How Much Do You REALLY Earn?

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Do you know how much you REALLY earn? No it’s not a trick question. The typical answer would be, “yes of course I do. I earn <insert salary figure>”. I say typical answer but let’s be honest with money and earnings in particular being such taboo subjects, you may just get awkward silence as your response. Anyhow if you responded with your salary that would be the wrong figure, so what am I talking about?

I’m talking about how much of your money you get to spend on living your life? Not anything associated with work and/or taxes. Thinking about it that way you’ll see that it really isn’t your salary. The tax element won’t come as a surprise as you see that deduction on your wage slip, but the work element – what is that?

This week’s post is inspired by my current read, “Your Money or Your Life” by Vicki Robin and Joe Dominguez. Considered a must-read in the personal finance world it provided the wake up call to many with regards to their money. As discussed in another post my wake-up call came via Rich Dad Poor Dad, but decided to check this classic out following numerous recommendations (I’m late I know). So let’s get stuck in.

How much do you spend to work?

Similar to how a company will have costs of sales (e.g. stock, raw materials, etc) we have costs of working. We earn money on the job but we generally have to spend in order to do so.

Now you’re probably considering your travelling/commuting costs but it goes deeper than that.  Think about:

  • Clothes you purchase solely for work purposes
  • Costs associated with your work routine (e.g. morning coffee on the way to work, those lunches in the work cafeteria or bought from elsewhere, takeaway/ eating out as your job has taken all your time/energy so you just don’t feel to cook).
  • Nights out, blow out weekends, vacations and expensive treats to make up for the restrictions and stress of the job.

And it doesn’t just end there with extra costs. Think about those additional hours other than those associated with working late:

  • Commuting time
  • Shopping time for work clothes
  • Time taken to get yourself in home mode after a day in the office
  • illness due to conflict at work or not taking vacation through as you don’t feel you have a “good enough” reason.

You’ll find your work costs and hours are much higher than you previously thought.

My situation

I had a look at my own situation to see where my pay and time was disappearing. Like many I commute to my current job, I set an upper limit for commuting time as I would happily do more fun things than sit in traffic. Nonetheless, if I didn’t travel to work my petrol costs would be a third of what they are.

Working in a high stress environment the hours are often long. Getting in early would help me to get ahead before new projects came up but also meant I’d often buy breakfast from the canteen, instead of eating it at home. Last minute requests often meant working late leading to eating out for dinner or ordering takeaway. As for lunch it was more of the same.

On the time front, I need at least an hour to switch off from work. That’s at least 5 hours a week or 20 hours per month.  As for shopping for work, I’m not a big shopper so this wasn’t a huge factor for me. When I do shop I do it as quickly as possible and more often than not it’s done online.

These additional factors really do add up and now that I’m not travelling back and forth to the office it’s even clearer. It has definitely made me see the financial impact of long hours and how working close to where you live can really help you save.

Why is this of benefit?

It will allow you to properly assess future opportunities. Just because a job offers a higher salary on paper doesn’t necessarily mean it does in reality. A job paying more but involving a two hour commute will have significant additional work costs both in terms of time and petrol costs. Same applies to the high stress job that has you always buying convenience food and that bottle of wine to unwind. These costs may more than offset the increase in pay.

Aside from the financial impact, many of these additional factors also have implications for your health so make sure you consider the whole picture before saying yes to the new opportunity.

If you want to make the best financial decisions and live the life you want grab a copy of “Your Money or Your Life” and start improving your relationship with money.

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4 Comments

  1. March 13, 2017 / 10:03 am

    I loved Your Money Or Your Life – in fact it was one of the four books that changed my financial life. Calculating your “real hourly wage” can be a wake-up call, and using that metric to evaluate your spending priorities is eye-opening.

    • msmoneymaximiser
      July 3, 2017 / 5:15 pm

      Definitely one of the must read Personal Finance books!

  2. June 16, 2017 / 9:00 am

    I cannot agree to this more! When my daughter started nursery that’s when I realised that my salary doesn’t take me far at all. Childcare is the worst. It has made me question if working is worth it.

    • msmoneymaximiser
      June 16, 2017 / 9:11 pm

      I can’t say I’m looking forward to those childcare costs! It’s crazy when you factor in that plus commuting costs, plus all the convenience stuff we do due to the time and stress associated with our jobs.

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