The Money Trade

If I had to point to one idea that really shook my financial thinking and showed me the value of turning my finances around, it was the concept of exchanging my life’s energy for money, as explained in the wonderful book Your Money or Your Life.

The idea is actually pretty simple on the surface. One of the big arguments in the book is that people trade pieces of their life’s energy for money. Almost every way that people earn income involves exchanging at least some mental or physical energy for that money.

It doesn’t take much imagination to expand that trade to time as well. We trade our time and our energy for money. Whenever we pick up our keys and head off to work, we’re swapping time for money. We wouldn’t (usually) go to work without that financial compensation.

When we get to work, we’re either performing physical or mental work (or both) while we’re there. Even time spent twiddling our thumbs wears us down. Not only that, there’s the constant mental wear of other aspects of work – office politics and so on. Those things expend mental energy as quickly as work does.

Our commute eats time and energy. Our time at work eats time and energy. In the end, we trade all of that time and energy for money.

That’s only half of the equation, though. What do we do when we have that money?

Almost all of our money is traded for stuff or experiences. We buy things we need. We buy things we want. Our cash is how we acquire those things we need and those things we want.

Money is just the means of exchange. Since we don’t live on a full barter system, where we trade an hour of work for a chicken or something like that, we need something to help us carry around the value of the time and energy we’ve given so that we can swap it for the experiences and goods we want.

This is fascinating and all, but how does it really matter?

What shocked me was when I started trying to translate that time and energy directly into experiences and stuff.

For starters, I looked at a typical day at my job. At that time, I would leave for work at around 7 AM and I would get back home around 5 PM or so. That’s ten hours. Of course, I could only bill for about eight of those hours, there was also the cost of the fuel, the wear on the car, and so on. After taxes, I ended up figuring out that I was bringing home about $85 for those ten hours outside of my home.

It gets worse. I would often come home mentally exhausted. I would zone out in front of a television show or video game. I’d do basic housework, but most evenings, I’d have to really push myself to do other things. The job didn’t just drain my hours – it also drained my energy. It’s hard to really account for that, but it’s reasonable to think that my job also ate an hour or two of my evening just because I was too worn out to really use that time very well.

This picture is my reward for $85 in my pocket. I’ve completely lost ten hours and I’m sitting at home exhausted at the end of the day, basically counting the hours until bed.

Now, start comparing that $85 to what things cost. My energy bill might be $170 for the month, so that amounts to two days spent like this – ten hours at work, a sapping of my mental energy, and a dull end to the day. Dinner and a movie adds up to half of one of those days.

For some of the required things in life, it’s an acceptable trade, but you don’t have to dig very far into your “wants” to make this trade seem ludicrous. Let’s say I get a bottle of soda at the gas station each day for $1.50 each. After a month, that’s $45.

Is a bottle of soda per day really worth half a day of time and energy lost to the mists of time? I suppose it might be for some people, but for me? There is no way on Earth that it’s worth it.

Now, some will rightly argue that you can’t just make that trade. I can’t choose to give up a daily soda and suddenly have half of a day of energy and time.

That’s where money comes into the equation. If you choose to make that trade, you’ve suddenly got that extra money. When you have that money, you can bank it for the future.

If I get $85 in my savings account, it’s worth one day of the energy and time spent at that job. If I can get up to $850, that’s ten days – two work weeks. Keep saving and before long, it becomes a ticket to freedom.

When I talk myself out of buying a soda, I’m really saying that I’d rather have twenty minutes down the road to walk in the park or help out with a volunteer project I deeply care about or read a book or play a game with a friend rather than twenty minutes in my office writing.

You can substitute the appropriate purchase and the appropriate enjoyable activities and the appropriate length of time into that statement to make it true for you.

When I look at my investments, retirement accounts, and savings, I don’t really see dollars any more. I see months and years that I can devote to doing the things I find deeply fulfilling rather than what I need to do to keep earning money.

It’s not money. It’s freedom. Freedom from things that drain time and energy away from the things you want to do.

Whenever you tell yourself that you can’t “afford” to put money away for the future, you’re saying that you’d rather have stuff and short-term experiences than the freedom to walk away from work. For me, that stuff and those experiences better be great to make that trade worthwhile.

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