We’ve all been there. Fantasizing over that item that we really don’t need to purchase, but really want in that moment.

That pair of shoes, or a hat, or coffee mug, or a funny t-shirt.

It only costs $10, or $50, or $100.

And it’s on sale! Why not go for it since it’s at such a great price?

Unfortunately, many times we use this kind of thinking and fail to evaluate the true cost of the purchase.

I’ll give you an example.

Let’s say that you work at a job where you make $20 an hour, and you want to purchase a new tech gadget that cost $100. That doesn’t seem too bad, right?

Yet, think about how much time you are spending to make enough money to make the purchase.

Given your pay rate, you will be dedicating 5 hours of your life to allow you to purchase that gadget.

Is it truly worth it?

There’s even more to consider.

At your income level, you’re likely to be in the 25% tax bracket. Since you are spending $100 of your take home pay to purchase the gadget, you’ll actually have to earn at least $125 of gross pay in order to make your purchase. This means that instead of working 5 hours, you’ll actually need to work over 6 hours in order to make enough for the purchase!

As they say in the infomercials, “Wait, there’s more!”

Let’s say you work a standard 8 hour day. At your pay rate of $20 per hour, you can expect to make total pre tax earnings of about $160.

Yet we all know that you aren’t only working for those eight hours.

The average commute time in the U.S. is 25 minutes one way. Additionally, most people spend at least 30 minutes or so getting ready for work in the morning. Add that to the hours that you are actually working, and you’ll be surprised.  You end up closer to spending 10 hours per day on work related activities.

Instead of working 8 hours per day for $160, you are actually spending about 10 hours of your life in exchange for approximately $120 in take home pay, resulting in a more true pay rate of about $12 per hour.

In order to buy that $100 gadget, you will actually have to spend over 8 hours of your life in work related activities.

Are you willing to trade 8 hours of your life for something you may not even use a few months from now?

That’s the true cost of a purchase.

For more information regarding this concept check out Your Money or Your Life, a book by Vicki Robin and Joe Dominguez that pioneered the idea of the true cost of a purchase.