How much are you really getting paid?
A few years ago I read Your Money or Your Life and it is a great book that provided me with a lot of valuable information including calculating your real hourly wage.
It’s not as simple as saying, “I make $400 a week and work 40 hours, therefore I make $10/hr.”
When you factor in all the additional expenses of having your job (some of which may not be obvious) that you could avoid if you didn’t have that particular job, you begin to see the value in this calculation.
In my case, my old corporate gig paid a reasonable wage, but when I added up all the additional time spent and expenses required, it really didn’t pay that well.
Also, if you’d rather watch us talk about this, you can check out our recent video here:
Adding up the hours
In my case, I used to drive 18 miles to work each day, requiring an extra 1-1.5 hours of drive time.
The getting ready process each morning required about a half-an-hour each morning.
My lunchtime, while a break, was still time that I was not entirely “free” to do what I wanted. Since it was not paid time, I include that in this equation as well.
The book mentions other hours that may be considered…
- Decompression Time: Time where it takes you a little while to get back into the swing of your “non-work” life each evening.
- Job-related illness: This would be illness incurred as a result of stresses from work, etc.
Adding up the costs
When it comes to expenses it can be challenging to think of all of them. But you can bet it is a lot more than just paying for gas and parking. Wear-and-tear on the car is a very REAL expense that many people don’t factor into the equation.
Like many people working in corporate America, I had work clothes that I had to buy and keep looking nice every day. Even if I brought my lunch, I was limited to certain items based on the time and tools I had available to eat my lunch each day.
Now that I am doing this blogging thing full-time I realized that I am avoiding a lot of the expenses that I used to incur on a regular basis.
You can be as conservative or as liberal as you want with this equation, but the book has a lot of ideas…
- Deserve it expenses: After a hard day, do you say, “let’s go out to dinner/dancing/movie/the mall because it was such a tough day”?
- Do you own a more expensive car/house/clothes/etc than you would otherwise, in order to help sales or your career?
- Are there expenses that you are paying others to do, that if you had more time, you would perform yourself? (i.e. gardening, repairs, cooking, cleaning, etc.)
- Are there foods you buy because you are too tired to cook dinner? Weight loss programs you enroll in because you ignored good nutrition because of your busy job?
- Do you have escape entertainment or vacations you take part in that you wouldn’t if you didn’t have a stressful job?
- Are there childcare expenses that could be avoided without your job?
- Are there career-related books, seminars, videos, etc. you use and pay for out of your own pocket?
I think there should be a balance when adding up these costs. You can get carried away blaming everything on your job if you aren’t careful. But, either way, it is always a good idea to re-evaluate each expense.
Why should you care?
I think this is an extremely valuable exercise for people nearing retirement to do. It can be very eye-opening to see how many expenses would be avoided by NOT having a job. My hunch is that a lot of people will realize that they can survive on a considerably lower income.
A lot of times parents who want to stay at home with the kids will find that this exercise helps make the decision easier. Is $3/hr worth having a job you don’t like and sending kids to daycare rather than being at home with the kids?
I used to work with a woman who drove something like 60 miles to work each day. She didn’t really like her job and did something similar to this exercise and figured out that she could take a $6/hr pay cut doing something she enjoyed and still be coming out ahead.
A lot of jobs, especially if you stay in the same industry, have similar expenses, but after adding up your real hourly wage, it may just be incentive to look at that dream job you have always wanted.