I am currently reading Your Money or Your Life
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 (which some 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.
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 lunch time, 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 that 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, “lets 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?
Retirement
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.
Stay-at-home-spouse
A lot of times moms (or dads) 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?
Career/employer change
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 paycut 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.
This article was originally published over at the FiveCentNickel.
{ 8 comments… read them below or add one }
That’s a fantastic lesson. I know I’ve been going through this process recently as I’ve taken a part-time job doing contract work. Sure, I may make X amount per hour on the job, but that doesn’t include all the prep work, “driving around the city” time, and so on. Factoring in all the other, “off the clock” work is crucial (though, as you seemed to mention, overwhelming at times).
This new situation’s definitely given me a new appreciation for what you’re talking about here. How timely!
Marshall Jones Jr.
Unfortunately if you break it down it probably is a lot less than you thought and less than you want. Sometimes your base may be high but it you are working crazy hours then per hour it may not be a lot. You may want to look for a less stressful job and have less hours even if it means a pay cut.
don’t forget to factor in some of the positives of having a job. for example, benefits. at my job we have great healthcare/dental and time off. like bob said, don’t get too carried away with blaming everything on your job. : )
I was really amazed once I did this exercise. There are probably dozens are more costs in trying to calculate your true hourly wage. For example, I have spent a few hundred dollars on clothes for work just this year.
This step from Your Money or Your Life, along with adding up all the money that has ever come into my life, was a real eye opening experience for me.
I used to always calculate out what I was making per hour, when I was making a salary. I found it better to not try and justify it this way because I personally always found that I wasn’t making near an hour what I thought I deserved. But instead had to start looking at all of the great future potential the job offered as opposed to the current situation. I find this to help more
In looking at my realistic pay rate, I found that the hidden benefits really dominated my result. Adding in the cost of paid vacations and holidays, 401k matching, health insurance all more than offset any extra cost incursions made by gas, clothing, food, etc. In a cost assessment to value what I would need to charge if I consulted on my own, I found that my employer is actually doing quite well by me.
Very interesting points! This just reinforces the fact that more of us should focus on our investments and less on our jobs. While investing does have costs, it is your money working for you…not you working and spending your time and resources to make money for others.
Thanks for the reminder. A lot of people ten to forget this, especially those who are desperate for a job. It’s really no different from being self employed. Is it worth your time and effort? Yes, surely it is more complicated than just factoring in time and effort but my point is that we should not just look at the figures alone.
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