I am intrigued by the FIRE movement where people work to get expenses as low as possible to retire early. I don’t adhere to the practices but some concepts can be borrowed from the movement.
When considering changes related to our careers we tend to rely on vague criteria to determine if we should take a promotion, change jobs, or even move. Calculating your real hourly wage can help with this. I acknowledge that money is not the only factor in determining your career but it is one of the primary factors. I mean, would you be working there if they weren’t paying you?
I found the concept of Real Hourly Wage from the book Your Money or Your Life.
Your Real Hourly Wage is a calculation that takes into account all of the benefits and pay your employer gives you and then subtracts all of the costs you bear working in that job (this is essentially calculated by comparing the money you would not spend if you were not working and comparing it to your current spending) and dividing it by all of the time spent associated with that job. For example, if you were to take a promotion that required you to work more hours but you made more money, how much increase (or decrease) in pay per hour would you receive?
There are calculators out there that you can search for or you could build one yourself. Here are some aspects you need to consider when calculating your real hourly wage.
- Pay
- Your Pay
- All benefits
- retirement match
- Time off
- HSA match
- Costs
- Costs you take on working from home like equipment and electricity
- Fuel, vehicle wear and tear
- clothes purchased or work and cleaning/maintenance of the clothing (like dry-cleaning)
- Food purchased at work rather than made at home
- vehicle cost (you might choose to buy a different vehicle to transport you to work as opposed to one you would buy if you did not work)
- Makeup/shave costs
- Escape entertainment like you might need to go to the movies to help decompress
- Convenience food
- Stuff to compensate for a job like expensive vacations or a boat or a summer home
- Job-related illness
- Hired help like a house cleaner, babysitter, or lawn care to take care of your life because you can’t due to work
- health costs, does the job stress contribute to you gaining weight or an overuse injury
- costs of using your personally owned equipment for the job like your computer or cell phone
- Time
- drive time
- Prep time like getting ready for work
- decompress time for the end of the day
It takes a while to pull this together but it is worth it to help understand how much you are really making.