Chapter 1: Understanding Inflation Beyond Dollars

Inflation is undeniably rampant today. However, the issue isn't solely the increasing cost of living. Consider this: if you were to find a pristine dollar bill from 1913, the year the Federal Reserve came into existence, its current value would be a mere $0.03. Over the course of a century, our currency has lost a staggering 97% of its value.

Increasing prices are merely a symptom of inflation. Over time, the buying power of our money has diminished, making everyday purchases more costly. This shift in economic reality has also transformed the nature of work. Instead of adhering to a standard 40-hour workweek, many individuals are maximizing their paid hours. Some are quietly juggling multiple full-time positions, while a significant number of young adults are engaging in side hustles.

This situation underscores a critical point: inflation is eroding our most valuable asset—time. As people spend more hours simply meeting basic needs, they have less time for personal pursuits, family, or entrepreneurial endeavors.

The collective impact is clear: everyone is working harder and longer. While this might seem necessary, it poses risks for our future economy. Our focus on immediate financial demands could jeopardize economic stability down the line.

This discussion will explore the intricate relationship between time and labor, specifically how time can serve as a proxy for money. By evaluating your cost of living in terms of time rather than devalued U.S. dollars, you can gain insights into how much time you need to allocate to afford basic necessities. This approach provides a clearer picture of inflation's true impact on your life—not just your finances. Given that there are only 24 hours in a day, time becomes a more reliable metric for assessing the rising cost of living.

In the timeless words of Benjamin Franklin, "time is money." He was correct. Economies exist to facilitate trade and commerce, requiring a mutually agreed-upon medium of exchange—money.

But where does money originate? Unless you're a government official or a bank, you can't simply print your own. For most people, money is earned in exchange for labor, which is ultimately a trade of time. Whether you're a plumber or an office worker, your compensation is a reflection of the hours you work.

While both time and money are interconnected, time proves to be a more effective measure when discussing inflation. Money that has been inflated loses value, which is often difficult for consumers to perceive. Although individuals might notice price increases or smaller product sizes, many price hikes are subtle and easily overlooked.

Time, conversely, offers a clearer representation of economic value. For instance, a loaf of bread cost 70 cents in the 1990s. With a tipped minimum wage of $2.13 per hour, that loaf required only 0.33 hours of work. Today, the same loaf costs approximately $2.54, equating to 1.19 hours of work.

Inflation is indeed raising living costs, and consumers are often unaware that they are effectively paying with their time. Many must engage in side hustles to earn additional income, while others resort to credit cards to cover expenses—mortgaging their future in the process.

Given that time is a fixed resource, it serves as the clearest indicator of inflation. Prices have risen, and many workers are compensating for this by exchanging more of their time for money. To enhance your purchasing power, consider your cost of living in terms of hours instead of dollars. This perspective allows you to better compare fluctuating market prices and maximize the value of your time.

As someone who has spent years in personal finance discussions, I often find that the focus is predominantly on money—how to budget, invest, and save. Yet, few examine money as a function of time and its economic implications for our lives.

To gain a clearer understanding of your economic standing, begin measuring your expenses in terms of time. Start by determining your average hourly rate. I personally track my time meticulously, which has proven beneficial. I can pinpoint the exact value of my hours.

If detailed tracking isn't feasible, you can estimate your rate by dividing your salary by the average annual work hours in the U.S., which is around 1,811 hours. For instance, with a $100,000 salary, your hourly rate would be approximately $55.

Next, monitor your expenses. I utilize a tool called Tiller Money for this purpose, which I will reference to illustrate how to quantify expenses based on time. Tiller is a customizable, spreadsheet-based finance management system that provides comprehensive insights into your financial situation.

One notable feature is the 'Hours to Earn' formula, which you can add to the Transactions tab of your Tiller Foundations spreadsheet. This formula converts your expenses into hours based on your average hourly rate.

For example, if your hourly rate is $55 and your utility bill is $115.33, that bill equates to about 2.10 hours of work. While some expenses, like utility rates, are largely beyond your control, this formula is particularly impactful for discretionary purchases—items like food, gas, subscriptions, and clothing.

Let's consider a subscription service as an example. I pay $10.99 monthly for Spotify Premium, which translates to 0.20 hours of work. While that may seem minor, if you have several subscriptions in the $10-$15 range, the cumulative time cost can be significant.

Food expenses also warrant attention. A recent weekend spent grocery shopping, dining out, and indulging in coffee totaled $39.79, or 0.73 hours of work. Recognizing the value of your time becomes crucial here. These expenditures reflect conveniences—you pay for the ease of not cooking or brewing coffee yourself. Ultimately, you are trading time, whether it's through purchasing or personal effort, and understanding this trade-off is essential.

Inflation is not merely a measure of rising prices; it indicates the trade-offs necessary to maintain your standard of living. The only constant variable to assess changing costs over time is time itself.

Money is indeed losing its value, leading to increased costs that require more of your time to earn. Identifying where you might be wasting time—be it on overpriced coffee or low-paying jobs—is vital to combatting inflation. This starts with gathering data to make informed decisions.

Final Thoughts

Money may appear to be a finite resource, yet it is fundamentally infinite. You can always earn more. However, time is limited; there are only 24 hours in a day, 168 hours in a week, and roughly 720 hours in a month.

Time is your true budget, not your income. If you find yourself exceeding 160 hours—the monthly equivalent of a standard workweek—you have three choices: reduce spending, increase hours worked, or seek higher-paying opportunities.

Striking a balance between reducing the time spent on lifestyle expenses and enhancing the value of your labor can help mitigate the effects of inflation.

How can you implement this in real life? Opt for less expensive options instead of the most convenient. Consider buying second-hand or creating items at home if the time investment is justified. Simultaneously, seek ways to elevate the worth of each hour you work—whether through freelancing, upskilling, or pursuing multiple income streams.

Ultimately, average individuals like you and me cannot halt the money printing. Instead of merely reacting, we must adapt by equipping ourselves with the data necessary for better economic choices.

Time is invaluable. What is your time worth?

The first video, "Measuring Inflation," delves into strategies for understanding inflation beyond monetary value. It offers insights into how inflation affects our economy and personal finances.

The second video, "Measuring Inflation & 3 Ways to Profit from it," discusses practical methods to navigate inflation's challenges and highlights opportunities for profit amidst rising costs.

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Affiliate Disclaimer: I am an affiliate partner of some of the tools mentioned in this article. If you click on a link and make a purchase, I may receive compensation. All recommended tools are ones I have personally used or tested.