How to Calculate- Then Harness- Your REAL Hourly Wage
You’ve heard the standard advice: think of any purchase in terms of how many hours you spent working for it. For instance, if you buy something for $20 and you’re paid $20 an hour, then you spent 1 hour working for that item. Sounds simple, right?
That's a great place to start, but that number alone can be a little misleading! It doesn’t take things like taxes and work expenses into account. In spite of what you see on your paycheck, everyone has a REAL, undisclosed hourly wage. How much they're willing to do and for what price.
To find yours, follow these steps:
First, take what you make in 1 week and subtract all taxes and any expenses that are DIRECTLY related to your job. For instance, if you wind up paying about 20% of your total income to taxes every year, then subtract 20%. If you have to spend roughly $200 on new professional clothes every year, then factor that in on a weekly basis. If you have to spend a certain amount of money on gas specifically to get to and from work, then subtract that as well. You might find that when all is said and done, your REAL income is closer to 50%-70% of what you thought it was. That's normal!
Then, add up ALL of the hours you spend related to your job in one week. This includes the hours you clock in for and are actually paid for, of course. But it also includes hours that you might not normally think of as "working hours": your commute, any breaks you have to spend at the office, any conventions, meetings, networking events, etc. Once again, if something is only done on a monthly or annual basis, include part of it in this equation.
Finally, divide the INCOME you came up with in Step 1 by the HOURS you spend working in Part 2. Voila! This gives you your real hourly wage.
Ronnie makes $20 an hour and works 40 hours a week, so his gross weekly income is $800. However, 20% ($160) of his income is taken out in taxes and he also spends $40 a week on gas just to get to and from his job.
💵 Adjusted income: $800 - $160 - $40 = $600
Then, although he works 40 hours a week, he commutes 1 hour each way (10 hours a week) and has a 1 hour lunch break (5 hours a week) in which he feels like he has nothing to do.
💸 Total time spent working: 40 + 10 + 5 = 55
So Ronnie’s REAL hourly wage is 💰$10.91, nearly HALF of what he thought he was making! Now, instead of looking at a $20 item and thinking, “that’s only 1 hour of my time!” Ronnie might think twice after realizing that that’s actually TWO hours of his time.
Your number might be a little bit shocking for you. It was for me! But now that you know what you ACTUALLY make per hour, you can make better financial decisions for yourself.
Have you ever used this method before? Let me know in the comments! 👇🏻
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