Living Your Best Life 

with

Instant Inspiration and Timeless Wisdom

Click   here   to subscribe to Living Your Best Life

The REAL cost of what you buy.

What we buy and how we buy it very often creates the situation that we can’t stop doing what we do because we must pay for what we bought. We become slaves to our desires and now we must work to pay the bills.

All too often we blame our financial situation on the "high cost of living" when in reality it is the "cost of high living" that is causing the problem. So. From today evaluate the necessity of your spending.

A good way to evaluate the "value" of your purchase is to determine the labour cost. This works better than the cash cost as we tend to take money for granted and no longer see it's value and even worse, we buy on credit and don't count the cost at all. But if you calculate the labour cost you will see things differently. Why? Because just about everybody complains about how hard they have to work.

So. What is the labour cost.

The labour cost is simply the hours that you will have to work to pay for this purchase.

To calculate your Labour Cost you first need to calculate your Labour Value.

To calculate your Labour Value take your nett salary (this is after all deductions such as tax, pension, medical aid etc.) and then divide it by the number of hours you work in that pay period.

Example.

Lets say you clear, after deductions, 10,000 per month and you work (well you are at work) an 8 hr day 5 days a week.

This means that you are at work 40 hrs a week (8 x 5) and 173.2 hrs (average) per month (40 x 4.33) OK where does 4.33 come from. This is the average number of weeks per month (52 weeks per year divided by 12 months per year).

Now lets calculate your labour value 10,000 divided by 173.2hrs = 57.74 per hour.

OK. Now you've got your LV (Labour Value) you can calculate your LC (Labour Cost)

Example.

You want to buy an item that costs 2,000.00 and you can get it on credit over 6 months at only 375.00 per month so total cost (TC) is actually 2,250.00.

Firstly Monthly LC = 375.00 divided by LV 57.74 = 6.5 hrs (Nearly a full days work)

Next Total LC = TC 2,250.00 divided by LV 57.74 = 38.97 hrs. (Nearly a weeks work)

Now ask yourself if this purchase is really worth all this labour.

To make this calculation even more meaningful you should actually deduct from your nett salary the costs that you have to incur to live and earn this salary. Now you are working with your disposable income. So let's recalculate.

Nett salary                                        10,000.00

Transport to work          3,000.00 (Calculate vehicle cost and fuel cost)

Rent                             2,500.00

Groceries                      1,500.00

Total Living cost            7,000.00

What's left?                                       3,000.00

So what's your actual LV? 3,000.00 divided by 173.2 hrs = 17.32

So what's your actual LC? 2,250.00 divided by 17.32 = 129.91 hrs. Is it worth it?

So before you spend calculate the real cost of what you are about to buy.

We'll continue with this subject in the next mail in the mean time apply the Triple S program

Spend Less - Spend Wisely - Save More.

Send me feedback here =>> Feedback <<=

To live your best life be true to the YOU, that you want to be.

Live with passion. Change your life from making a living to making a difference.

Live up to the reputation that you want to have.