# How to decide if something is really worth the purchase to you

I used to do these calculations when I wanted to buy something but wasn’t sure if I REALLY wanted it. Ultimately, if you want it anyway, you’re going to YOLO and get it 🙃 but these calculations made me pause and really consider their worth to me. Sometimes I bought it anyway, other times, I decided it wasn’t worth it.

Here are some of the calculations you can use to decide its value to you:

### 1. How many working hours does it take to pay for it?

Take your yearly gross salary, minus out (roughly) your annual taxes to get your yearly net salary, and divide by 2000 hours.

Why 2000 hours?

That’s the calculation of a year’s worth of working hours at a standard 8 hours a workday minus 2 weeks of vacation; adjust to your situation as you see fit).

Example: You earn \$35,000 after taxes

\$35,000 net income / 2000 hours = \$17.50/hour

\$2000 gadget / \$17.50 earned hourly = 114.28 working hours to pay for it, or almost 3 weeks

### 2. What % is it of your disposable monthly income?

This one, requires that you take your annual gross income, minus out your annual taxes, and then to also remove your NECESSARY annual spending. By that, I mean your rent/mortgage, utilities, groceries, household costs, daycare, gas, AND SAVINGS/INVESTMENTS.

Yes, I 💯 consider savings and investments as an essential part of your bills, no matter how little or how much you can save (every bit counts).

(If it’s too hard to do it annually, divide your net annual income by 12 and then minus out your monthly expenses…. Or multiply your monthly expenses by 12. Either way works.)

After you have that final amount, divide your purchase into it.

Example: You earn \$35,000 after taxes.

You spend \$2500 a month or \$30,000 a year on living essentials and savings.

\$35,000 – \$30,000 = \$5000 a year

\$2000 / \$5000 = 0.40

0.40 x 100 = 40% of your disposable income will go to this purchase

Is it worth it?

### 3. How many net disposable income hours does it cost?

Alternatively as a mix of approach 1 & 2, you can calculate it as how much it would cost as DISPOSABLE net income working hours.

This method is super accurate only because you know that what you make, isn’t what you really get to keep and spend on yourself. You have to pay for shelter, food, etc… and that eats up a nice chunk of what you earn.

Simply take your disposable net income of \$5000 from Method # 2, divide it by your 2000 working hours and then see how much your purchase is of it.

Example: You make \$35,000 a year after taxes as your net annual income but after \$30,000 of savings and expenses, you have \$5000 disposable income leftover.

(FYI I hate the word “disposable income” as no income is actually disposable, but this is the term used by many.)

\$5000 / 2000 working hours = \$2.50/hour

\$2000 gadget / \$2.50 = 800 working hours (using net disposable income) to pay for this item.

### 3. What % is it of your net worth?

This one may be the simplest, especially if you already know your net worth.

Net worth is simply:

What you OWN – What you OWE = Net Worth

Example: You have \$2000 savings, a \$500,000 home and \$5000 in retirement savings.

You OWN:

\$2000 + \$500,000 + \$5000

= \$507,000

But you have a mortgage of \$450,000, and \$15,000 of student debt and \$7000 in credit card debt.

You OWE:

\$450,000 + \$15,000 + \$7000

= \$472,000