The term Money Illusion evokes those distortive mirrors you find at your hometown fair’s makeshift haunted house. The kind that stretches you out like Yao Ming or makes you rotund like Elmer Fudd. But when it comes to your actual __money__ – the __illusion__ is way less obvious. Money Illusion is a [behavioral bias]() that gives many people “the illusory picture of their wealth and income based on nominal dollar terms, rather than real terms.” It typically involves inflation, where your savings interest rate (of say, 1%) might not outpace the rate of increase in your rent, gas, and other basic needs. When the latter outpaces the former, you’re typically worse off. But it may be hard to catch because the slight increases are not acutely visible. The illusion can be even sneakier; “experiments have shown that people generally perceive a 2 percent pay cut in nominal income with no change in monetary value as unfair. __However, they also perceive a 2 percent rise in nominal income, where there is 4 percent inflation, as fair.__ “ So we’re faced with a challenge. How do you make the invisible visible and __adjust for the true economic impact?__ Are there any other places in our lives where invisible factors obfuscate the true value of a good or service? Let’s think about our wages. What would one’s hourly wages look like if you adjusted for __invisible time__ (travel, weekend work, and commuting) and __invisible costs__ (commuting, Brooks Brothers shirts you’d never wear IRL, and meals)? Here’s a nifty calculator to set that pesky _Money Illusion_ straight. ## Money is your Life Energy Vicki Robin’s book [Your Money or Your Life]() lays out an eye-opening exercise to calculate your “Real” Hourly Wage. In the book (the _de facto_ bible to the [FIRE movement]()), Robin defines money as “something we choose to trade our life energy for.” She expands on this concept in [her blog](): > _Our life energy is our allotment of time here on earth, the hours of precious life available to us. When we go to our jobs we are trading our life energy for money. You could even say that money equals our life energy. So, while money has no intrinsic reality, our life energy does — at least to us. It’s tangible, and it’s finite. It is precious because it is limited and irretrievable and because our choices about how we use it express the meaning and purpose of our time here on earth. Money is something you consider valuable enough to spend easily a quarter of your allotted time here on earth getting, spending, worrying about, fantasising about or in some other way reacting to._ ## Your “real” hourly wage calculator But before we trade our _life energy_ for money in the form of work, Robin emphasizes the need to set our Money Illusion straight. And that requires understanding our __“real” hourly wage.__ But before we dive into the spreadsheet, some words of precaution. The purpose of this calculation is one of inquiry (or as the spiritual woo woos would say, _discernment_). Approach this spreadsheet with __curiosity, inquisitiveness, and self-compassion__. Leave the feelings of __sadness, grief, nostalgia, hope, guilt, shame, embarrassment and anger__ at the door. This mindset is critical and Robin adds that it goes a long way towards lightening “the physical and emotional loads you’ve been toting around for years.” ## How to use the Spreadsheet __First__ , start off by making a copy of the template (so that you can modify it). I don’t think you’re ready for this jelly __Next,__ complete the __income, time, and cost__ sections by inputing your values into the __tan cells (with blue text)__. Pay attention to the _instructions in italics_ to ensure the accuracy of your measurement units and time periods. ## Show me the money!!! And voila: ![Blog post image](/images/blog/summary.png) The spreadsheet is dynamic; as you input new values, the summary section will __update automatically.__ ![Blog post image](/images/blog/giphy.gif)Who knew Google sheets could be so suspenseful? Now as you evaluate the result, consider the following questions: * Did any part of the exercise cause agitation? Does it invoke feelings of the [scarcity mindset]() or “not enough?” * Within your existing situation, how might you increase the “real” wage? * Does your “real” wage impact your sense of [financial security]()? * Does knowing your “real” wage impact the way you think about [budgeting and spending]()? * Is your spending in alignment with [your money values]()? * Do you see any opportunities to [spend money to buy back time]()? * * *