Let’s say I have a brand-new car. You’ve been in the market for a while, and I’ve got the best deal in town.
You can drive it home today for an incredibly low price. No money down, no interest. I don’t even care about your credit score.
The price?
One year of your life.
Would you take me up on it?
Forget the car for a moment. How much of your time would you trade for a nice vacation? A new pair of shoes? A fancy dinner out?
Would you give an hour of your life for a meal driving home from work? A week for that dream trip to the beach?
In reality, when we want those things, we just swipe our credit card. It couldn’t be easier.
As long as we can afford the payment at the end of the day, what does it matter? We work hard, so it’s worth it.
Or is it?
This summer, I read Your Money or Your Life by Vicki Robin. She argues that because we sell our time for money, money is really life energy.
We may not literally spend hours and minutes as currency, but every time we spend money, we’re spending pieces of our life.
At first, this sounds obvious. Of course we trade time for money. We call it an hourly wage.
What’s less obvious is how much money we truly earn for the time we give up.
Meet Sam
This is Sam.
Sam works in an office, doing office-type things. He makes $80,000 a year working 40 hours a week.
To calculate his hourly wage, we’ll divide his income by the number of hours he works in a year:
- $80,000 ÷ 2,080 (52 weeks x 40 hours) = $38.46 per hour
Not bad!
But that number doesn’t tell the whole story.
We all know about “cost of living” — groceries, rent, healthcare. But there’s another category most people overlook: cost of working.
Cost of working includes any expenses you incur only because you have a job.
There are obvious expenses, like transportation , professional clothing, and the 2 pm coffee to get you through the afternoon.
Less obvious ones might be eating dinner out because you’re too tired to cook, or retail therapy over the weekend to blow off steam.
Some expenses will vary by person. Would you get your hair cut as often if you weren’t working? If not, that’s a work expense.
What about your vacation? If it’s really just a time to get away from work and recover from burnout, it might be a work expense.
Include your time in your cost of living calculation, and you’ll consider commute time, time getting ready for work, time to decompress after work, time that work lives rent-free in your head…
You get the point.
Real Hourly Wage
When we subtract our cost of working, both time and money, from our income, we get what Vicki Robin calls your “real hourly wage”.
Let’s apply this to Sam.
He says he works 40 hours a week, but in reality, he’s been staying late — about an extra hour each day.
His 10-mile commute takes about 30 minutes due to traffic. He figured that if he was going to be spending an hour in traffic every day, he deserves to be comfortable. So he upgraded from his old college car, and his payment costs $500 a month.
Work has been stressful lately, so he tries to get himself out of the office and goes for walk. He found a nice coffee shop just three minutes away. He gets a $6 drink there about twice a week, and usually grabs one of those $8 sandwiches as well since it’s convenient.
By the end of the day, Sam is too drained to cook, spending $45 a week on takeout. It usually takes another 30 minutes in front of the television once he’s home to totally decompress.
To “dress for the job he wants,” he budgets $50 a month for professional clothes. It takes about 30 minutes getting ready for work each day between shaving, changing, and trying to keep his tie-tying attempts to less than three.
Sam has always wanted to go on a really incredible vacation, but he’s just so tired. Maybe one day he’ll take a month and backpack across Europe. Instead, he just takes his time off and uses it as a chance to get a break and recover before getting back to the grind. At least he usually gets a good view from his beach chair! Sam’s “vacations” usually cost him about $2,000 each year.
Before, we said that Sam works 40 hours a week for $80,000. Now that we have this extra information, let’s make some adjustments.
Let’s tally his annual job-related expenses:
- $6,000 – car payment
- $3,640 – mileage to and from work
- $1,456 – coffee & lunches
- $2,340 – takeout
- $600 – professional wardrobe
- $2,000 – recuperation with a view
- $9,000 – to the other Sam (Uncle Sam)
That’s $25,036 just to maintain his job.
Subtract that from his $80,000 salary, and Sam’s adjusted income is $54,964.
Now let’s adjust his time: 40 work hours plus an extra five hours a week, plus commuting, getting ready, and decompressing — roughly 55 hours per week.
That’s 2,860 hours per year.
Here’s Sam’s real hourly wage:
- $54,964 ÷ 2,860 hours = $19.22 per hour
That is LESS THAN HALF of the hourly wage we calculated earlier!
The True Cost: Life Energy
Now, let’s take it one step further.
We can take that real hourly wage and convert it into life energy:
- 60 minutes ÷ $19.22 = 3.12 minutes per dollar
Every dollar Sam spends costs just over 3 minutes of his time. This is the real cost that he needs to consider whenever he buys something.
$14 at the coffee shop? 44 minutes. A $200 concert ticket? Nearly 11 hours.
Maybe those things are worth it — only Sam can decide. But at least he now understands the true cost.
Our life energy is nonrenewable. You can always earn more money, but you can’t earn more time.
So, reframing purchases in terms of life energy forces us to ask: is this really worth it?
Understanding the Alternative
It’s easy to dismiss this as a thought exercise. After all, we need to spend money on something — and it feels good to reward ourselves after working hard.
Without an alternative, what’s the point?
Again, we need to make sure we understand the cost.
Let’s do one more thought exercise.
If money weren’t a factor, how would you spend your life energy?
Would you spend more time with family? Travel? Finally learn to play the guitar?
Maybe you’ve always wanted to get more involved in your community or church, or to volunteer with a local organization.
If you weren’t working, how would that impact your mental health? Would you be less stressed? Anxious? Tired? Frustrated?
How about physical health? You could finally take the time to train for that 5k your friend invites you to every year. You could try some of the recipes you pinned to your Pinterest board, or maybe actually catch up on your sleep.
Ultimately, most of us would focus on one thing: whatever we value.
This is the alternative, and this is why real hourly wage and life energy matter.
So, instead of that coffeeshop lunch, what if you could buy back your time?
How much would you pay to have freedom and options?
Enter Financial Independence.
Financial Independence, or FI, is the idea of no longer needing to trade your time for money. You can still work if you want — but you don’t have to.
FI gives you freedom — the ability to spend your life energy on what matters most.
This might sound unrealistic, unbelievable, or simply unattainable.
This is one of the reasons I decided to start writing.
I want to show that it is not just possible but practical.
I plan to chronicle mine and my wife’s journey to FI — the choices we make, the challenges we face, and the lessons we learn along the way.
The formula to get to FI is simple: increase your income, minimize your expenses, and invest the difference.
Simple, but not easy — and everyone’s path looks different.
I’ll be writing more about the fundamental formula of FI and how my wife and I are utilizing it. I’ve found there is a lot to learn, and a nearly infinite number of ways to implement them.
As I share our experience, I hope you’ll join in and share yours.
Your Turn
Try calculating your own real hourly wage. Are you surprised by the result?
How does this reframe your purchases?
What are you willing to trade your time for — and what might you choose to skip if it meant buying back your freedom?
Let me know in the comments, and check back soon for more as we break down the FI formula of increasing income, minimizing expenses, and investing the difference.