What is your true hourly rate?

Do you know what your true hourly rate is? It’s not the rate you were hired in at. Your true hourly rate takes a bit to calculate but it does wonders for helping you realize how much your stuff is costing you and how long it takes you to purchase that stuff.

Let’s say Joe makes $52,000 a year. He’s salary so he doesn’t get any overtime but he can live on $52,000 a year. Dividing by 52 weeks a year and 40 hours a week that’s $25 an hour.

His workday  is 8-5 but he usually leaves at 6 in the evenings. He lives 30 minutes away so he commutes an hour each day. He doesn’t usually work in the evenings but he does tend to work at least one day during his weekend for a few hours. At least 2x a month he has to go out to dinner with clients, which doesn’t cost him anything but his time and gas. Now instead of a 40 hour week, he has a 50 hour week.

He also has costs associated with his job. He has a wardrobe that he has to buy. He has a car which requires upkeep and gas to keep it moving. For the sake of the example, let’s assume his car is paid off and we’re just talking about gas and maintenance of $75 / week. Annually that is $3,900. I’ll assume wardrobe costs annually of $500.

$52,000 less taxes and other deductions (I’ll keep it simple at 25%) = $39,000

less $3,900 and $500 = $34,600

$34,600 at 50 hours a week = $13.30 an hour.

When you think about your bills in terms of $13.30 an hour, how many hours do you have to work in order to pay for your stuff?

$1,000 mortgage? 75 hours

$300 car payment? 23 hours

$125 cell phone? 10 hours

$30 weekly coffee habit? 3 hours

This exercise shows you a couple of things:

By seeing your true hourly wage that is required for your job, it might show you that perhaps a job closer to home for less pay could be better for you. Or a job that is full-time but it really 60 hours a week isn’t worth the 5% extra pay.

It also shows you how much of your life you’re using up to pay for your bills. Some are necessary. Some are worth it. But some aren’t. What’s important to you?

What’s your true hourly rate?

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