For many people, any time they are deciding on a big ticket item like a vacation or some luxury item, the calculation simply comes down to “Can I afford the monthly payments?” A little better question is “Have we saved up enough money?”, but I’d argue even this is the wrong approach when making a decision.

I don’t want to tell anyone where they should or shouldn’t spend their money. OK, I sometimes do, but really that is an individual decision based on what every person values, and everyone needs to make that decision for themselves. However, I think everyone needs to have the right information when making purchasing decisions, and that comes down to my common theme of using time, not money, as your limited resource.

Instead of asking “Can I afford the payments for that dream vacation?” or even “Do I have the $10,000 in my account for it?” a better question to ask is “How much longer will I need to work to offset this purchase?”. Instead of paying in dollars, you are really paying in “Pain Dollars” or working time. This is key, because the conversion of dollars to Pain Dollars is different for everyone. For example, let’s say that vacation meant you’d have to work 4 more months (more on this calculation in a moment) at your job. Is that worth it? For some, yes, the reward is worth the pain, and for some no. It depends on how painful your job is and how much you value the item you are about to purchase.

To figure out what your Pain Dollars conversion is, I use my early retirement “Crossing the Streams” approach, and compare my original asset curves with one set back by the purchase of the item ($10,000 in the case of this vacation). I suggest you read this blog post to understand this a little better if you haven’t already.

Looking back at that original scenario, we had a 32 year-old doing well, with a projected early retirement in March 2043 (age 56). What if she decides to take that vacation? Her current bucket one assets decrease by $10k and her crossover point shifts by 4 months:

I know what you’re thinking, if I make more than $10K in 4 months, how can the impact be this great? And, the impact above looks like a lot more than $10k! The answer is a) not all of your money you make goes to savings (in fact most doesn’t) and b) we are looking at the impact of a purchase today compounded over time. Is that dream vacation worth it? Some would say yes, some would say no, but I think everyone should be informed of its impact in his or her working time.

This is also part of the power of working in a job you really enjoy. For those lucky enough to love their job, the conversion rate of Dollars to Pain is very advantageous, meaning your able to exchange very little pain for a great deal of dollars. By thinking about “paying in Pain” everything just became cheaper! Four months for you might be pennies—doing your job everyday is a pleasure—four months to someone else might be a fortune.