recommend that we should probably have a little bit better understanding of this term “money.”  So I’d like to ask you…What is Money?

In all my years of teaching, I have never met anyone who wouldn’t like to have more money.  In fact, the vast majority of my students view more money as the ONLY solution to their financial troubles – their golden ticket to being able to stick to a budget, save money for the future, improve their credit, reduce the amount of stress they experience in their daily lives, and to have a good life.  So, what is money?  When I pose this question to one of my classes, the responses I get are typically verbalized with vigor.  Money is power!  Money is status!  Money is opportunity!  Money is evil!  Money is freedom!  Money is worry!  It’s bad, no, it’s good.  It’s paper, it’s electronic.  It’s imaginary.  It’s government conspiracy.  It’s control. It turns out to be a lot of things.

Let’s use our imagination for a moment.  Imagine you had a hammer sitting on a table.  Does the hammer have any use just sitting there on the table, without a human to interact with it?  No.  The hammer can’t get up and start pounding nails into the wall on its own. All it can do is sit there on the table, patiently waiting for a human to pick it up and use it.  On its own, it has no use.  Sitting there on the table, the hammer merely represents the ability to do several things – some good, some not so good. It could put nails in walls, take nails out of walls, knock something loose that was stuck or push something into place.  On the other hand, it could also smash your thumb, knock a hole in a wall, make dents in things, or potentially seriously injure or even kill someone.  The hammer is simply a tool.  You get to determine how to use it and until it is being used it is neither inherently good nor bad.  It just is.

Money is really no different.  If left sitting in the wallet, it will do nothing.  If left sitting in the bank account, it will do nothing.  It might draw some interest, but until it is used, the interest will do nothing too. By itself, money doesn’t do anything, and it doesn’t do anything to us.  It does not move without us “willfully allowing” it to leave our possession, a behavior commonly referred to as spending.  In order for money to leave your possession, you have to willfully allow it to do so – always.

If you have a $10 bill in your pocket, it can represent many possibilities – but it is neither inherently good nor bad, it just is.  If you have $100,000 in the bank, it might mean a lot of different things to you, but until it is being used, it is neither inherently good nor bad, it just is. That $10 or $100,000 can be used to make purchases that will be beneficial, or it can be used to make purchases that are not beneficial. In the same way that you get to determine how to use a hammer or any other tool, you also get to determine how you will use your money.

So, as a reminder, money is simply a tool.  Money might come in many different forms, like paper, coins, or electronic information, but ultimately, it’s still just a tool and we get to decide how to use it.  All of those other things that we think about money, they are just reflections of what money represents to us.  And it is good to know that about ourselves as well.  But we will come back to this point over and over, money is a tool and it is a neutral object that we use.  Money does not use us.

 

Creating Perceptions Through Marketing – Part 4 – Turning Wants Into Needs

Successful marketers know that one of the most effective ways to get customers to spend money, time and energy consuming their products and services is to convince the customers that they need a particular product or service.  Most often they accomplish that by either creating a need where one did not exist before, or by turning a want into a need.  For example in 2011, Dove introduced a new deodorant purported to give women “softer, smoother underarms in just five days.” Hinging on the idea that women’s armpits are unattractive, the sales campaign for the product included ads portraying women joyfully cutting the sleeves off their shirts, as if they’d just been liberated from a shameful deformity and survey results asserting that armpit dysmorphia is a pervasive problem plaguing the majority of women worldwide.  By pinpointing a problem that most consumers didn’t even know they had, exacerbating anxiety about the problem, and then selling the cure, Dove’s powerful marketing formula successfully creates a need where one did not exist before.

The computer and mobile phone industries have been successfully turning wants into needs for decades.  People are really adamant about needing their computers and cell phones.  Remember when internet access used to cost like a hundred dollars a second, when you actually figured out what “Wi-Fi” meant, or when only grown-ups carried a cell phone?  I thought needs were about survival.  “Yeah,” people tell me, “I know.  I need them to survive.”  And they’re not kidding either.  Just try telling someone you’re taking his or her cell phone or computer away for the day and you’ll get one of two responses.  One is, “Oh Hell no, you’re not!”  The other is this unbelievably sad, scared look, that I think is best described as panic, sometimes followed by whimpering and, on occasion, cowering in a corner in the fetal position.  Ok, so we need them.  Why?  Because we’ve been told over and over that we do, we believe that we do, and so we do.

