Try this eye opening exercise:  calculate your REAL Hourly Wage.

Here's why you need to know your REAL Hourly Wage.  In order to make intelligent spending decisions you need to be able to determine the real value of the purchase.  In terms of budgeting, if something goes out as an expense, something else needs to come in as income to balance it.

So, if you're considering a $70 purchase, you need to know how many additional hours you will have to work to earn the money to pay for the purchase.   Then, you can intelligently decide whether the $70 purchase is worth having to work the extra hours.

Let's say your gross salary is $50K and let's say you get paid to work an average of 2000 hours per year.  If you divide your $50K salary by 2000 hours, your real hourly wage is $25, right?

Guess again!

By "REAL" I mean what you take home after taxes and minus job-related expenses such as commuting, coffee, meals, your wardrobe, daycare and dry cleaning.

Here's what you do:

• Write down your Gross Salary
• Multiply by .7 (to account for taxes)
• Subtract Job Related Expenses (like those mentioned above)
• Divide by 2000 (the number of hours the average person gets paid to work each year)

So, if your gross salary is $50K, you multiply it by .7 which equals $35K.

Then you subtract annual job-related expenses, say $6500, and you're left with $28,500.

Then you divide $28,500 by 2000 and get $14.25/hour.

This is your REAL hourly wage.  This is the number you use to help determine the value of a purchase in terms of the number of additional hours you'll have to work to pay for it.

Naturally this is only a rough number.  You should apply your own tax bracket to the formula and you will need to account for other things like the amount of time you spend getting ready for work and commuting to it, but you get the idea.

Bottom line: Your $70 purchase will require you to work nearly five additional hours.

Does it make sense?  Is it worth it?

It's your money and your time...You decide.