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angela self on spending

Many measure time spent at the office by calls made, e-mails sent and reports filed. Better to see it as hours banked toward a new car, a piece of furniture or a night on the town.

Then, when you get the urge to splurge, you can run a quick calculation in your head (or, for a less mental form of math, on your cellphone's calculator) to figure out how many hours you'll need to work to pay for the purchase. You'll likely think twice.

First, calculate your hourly wage: Divide your net take-home pay (after taxes and deductions) by average hours worked each month. Then divide the price of the item you're thinking of buying by your hourly rate. So, if you net $3,000 for 160 billable hours, you earn about $19 an hour. And that $800 sofa you're eyeing? It'll cost you 42 hours of labour.

This formula is especially eye-opening when it comes to smaller purchases you are in the habit of making but do not really need. Would you still dine out regularly if you knew you had to work a full day to pay for it? Some simple math can help you decide.

Angela Self is one of the founders of the Smart Cookies money group. Read her weekly column on managing debt and saving money at the new globeinvestor.com.

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