How figuring out your real hourly wage can help you say NO to temptation and YES to valuing your time and your life!
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In TV & movies, you see people scoff at spending $300 on dinner. “Oh, that ain’t nothing! I make $300 an hour consulting!” Goodie for them. However, you know they’re not keeping $300, they’re probably blowing it. You wonder, how much do they actually take home? How much do they actually save? What’s their real hourly wage even? Real hourly wage? That sounds fake; it’s their salary right? Wrong! If you don’t know your real hourly wage, then I suggest you pay attention, this is super simple math, it’s going to sting but you’ll be so glad you figured it out!
What is a Real Hourly Wage and Why You Should Care.
In a nutshell, your real hourly wage is how much money you make per hour (aka what your paycheck stub says) minus all of the costs associated with your job. You should definitely care because it’s probably nowhere as high as you think your wage is. This exercise might be a bit depressing, but it’s an eye opener, which hopefully will get you looking at things in a new light.
Figuring out your real hourly wage is part of the process in the book Your Money or Your Life by Vicki Robin. Many consider it one of the most influential personal finance books ever written! It was originally released in 1992 with co-author Joe Dominguez, and just revised in late 2018 due to popular demand.
For example, you have a part-time job which brings in some extra money. It is an okay job, some days you like it, and some days you don’t want to deal with your coworker’s drama. If you figure out your real hourly wage, you may find that you are only netting $6.34 an hour. And, your tasks at home kind of pile up because you’re not at home doing them. Causing you to stress out, and lose sleep because you’re staying up later than usual to finish the laundry. All this for a lousy $6.34!
Or you may find, that your real hourly wage is excellent, say netting $42 an hour. Yet you feel kinda bad that you’re not at home taking care of “all the things”. But, since you net such a high amount, it is totally worth your time (in a financial way) to hire a house cleaner to come in at $22 an hour and take care of all those things. Win!
Let’s take a step back and look at a closer point in the scenario above. I mentioned that something was worth it, in a financial way. There can be many ways something can be worthwhile, not just monetarily, and for each person, those things can and will be different. For example, a job may be worthwhile because of the social interaction you get (Moms NEED to talk to other adults), or it may be worthwhile for the skills and knowledge you learn, or the networking, or the perks. Or hiring a cleaner may be valuable because you HATE cleaning soap scum, you actually dread it.
Be thinking about these nuances when considering your real hourly wage because it’s all a piece of the puzzle.
How Do I Calculate My Real Hourly Wage?
Start thinking about all the things you buy to go and do your job…
- gas for your car
- parking fee
- wear & tear on your vehicle
- clothes to wear
- afternoon coffee
- dry cleaning
- daycare for littles
- professional fees
If you get paid a salary, you can divide your monthly income by the number of weeks then divided by 40 hr traditional work week. Or if you work 50 or even 60 hours then use that number.
I am going to be pretty real (kinda scary) and use my own real-life figures. My numbers aren’t impressive, I only work three days a week at my regular job, but it will be eye-opening to be sure!
My Real Hourly Wage – Scenario 1
Income: I make $21.50 an hour, working 7.5 hours a day = $161.25 a day. Times that by three days a week = $2,094 a month. Not a lot. But I really do enjoy my job, and I find it meaningful work.
- gas for your car – $32 a week to fill the tank, about 1/2 is work-related. So $5.33 a day
- parking fee – $180 a year permit = $1.20 a day for 150 work days a year ( I took out two weeks of the year for normal vacation time off work).
- wear & tear on your car – my car has 211,000 miles on it, its a sunk cost.
- clothes to wear – I am trying to shrink my closet, no add to it. But I do replace items that wear out. So let’s say guestimate that I spend $15 a month / 13 working days a month = $1.15
- lunch – I bring my own 90% of the time, so maybe 2 times a month I spend $8 on lunch out. So $16 /13 days a month = $1.23
- afternoon coffee – I buy a coke once a week on average $1.09 x 4.33 weeks / 13 days = $.36 a day.
- dry cleaning – nope
- daycare for little one – $66 a day – but we’d most likely spend that anyway (at least two days a week).
- professional fees – nope
So if you take my daily wage of $161.25 and take out 17% (my effective tax rate for 2018) = $133.84 a day
Adding up all the items above = $9.27 in expenses (I’m pretty frugal).
$133.84 – $9.27 = $124.57 a day / 7.5 hours = $16.60 an hour
My Real Hourly Wage – Scenario 2
If you want to see shit get real, then let’s add in daycare at $66 a day.
($124.57 a day – $66) = $58.57 a day = / 7.5 hours = $7.81 an hour
Let’s look on the bright side of the things. With my job, I get adult social interaction, sometimes free food, and during my commute is when I listen to podcasts. Oh, I forgot my commute, which can be 45-75 minutes each way depending on traffic (20 miles each way). It’s lost time, but I fill it by listening to financial podcasts, so I am learning.
What to do now? How does this impact my spending?
In figuring out my real hourly wage, there are a few points that are rising to the top. Firstly, is my job worth it? Secondly, how does this affect my spending habits?
Let’s start with my job. I do very much enjoy my job. I work for a small Pacific NW company where I focus on community partnerships with non-profits and help employees experience the joy of volunteering, with those that need a bit of extra love & support. It’s a great job, and I enjoy it. (It’s important to note that our family’s health insurance is through my Husband’s work.)
When I think about my spending, I think I will have a different lens on when buying items. Really asking myself “is this worth it?”. For example, I would like a new pair of jeans, as my favorite ones are wearing out. I get jeans for about $80 at Nordstrom Rack. So $80 / $7.59 an hour for my real hourly wage = 10.54 hours worth of work. Ummm…. yeah, I’ll pass on jeans for a while.
hee hee… I couldn’t help but use that song 🙂
Your Money or Your Life
This exercise is part of Vicki Robin’s critically acclaimed book Your Money or Your Life. Where she walks the reader through the process of really examining their behavior and their lifestyle, and how it is impacting their life. It’s genuinely a mindset-shifting how-to book and drives you to question the point of your life (that sounds extreme I know).
One statement really struck me…
“And they call it making a living? Think about it. How many people have you seen who are more alive at the end of the workday than they were at the beginning? Do we come home from our “making a living” activity with more life? Do we bounce through the door, refreshed and energized, ready for a great evening with family & friends? Where’s all the life we supposedly made at work? For many of us, isn’t the truth of it closer to “making a dying?” Aren’t we killing ourselves – our health, our relationships, our sense of joy and wonder for our jobs? We are sacrificing our lives for money, but it’s happening so slowly that we barely notice.”Vicki Robin
That’s real right there.
If you really want to dig deep into yourself and your spending habits and belief system about money (we’re talking big picture here) I encourage you to pick up Your Money or Your Life. It has a huge cult following and is a must-read for anyone trying to change their relationship with money!
At the end of the day
Figuring out my real hourly wage wasn’t the most uplifting of exercises, kind of a bummer actually. Yet, I know that it was necessary for me to figure out the cost & return of my job. What was more startling was getting my brain to process “this new Cuisinart would cost me 18 hours of work! Oh hell no!”
Going forward, I plan on keeping my eyes (more) open for opportunities to pivot, grow, and live a life that I feel has true value. Because I am more than just “working for a dying”, I am here to live!
Your Money or Your Life by Vicki Robin
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