Would pricing items in terms of hours worked change how you shop?
TORONTO – Want to purchase a new coffee maker this holiday season or tickets to a sports game but you’re not sure if it’s worth it?
Experts say pricing an item in terms of how many hours of work it would take you to pay for it could be a useful tool for those who are looking to become more mindful in their spending.
“This can help remind individuals that every dollar they spend is representative of the hard work that they put in to create that dollar,” said financial and estate planning expert Julia Chang. “This can be particularly helpful for those who do a great deal of online shopping, and may be particularly useful for the rising generation of digital natives who rarely use physical money.”
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Chrome’s website extension “Time is Money,” for example, calculates your hourly take-home pay or annual income and then analyzes how many hours it would take to pay for an item.
“You can’t get back time you’ve spent, but you can make decisions today that save you time tomorrow,” reads the app description.
Financial advisor Derek Moran said any creative way of getting people to be more aware of spending, saving and ultimately investing is a good thing.
“It’s a great start and not a solution but certainly a necessary step in the right direction,” he said. “Each of us is wired a bit differently so this will certainly resonate with some.”
Chung said that limiting consumption is always an effective way to work toward savings and tools like this are useful if people actually use them and they work as a deterrent.
“It would be the first step toward creating a cash flow surplus that would allow for savings,” she said. “A plan to save would be necessary to ensure that the additional cash flow isn’t viewed as further opportunity to spend.”
Lisa Kramer, an associate professor of finance at the University of Toronto and an expert on behavioural finance, said people have a tendency to overspend when using electronic means of payments, such as credit cards, relative to physical cash.
“Since online payments are electronic, people can have trouble being disciplined and avoiding overspending,” she said.
Kramer said that by showing people the cost of their potential purchase in hours of work time instead of just in dollars, consumers may find the cost more salient, and “this may help them keep their impulses in check.”
“Whether or not the avoided purchases will translate into increased savings will depend on whether consumers simply channel their funds into other purchases, perhaps offline,” she said.
Moran said that the long-term implications of money saved or wasted are enormous and if we could somehow get that point across “it might get people not only saving more but investing more wisely.”
“Investing is about foregoing spending today so that we can spend far more later,” he said.
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