FINANCE YO SELF

Experts on Value

Most people know what they like.  By the time people acquire enough earning power to enable them to get what they want, they’ve already spent years developing likes and defining who they are.  Once the basics are satisfied they can start thinking about what they would like more – a better car, a house, a new wardrobe.  These likes are a decade or more in the making, minimally satisfied with summer jobs and birthdays.  Finally, armed with increasing salaries and more access to capital (credit cards and loans), people are able to take some real action in getting what they want.


I think people value mostly worthwhile things – family, comfort, time, freedom.  What gets lost in the routine of college – career – starting a family – retirement between 65 and death is the ability to value accurately.  Value, while accurately seen as something that can be given or received, is mistakenly viewed as a resource.  In this sense, value can be acquired with money, time, energy, etc, can have a determined worth, and either exceed, meet, or fail to meet expectations.

The problem with thinking of value this way is that most people don’t seem to take a long term (lifetime) approach to managing their resources.  They trade the resources given to them (health, time, and money) for value and expect a certain, equal amount in return.

Value is what someone thinks something is worth.  Assigning worth to something creates expectations based on what is given and received.  A gap occurs when what is being given (usually money) is overestimated and returns are thus disappointing.

Your Real Hourly Wage

One of the first exercises in Your Money or Your Life is to calculate your Real Hourly Wage.  This number comes from adding in monetary and time costs of your job – commuting, grooming, decompression activities, health effects, unpaid overtime – and determining how much, after all that you put in to maintaining your job, you really take home an hour.  The typical figure is around half of what you think you make.

Most people I think are aware of all this “extra effort” but instead chalk it up to Being an Adult.  That’s just life.  And I get the feeling that life has a lot of disappointment for most people.  The real hourly wage enables us to accurately understand the cost of what we’re trading and what we can get in return.  If you don’t know what you’re trading, how can you know what to expect in return?

Enough

Next we have the concept of Enough, also discussed in YMOYL.  The allure of Enough is that you’re more content with what you have, because

  1. You accurately understand your resources (via the RHW) which has led to spending amounts on value that at least meet your expectations.
  2. Over time as you spend resources which provide a return of meeting expectations, you abolish the feeling of disappointment.  Disappointment is the feeling of expectations not being met, ie. the opposite of enough.

Maybe Value is a resource, which only you can accurately determine the price of.  I’d rather think of it as a statement about what you like, disguising consumerist ideas like convenience and safety.  Between the statements I like freedom and I value freedom, which one sounds more purposeful?

Knowing that we determine the value we get from something makes us feel in control.  Knowing what we like and having the resources to get it makes us feel sure, confident, and aware.  So we go out and trade our overinflated resources and are disappointed when we don’t get what we expect.  It can’t be me, we think.  I know what my time is worth and how much something costs.  

Determining likes and dislikes is a lifelong activity.  By the time you step into some real earning power you’ve easily put in the 10,000 hours it takes to become an expert at something.  I think I’m going to dedicate my next 10,000 to the next logical step:  Expert of Enough.

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