How much is a thousand dollars worth?
Asking how much a thousand dollars is worth might seem like a no-brainer question, but it isn’t really. You see, a thousand dollars might be pocket change to one person, and several years’ worth of savings to another.
It’s probably more useful to ask how much a certain amount of money is as a percentage of your income, and the time it takes you to earn that money.
Suppose you want to go on a trip that will cost you $1,000. If you bring home $500 per week after taxes, that thousand dollars is close to 4% of your net income. If you bring home $2,000 per week, it’s closer to 1% of your net income.
Why does this matter?
It helps to put things in perspective. If you know ahead of time that you’re planning to spend 4% of all the money you’re likely to make this year on something — and it’ll take you two weeks worth of work to get that money — you’re more likely to question the value of what it is you plan to spend the money on.
It’s too easy to get into the habit, otherwise, of thinking “well, that’s a lot of money, but it’s really not that much compared to _____” — especially when you see ads every day for big screen TVs for $700 and cars for $18,000.
It helps you find your own affordability point, along with your own priorities, so that you can align your spending with the things that you value.
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