How much do you get paid to work?
Seems a relatively straightforward question, right?
Most of us will reply with $25 per hour, or $50,000 per annum. The amount doesn’t matter. The point is we often answer with the amount that we are paid by the company we work for.
The problem is, this amount is before all expenses and time.
An example to calculate hourly pay
Kylie is paid $25 per hour in her job as an events coordinator. She works 40 hours per week. Her pay is $900 per week or $46,800 per annum. This is not what goes into Kylie’s pocket though.
Like all kiwis, Kylie needs to pay tax on her earnings. Her after tax or in the pocket pay is now $761 per week or $39,590 per year. Her $25 per hour pay is now just $19 per hour.
That is not all. Her house is approximately 30km from her job, which works out to be 45 minutes’ drive each way in peak hour traffic. Kylie spends $50 a week on fuel costs and vehicle maintenance related to work. She also has to buy new clothes every year at a cost of $500. Kylie also buys coffees and one lunch a week at a total cost of $30.
As if her pay wasn’t bad enough, she is now having to pay to go to work! Let’s be clear. These are costs that would not be incurred if she wasn’t working.
Her 40-hour pay is now $671.38 per week or $16.78 per hour after paying for clothes, petrol and lunch/coffee.
Kylie is spending more than 40 hours a week on her job. Yet she is only paid for 40 hours! She needs 30 minutes each morning to get ready for work. Her travel time is approximately 90 minutes per day there and back. Then she spends another 30 minutes unwinding from work when she gets home, and going through work emails. This is 12.5 extra hours dedicated to work per week.
In effect, Kylie is getting paid for 52.5 hours work per week. Her new pay is a jaw dropping $12.79 per hour ($671.38/52.5) for her time. $4 less than the minimum wage.
Final Thoughts
So, before you go buying that $15 lunch, thinking it is only 35 minutes work. Think of the true cost of that lunch – 70 minutes work. Double of what you may have thought. This thinking should be applied to all your spending.
We should also consider how our jobs are affecting our health. That is another intangible cost of many jobs. I have often held stressful, high-paced job positions, that have seen other members in my team experience heart attacks and other stress related health conditions. It is hard to determine the exact cause, but I think work can be a big contributor for many of us.
Maybe you experience teeth grinding, poor diet or an unhealthy liver as a result of your jobs. Our bodies were not made for sitting down 40 hours per week hunched down over a computer.
I don’t want to live an unhealthy life, being told what to do for 40 hours a week for 40 plus years. Many of us are even paying for the privilege to work with our travel and clothes spending.
I enjoy my job, but more than that, I enjoy my freedom. By understanding the true costs of your time, you will be able to understand how long it will take in time to pay off your spending.
Then, you can decide whether you would rather spend your time or buy your time.
If you spend your money, then you are selling your time. For every hour of time that you spend on ‘things’, that is more than an extra hour you will have to work to reach your financial goals. For every hour of time that you do not spend on anything, that is more than one less hour of time you will need to work. More if the saved money is invested in productive assets.
Not everyone dislikes their jobs, but that feeling may not last forever. There may be a time when you grow tired of the office politics or bureaucratic procedures. Wouldn’t it be nice to have enough savings to be able to ‘cash in’ your time and do what you want, when you want, instead of having someone else dictate how you spend your time?
This post was inspired by the book “Your money or your life” by Joe Dominguez and Vicki Robin. I highly recommend this if you are looking for a motivational kick up the ass for your savings.
The information contained on this site is the opinion of the individual author(s) based on their personal opinions, observation, research, and years of experience. The information offered by this website is general education only and is not meant to be taken as individualised financial advice, legal advice, tax advice, or any other kind of advice. You can read more of my disclaimer here
Comment below. Have you calculated your true cost of work? Surprised by your number?