My brother is selling his house. To get it ready for market, his family has been packing stuff in boxes. When it came time to pack his wife's shoes, the kids were amazed. She had sixty pairs of shoes. “How much did these cost?” my brother wondered. “Only about $75 each,” his wife told him.
Their kids are still a little young to understand money, so my brother tried to translate this for his oldest son. The kid had just spent a couple weeks working, for which his grandfather paid him $20 per day. He saved his money and at the end of the two weeks, he bought an iPod. (Though what a seven-year-old kids wants with an iPod, I'll never know…)
“One way to look at it,” my brother told him, “is that for every two pairs of shoes, you could have an iPod.”
My nephew thought about this for a bit. “That's a lot of iPods,” he said.
“Yes,” his father said. “That's thirty iPods.”
My nephew thought about this some more, and then, like a good Roth, came up with an entrepreneurial endeavor. “Maybe we could sell these shoes and buy more iPods,” he suggested.
It's an amusing anecdote, but it points out something very useful, as well. One way to measure how much things are worth, is to compare them to something that you already own and value. My nephew likes his iPod, so it makes sense to show him how the cost of the shoes compare to it.
My wife often measures things in lattés. If she sees something that strikes her fancy in a store, she'll stop and consider: “That shirt is three lattes” or “Those earrings are ten lattés” or “That book is two lattés”. Looking at things in this way, she's able to figure out how much they're actually worth to her.
A friend of ours measures things in Saturns. She loves her car (a Saturn, naturally), and so whenever somebody mentions something expensive, she's able to compute it's value to her. A fancy plasma TV might be one-fifth of a Saturn, for example. A house might be ten or twenty Saturns.
I've even begun doing this a little myself lately. As you know, I'm a comic book collector. Specifically, I collect the hardbound compilation volumes that the big companies release once every month. These cost $50 each. (Well, I get them for $35 each, but in my head I still think of it as $50.) So I'm able to measure things in Masterworks (the name one company uses for its series of books.) A new laptop computer is very expensive. The one I want is thirty Masterworks. The new Nintendo Wii I've saved for will probably cost five Masterworks. A nice dinner out is one Masterwork.
Money is an abstract concept. It doesn't really represent anything besides time and labor, and those are hard to visualize. If you can find something concrete to use as a measure of value instead, it makes it much easier to visualize how much something is worth to you. I used to spend $250/month on books. I don't anymore. I now know that $250 is five Masterworks, and there's no way it's worth it to me to spend five Masterworks each month on books.
What sorts of concrete things can you use to measure money?