# How much do you really make? Calculate your 'true' hourly wage.

## Factor in employee costs, taxes, and extra time and a \$25-an-hour job turns out to pay less than \$12 an hour.

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Everyone’s job has some sort of expense associated with it.

For example, my current work pretty much requires me to have an internet connection at home and at least one computer. If I don’t have these things – and I pay for them out of my own pocket – I can’t create posts and get them on The Simple Dollar. I would have to go elsewhere to post, which would create its own expenses.

I’m fortunate, though. My current work has no wardrobe requirements (which means no time or money spent shopping for work clothes, getting things dry cleaned, etc.), no commuting requirements (which means no time spent commuting, nor money spent on fuel and auto maintenance and auto replacement), no travel requirements (which means no time spent flying elsewhere, no nights spent away from home, and no incidental costs), no extra child care costs (because I can watch them from home if needed), and no social obligations to eat lunches outside the home or get drinks with coworkers.

My previous work had all of these expenses. Although it wasn’t an everyday thing, there were certainly days where I had to dress well for work. I had a commute that took me around twenty minutes each way. I had to travel three or four times a year, with those trips varying in length from three days to a week. I had to keep my children in daycare. I ate out with my coworkers a few times a week and went out with coworkers or other professional acquaintances once a week or so.

One way to really dig into this – a method that I’ve described before on here – is what I call the “true hourly wage.” All you do is sit down and figure out two key numbers.

First, how much time do you invest in actually working plus time spent in extra activities related to work, like commuting, travel away from your family, shopping for work clothes, going out for lunch, going out for other social events in the evenings, and so on?

Let’s look at an example. Let’s say you make \$50,000 a year at a reasonably high-stress job. If you assume you work 40 hours a week with two weeks of vacation a year, your hourly rate is nominally \$25 per hour. Not bad, right?

You might work forty hours a week with two weeks of vacation a year, but let’s say you’re commuting half an hour each way per day (another five hours per week). You also go out to lunch with coworkers as part of a “lunch break,” which eats three more hours per week. You have to properly wash your work clothes, which eats another hour per week. What about the extra time you spend thinking about work or stressing out about work? Do you have to spend some “decompression” time when you get home? Let’s give you another two hours per week for this. Twice a year, you go on a trip that takes you away from your family, which adds up to another eighty hours spent away from home per year. Twice a month, you go out with coworkers in the evening, adding up to another sixty hours per year. There’s also the time spent dealing with extra car maintenance and fueling stops – let’s say another ten hours per year. That’s an extra 700 hours per year that you’re not getting paid for – more than athird more than you’re on the clock.

Now, how much of your salary is devoured by your job? If you drive an extra 15,000 miles per year in a 25 miles per gallon car, that’s 600 gallons of gas plus five additional oil changes plus 15,000 extra miles on your maintenance schedule plus 15,000 miles closer to a car replacement. The federal government estimates the cost for all of this at being around \$0.50 per mile – I’ll call it half of that and we’re still looking at \$3,750 a year. Do you need work clothes? Let’s say this person needs about \$250 in clothes per year. You eat out with coworkers twice a week for social reasons, which eats up \$10 per meal, or \$1,000 per year. You go out twice a month with coworkers in the evening and burn through \$25 each time, which adds up to another \$600 per year. Let’s say you have the American average of two kids that require some after-school care which costs \$50 a week (we won’t even get into the nightmare of daycare for younger kids) – that’s \$2,500 a year. That’s \$8,100 in expenses just to keep you going at work.

What about taxes and so forth? You should be looking at your after-tax salary, so let’s lop 20% off your salary when doing this calculation.

So, your starting salary of \$50,000 gets 20% lopped off with taxes and \$8,100 in additional expenses chopped off, so you’re left with a salary of \$31,900. You’re actually working 2,700 hours per year, so your actual hourly wage at work isn’t the nice \$25 you thought it was. It’s actually \$11.81.

Feel free to calculate this number for your own purposes. Figure up how much time you actually spend doing things that are caused by your job as well as all of the extra expenses associated with it. You might come up with a shocking hourly rate.

This isn’t to say you should live or die by this number. You shouldn’t.

The important thing to keep in mind is that salary doesn’t represent the real value you get out of a job. A job that earns \$50,000 a year but has all of the requirements above might actually net you less for your time than a \$28,000 a year job that is within walking distance of your house, has extremely casual dress, and allows you to walk out the door each night without a second thought.

Income isn’t everything. It’s just as important to have a job that doesn’t nickel and dime you, doesn’t fill you up with stress, and doesn’t quietly eat up more and more of your time. Those “features” eat up your income like nobody’s business.

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