On Saturday, I wrote about my transition from spender to saver. I mentioned that I'd recently peeked at the latest camera equipment. “I spent twenty minutes on Amazon, drooling over the Nikon D300,” I wrote. “I'm tempted — but not much. I'd rather save that $1,800 for the future.”
Reader Kristi Wachter left an astute comment:
$1800? That's, what, 6% of a Mini Cooper?
This is an excellent way to look at proposed expenses: re-frame the purchase in terms of something you already value. I've already spent several months coveting a Mini Cooper. By looking at the new camera in terms of how much Mini it would cost me — 6%! — I get a better idea of the sacrifice I'd have to make to buy it. It makes the idea more concrete. In a way, the Mini Cooper has become a sort of personal currency.
Money is an abstract concept. It really represents time and labor, and those are hard to visualize. By finding something concrete to use as a measure of value instead, it's easier to visualize how much something is really worth to you.
For example, my wife sometimes measures things in lattés. If she sees something in a store, she'll stop and consider: “That vase is three lattes” or “Those shoes are ten lattés” or “That book is two lattés”. By looking at things in this way, she's able to figure out how much they're actually worth.
Our friend Marla measures things in Saturns. She loves her car (a Saturn, naturally), and so whenever somebody mentions something expensive, she's able to compute its value to her. A fancy plasma TV might be one-fifth of a Saturn, for example. A house might be ten or twenty Saturns.
Last night at dinner, I mentioned this notion to our friends Mike and Rhonda. “Oh, we used to do that all the time,” Rhonda said. “When we were first married, we lived near a sushi place. We loved their rainbow rolls, but they were kind of expensive. Whenever we got paid, we'd convert the dollars to rainbow rolls.”
Obviously these sort of personal currencies aren't sophisticated financial tools. They are, however, quick and easy ways for each of us to measure the relative value of the things we buy.
Author: J.D. Roth
In 2006, J.D. founded Get Rich Slowly to document his quest to get out of debt. Over time, he learned how to save and how to invest. Today, he's managed to reach early retirement! He wants to help you master your money — and your life. No scams. No gimmicks. Just smart money advice to help you reach your goals.