I have been pondering time. I am celebrating a birthday in a few days and every tick of the calendar into yet another year marks the passing of more time.
There is a saying that “time is money” meaning that to waste time is to waste money. It is a loss of productivity. I think that saying is only partially true.
There is a flip side to that concept and that is to think of money as time. Now that may seem like an odd thing to say or even read. Some might say that money is not time but a measure of value, or worth. However, I would argue that all we ever really have is time – and a rather finite amount of time. And it is the spending of time that then creates value, and so the utilization of time is measured in money.
Consider this: you are paid in some value/hour. Here in Canada we measure that in dollars so we will say dollars/hour. Now the typical Canadian worker apparently earns around $40,000/year, and typically works a 40 hour work-week to earn that wage. So 40 hours times 52 weeks gives us 2080 hours of labour, and $40,000/2080 is about $19.25/hour. I like to be simple so let us say the typical wage earner gets $20/hour.
Now at $40,000/year the typical worker would pay 15% in federal taxes and around 10% in provincial (this will vary by province) so for illustration purposes about 25% in taxes. So about $10,000 in taxes. Now ponder that in terms of time – 25% of 2080 is 525 hours. That is 525 hours of your labour just to pay the government.
Think of how you might have spent that time doing other things…
Now apparently the typical Canadian is about $115,000 in debt.
If the typical Canadian earns $20/hour how long do they have to work to pay off the debt?
Basic math is $115,000/20 = 5750 hours of labour.
5750/2080= 2.8 years
Oh but wait we already noted the government takes 25% of our time.
Okay re-calculate: 5750/1560 = 3.7 years
Of course that is assuming all one does is use their time to pay off the debt.
And it assumes that the debt has no interest – and well we know that debt does have a penalty to bear.
We have been too simple it seems – so lets add in some basic living. Various sources place the yearly income required for a single person to meet all their basic needs at around $20,000/year. That $20,000 will cover all the costs of living (food, shelter, clothing, health etc).
If you earn $40,000/year – right off the bat you require $20,000/year to live a basic lifestyle. Okay so 50% of your wages are gone.
Now back to our debt that would take 5750 hours to pay off at $20/hour.
Well, we only have 1040 hours to use for that debt payment:
5750/1040= 5.5 years of your working life.
OH and plus Interest. Gotcha…
Let us assume 5% interest on the entire time-debt amortized over the 5.5 years of payback. Well 5% each year compounded monthly would add over 950 hours of payback time…so almost another full year (with more interest on that year)…
In the end it seems that if an average worker with an average debt living a basic lifestyle and paying every extra cent toward debt reduction it would take them about 6.5 years of working to pay off the debt.
That isn’t too bad really – of course the reality is we wouldn’t ever be so dedicated to paying off the debt. At best we might dedicate 25% of our free income to debt reduction – because we certainly want to enjoy life. And typically much less…
And we might want to buy other things on credit and run up more debt. Borrowing against our future time – pledging hours from tomorrow and next month and next year to get what we want now.
And that 6.5 years of debt servitude becomes 15 years…and 20 years…
My point after all that really really over-simplification is before you borrow money think about how much time it will cost you in the future – and how many other things you will be giving up for that “gotta have it now” itch.
Your time is limited so spend it wisely…