How Much Do I Make/Spend Per Day
As we get older and generate more income and our wealth grows, it becomes harder to grasp the numbers. The numbers inevitably get bigger; we’re talking about numbers inflation here.
When I first started working, I would consider a $100 gain in my equity portfolio to be the end of a great day! Nowadays, that would be considered a relatively “flat” or bad day.
Most people think about how much they make on a yearly or even an annualized basis. I think it is even more interesting to look at your income and spending on a daily basis instead.
I like thinking about how much I earn on a daily basis because the number is much smaller so it seems easier to achieve. I am a firm believer of setting smaller “baby step” goals that add up over time instead of some insurmountable grandiose dream.
Let’s say you wanted to start a side hustle that could make an extra $10,000 per year.
Well, $10,000 would be ~$27/day. Say you had a side gig on Fiverr and earn $4 per task (after the site takes its cut). This means to make the $10,000 a year goal, you would have to complete 7 orders per day (even less if you have upsells)
If each order takes 15 – 20 minutes to complete, you would need to spend 105 – 140 minutes a day to meet the objective.
In this example, the $10,000 a year income and the daily $27 income are the exact same. However, somehow the $27 daily income target seems much easier.
After all, you would only need to work ~2 hours a day to achieve that objective. By breaking down your goals into much smaller targets/increments, it becomes so much easier to grasp and achieve. That’s why I started to think about income on a daily basis.
Similarly, it is very useful to analyze spending levels on a daily basis. I think the results are very interesting (if not useful). The great benefit of using daily spend numbers is that they are much easier to visualize and compare to everyday purchases.
For example, setting a $300 a month budget on lunch is much harder to visualize than setting a $10 a day target for lunch. The $10 daily figure is a much more comparable number to use when you go out looking for lunch. That way, you might think twice about getting the double meat, guac, chips, and drink at Chipotle!
Family Money Plan recently put out a great article on analyzing your daily spending rate so I won’t talk too much more on the subject and will just refer readers to their post.
How Long Do I Have To Work To Afford It
For my first job I worked as a cashier at a major drug store chain. It was a smaller store, but there were still plenty of things to be done like stocking the shelves, cleaning the floors, and building displays. To be honest, I hated the job but it paid well for a guy with no discernible skills.
The job paid $10 an hour when the minimum wage in the state was probably $1.50 – $2.00 lower! What’s interesting is that most days during my break I would actually buy some candy from the front. I mean it was very tempting. The candy just sat on the shelf and taunted me as I rang up items at the register all day.
In total I’d probably spend $2 – $3 bucks on candy or some kind of unhealthy snack. Eventually I thought about how crazy that really was. I really didn’t even need some of the snacks. In fact, I eventually just bought them for the sake of buying it.
I quickly did the math…by buying $2 worth of candy, it would take me 12 minutes to earn that. That sounded crazy! Work more at a job I didn’t really like to buy something I really didn’t need?
I forgot about that lesson for a while until a few months ago. When you have a relatively decent paying stable job (even more so with those who work in the public sector), you sometimes forget how good things are (in fact check out Untemplater’s post on the subject).
Since we often forget how great we have things, I thought it would be really interesting to think about affordability of purchases.
Instead of saying how much it costs to buy something let’s translate it into hours worked. So now you would say how long would it take me to work in order to buy this thing? How long would I have to do this side hustle to afford this vacation?
Say you did the math and figured out you make $400 gross (before taxes) per day (not including the weekends) at your job. And you’re considering a lavish and romantic beach side getaway that costs $9,000. In effect, it would take you 22.5 days to save up for. Sounds kind of crazy right?
Thinking about how long you have to work to pay for something really makes you feel differently when you purchase something.
I guarantee you’ll start to look at things differently!
Conclusion
Thinking about daily income/spending levels is much more interesting than on a monthly or annual perspective. Setting a daily income target makes it seem much easier to achieve. Similarly, a daily expense target sometimes makes you think twice about spending on something you might not need. This line of thinking is amplified when you consider how long you would have to work to purchase something!
Readers, what do you think about my 2 different ways to think about income and spending? Do any of you do the same thing or have another unique perspective? Let me know in the comments!
Great thoughts! I’m also a fan of the breaking things down to smaller increments. I also like your idea of daily spending limits as well as thinking about purchases in terms of how long you’ll need to work afford it. I sometimes do that myself with bigger purchases. If I feel that it’s not worth working so-and-so hours/days just to buy something that I don’t need and won’t add value to my life, then I just forget about it.
Thanks! Yeah, I find when you really think about how long you’ll have to work to be able to afford a bigger purchase you’ll really consider whether you need it or not. Thanks for stopping by!
I try to balance the two, both long term and short. If you look too much at the short you will become caught up in those things you don’t buy daily. So for example if I bought a years worth of paper towels in bulk the impact on my finance daily is way out of proportion. However if I account for it as a year its nothing.
Also you might find yourself justifying something as only being 4 dollars today.
On the flip side of that I have a number written in the corner of a sheet of paper I look at every day at work representing the dollars my hours at work will save simply because as you said a year is an abstract construct at some points. If you look at it overtime the time frame may make the goal less in the here and now. Sure I’ll spend the 4 dollars but I’ll make it up by not spending it next week. And thus it becomes of little value.
Good points. I bought a 20 class yoga package recently, but I only ‘amortize’ the expense when I go into class even though I already paid cash.
Hi Par,
you present an interesting approach. I have not considered my dividend income on a daily or hourly basis. I do however how much I make per hour or day in my day job. So, I know how many hours/days I have to work for something. What I really like to do, especially with larger purchases that last multiple years, I try to break down what it costs me per hour and then compare that number to a night out at the movies or so. It turns out that a night at the movies can be quite expensive when you compare it to alternative ways of spending your time.
Great approach. I typically think movies are a poor source of entertainment on a dollar-per-hour basis. IMO it would be much more efficient to buy a video game because once you paid the initial cost, you can play as much as you want!
I’m similar with you…I don’t count my dividends as income. I feel like if I did, I would try to chase for yield instead of thinking long-term.
I do the same exact thing that you do. I love breaking things down in fractional costs and earnings!!! I am a big fan of setting goals and then creating a financial bridge on how you are going to get there. Thank you for sharing an excellent breakdown and glad to know I’m not the only one 🙂
YES! Breaking things down is great! For a while I tried to hit home runs with my goals and I just never did. It’s much easier to create little steps that advance you forward than go swinging for the fences. Thanks for stopping by as always!
I love breaking larger goals down into smaller, more manageable steps, so figuring out daily spending/income makes a lot of sense to me.
And figuring out how long you have to work to buy something is a great technique. I learned this from the book, Your Money or Your Life. They actually have a method for figuring out your “true” income – how much you make per hour after your figure in your work related expenses, such as a commute, clothing, etc.
I agree, breaking a big goal up is so much easier than trying to hit the home run (and it’s better for the self esteem too). I’ve never heard of the book, but I’ll have to check it out because that’s a neat financial framework to have.
As a fun fact, I read somewhere that Warren Buffett has essentially made $37 million a day…(which is over $25K a minute haha)!