You go to work, you put in your time, you do your job, and you get paid.
You take the money, you buy stuff with it, you go back to work and the
cycle starts all over again. That's the way it goes.
So what do you really make? Have you ever stopped and thought about it?
Sure, you say, $10.00 per hour (or whatever it is you get). But, is that
what you really make? Whether you get paid by the hour, on commission or
salary, you work X number of hours for X number of dollars. If you work 40
hours a week at $10.00 an hour, you bring home a gross wage of $400.00.
But gross wage is not what you really make. Oh yeah, you say, there's
those deductions - income tax, benefits, pension plan, whatever. That's
true. But gross wage minus deductions only equals net wage and that's
still not what you really make.
To spend money wisely, you need to know what your real wage is. Look at
it this way. If a shirt costs $40.00 and you make $10.00 per hour, it
takes 4 hours to pay for it. Right? Wrong! Actual take home pay is not
$10.00 per hour. To calculate real hourly wage, the total amount of money
needed to get to work must be divided by the total amount of time spent
getting or being there. The true cost of working includes all expenses
directly related to working the job including travel time, unpaid breaks,
transportation, clothing, lunches, and daycare. Any time and expenses that
would not exist if you stopped working.
Figuring your real wage is both interesting and frightening. It's easy
to see why home based businesses and working from home are becoming so
popular. A lot of time and money goes into maintaining a job that can not
be recovered.
Look at the following example. Working seven paid hours per day with
one unpaid hour for commuting and one unpaid hour for lunch equals nine
job-related hours per day. Expenses include taxes, parking, and vehicle
maintenance, clothing, lunches and daycare. Here's how it goes over a
two-week period.
Hours and Income
Paid hours - 70
Unpaid hours 20
Total hours 90
Total Income $700.00
Expenses
Taxes at 22% - $154.00
Parking at $1.25 per day - $12.50
Vehicle maintenance at $50 per week - $100.00
Lunches at $5.00 per day - $50.00
Daycare at $25.00 per day - $250.00
Clothing at $25.00 per week - $50.00
Total Expenses - $616.50
Real Wage
Total Income - $700.00
Less Total Expenses - ($616.50)
Sub Total - $83.50
Divided by work hours - 90
Real Wage $0.93
Now you and I both know that these expenses are pretty minimal for most
people's situation, especially in the bigger cities. Yet, in this
scenario, real wage is $0.93 per hour, quite a big difference from $10.00.
Using the real wage, the same $40.00 shirt would take 43.01 hours to pay
for. It sure changes your thinking process.
Calculating your real wage can be depressing, but don't let it get you
down. It's a fact of life. What it shows you is how much you actually make
and that in turn allows you to make more reasonable and responsible
spending decisions. It's easy to see why huge debt loads accumulate when
purchases take weeks and even months to pay for. In one day, it's possible
to rack up debt that will take several months' worth of work to pay for.