The pervasive message that marketers spend as much as $200 to $400 billion a year on, and bombard consumers over 3,000 times a day with, is, our lives, as they exist right now, are not enough.  We are not successful enough, pretty or attractive enough, or rich enough.  We don’t drive the right car, support the right cause, live in the right neighborhood, or eat the right foods.   We don’t smell right, don’t dress well, and we don’t belong to the right groups.  Our teeth aren’t clean enough, our clothes aren’t clean enough, and our houses aren’t clean enough.  We’re not efficient enough, productive enough, or well enough connected.  We need to work harder, exercise harder, and play harder.  We need to be better friends, better spouses, better parents, and better providers.  We need $1.5 million to retire, we need to take our families on vacations, and we need to pay for our kids’ 155 different activities. We need more money, more money, and more money.  And if we just had a little bit more money, more success, more status, more shoes, whiter teeth, if we just had the right product or service, our life would be nothing but sunshine and happiness, just like all of the excited, smiling people on the billboards and in the television commercials.

Our parents heard it before us, and their parents before them.  Our families are surrounded by it. It’s all around us, all the time. It is a never ending, around the clock message.  We are lacking, we’re not good enough, not yet.  Out with our friends and colleagues, at work, even at our schools and places of worship – we are bombarded by it.  And based on the figures, we’ve marketed the heck out of it, we’ve bought it, and we’ve even gone into debt for it.

 

Creating Perceptions Through Marketing – Part 3 – Data Mining

Now let’s take a moment to consider all of the ways in which marketers and advertisers are able to access information about the individual consumer’s spending habits and personal shopping needs.  Google is a marketer/advertiser gold mine.  Spend a few minutes surfing your favorite Internet sites and they know a lot more about you than you probably would like for them to know.

Target, who has been credited with being able to find out if a customer is pregnant, even if she doesn’t want them to know, has been collecting vast amounts of data on every person who walks into its stores for decades.  Each Target shopper is assigned a unique Guest ID number that not only keeps tabs on everything you buy but is also linked to demographic information such as your age, marital status, number of kids you have, which part of town you live in, your estimated household income, how long it takes you to drive to the store, whether you’ve recently moved, what websites you visit, and what credit cards you carry in your wallet.

Acxiom, the leader in the multi-billion dollar database marketing industry, was featured in a June 2012 New York Times article by Natasha Singer and was said to have databases containing “information on about 500 million active consumers worldwide, with about 1,500 data points per person…and knows things like your age, race, sex, weight, height, marital status, education level, politics, buying habits, household health worries, vacation dreams – and on and on.”

Wait a minute – did they say “multi-billion dollar database marketing industry?” When I first read it, I just kind of read on by, and then about a paragraph later, did a double take.  Database marketing Industry – in the words of my three-year old daughter – “What does that even mean?”  It means, folks, that there is a whole industry dedicated to gathering as much information about you and your behaviors as possible and selling it to others who then use it as a tool to try to manipulate what, where, and how you consume goods and services.  Now I promise I’m not going to go all 1984 on you.  I’m not a conspiracy theorist.  All I am saying is, if you ask me, that is kind of creepy.

So, what is the purpose of all of this marketing anyway?  In layman’s terms, marketing is an effort to get consumers to behave, i.e. spend their money, their time, and/or their energy, in ways the marketer would like for them to behave.  Retailers want you to spend your money, time and energy consuming their products and services.  The Humane Society wants you to spend your money, time and energy supporting their philanthropic efforts.  Politicians want you to spend your time and energy voting for them.  Anti-drug campaigns want you spend your time and energy not doing something – “just say no.” Even awareness campaigns and health campaigns want you to spend, or refrain from spending, your money, time and energy in a particular way.  They all want you to do something, to behave a specific way.

Successful marketers know that one of the most effective ways to get customers to spend money, time and energy consuming their products and services is to convince the customers that they need a particular product or service.  Most often they accomplish that by either creating a need where one did not exist before, or by turning a want into a need. That is to say, by changing our perceptions.