In this article I’ll show you that, for better or worse, we all are in business. You’ll walk out of this blog post with a damn useful tool to rock and make successful your personal finances.
Revenues and profits are not only for businesses, we also have cashflows coming in every month.
On one side you have inflows: income from net salary or side hustles. On the other side, you also have the counterpart, outflows: expenses (food, rent, gas, clothes, etc.).
Subtracting inflows minus outflows we get the sweet sweet profit. Having $0 profit is synonym of just making ends meet or living paycheck to paycheck. And as a business, having constantly negative profit (also known as loss) means going bankrupt.
Here is the plot!
Dividing the profit by the amount of hours worked you get profit/hour worked.
At this point you are wondering: And what the heck do I do with that? With this indicator you can calculate how many hours of work an object or service is worth. Allow me to explain better how much that $50 dinner really cost.
Running the numbers
Our imaginary friend, John, earns $3000 a month after taxes. John works on average 168 hours a month (21 working days * 8 hours a day). After paying all the monthly expenses he keeps $1000 in profit (John’s monthly expenses are $2000). Therefore, his profit/hour-worked is $5.95/h ($1000/168h). For the sake of simplicity let’s round it up to $6/h.
John would have to work approximately 8 hours (one entire day) to pay for the $50 dinner! You can obtain that by dividing $50 (the dinner cost) by 6 (profit/hour-worked), which is more or less 8 hours. In other words, one entire day of work gets expensed in a $50 dinner. Is it worth it? It depends on how badly John wants that dinner.
You have the control
Time is your most important asset as we saw in this article, and it’s non-refundable. We can take back money, relationships, or even health, but not time.
Here you have a calculator that helps you calculating how many hours of your life is worth it that product or service that you want to buy:
- We are all in business and it’s better to have profit than losses.
- One good indicator of your day-to-day operations is profit/hour.
- Every time you pay for a good or service, indirectly, you pay with time (your most important asset).