I’ve known my hourly wage since I started working. It’s a simple salary divided by weeks divided by hours per week, no biggie. Is there really more to it? Yes, according to Vicki Robin and Joe Dominguez in Your Money or Your Life. They establish that money is simply a thing you trade your life energy for, and step 2 of their 9 steps to transform your relationship with money and achieve financial independence is to establish your real hourly rate.
My Own Hourly Rate
It’s much easier to practice mindful spending when you know your hourly rate. Even when I got my first salaried position in 2012, I still calculated the number out. If you are salaried, divide the annual salary by working weeks per year, and then divide that number by average hours worked per week. I subtracted out vacation weeks.
Knowing this number makes it easy to hold up the new shirt at the mall and say “Oh, it’s $30 to buy this shirt, was it really worth the hour I spent at my desk or in that meeting?” Using this trick keeps my priorities-based spending high.
I always knew there were extra costs to work, but I never tallied them out or adjusted my hourly rate. Until now...
The Extra Hidden Costs
I drive 11 miles one way, or 22 miles per day. This amounts to approximately 4.5 gallons of gas per week, or about $14. There’s also wear and tear on the car, which if valued at $.40/mile amounts to $44/week. I make a point to do errands on my way home, so that saves time later and means less travel overall. I don’t have any tolls or parking fees. I almost never hit traffic on the way to work, so it’s a 20-minute commute in. However, the time involved to get home ranges from 20 minutes with little to no traffic, up to 40 minutes when there are traffic jams. For simplicity’s sake, I’m assuming 4 hours per week spent commuting.
Most of my clothes are from outlets or have been given to me freely by friends or through my Buy Nothing group. As a young professional, I like to look the part. Last year, I spent $658 on clothing. This year, I’m already at $454, but $220 was for a new Coach purse last month meant for everyday use. (My last one made it 5 years and was still in decent shape!) I’m just going to assume $10/week for simplicity, rather than dividing out items by what was meant solely for work, which items were meant for casual wear, and which items work for both. I don’t use any makeup or other products specifically for work, so there’s no additional cost.
I spend about fifteen minutes each morning getting ready for work (thanks to no makeup and to always putting things away the night before). Since some mornings are harder than others, I’ll round up to 1.5 hours.
We all have to eat, but the point of this category is what extra costs will be incurred simply due to being in a work environment. I don’t drink coffee, so I don’t have any costs or time spent in line. I bring my breakfast and lunch from home, but I do spend about $5 each week for Taco Tuesday (the cafeteria puts out a great taco bar that’s very filling and nutritious, and it’s actually a huge plate of food). Once a month, I try to meet at Starbucks with one of my mentors or with someone who wants to meet with me, so I usually buy a $5 drink. For simplicity, I’ll say $1/week.
The Taco Tuesday bar is about 5 minutes between arrival, filling my plate, and paying. I enjoy my coworkers’ company throughout the lunch break. While I’m in line for Starbucks, it’s usually with my mentor asking them questions already, and since it’s only once a month, I suppose it averages to a minute a week. 6 minutes a week total, or .1 of an hour.
The other piece of this is the meals purchased because work has taken away any desire to cook or clean up the kitchen afterward. However, we keep frozen food around the house or eat leftovers or instant meals. If we do go out, it’s a conscious date night.
The whole point of this category is to think about what expenses are incurred because you’ve had a long day at work and are feeling drained, looking for an easy escape. Cable TV and a beer to unwind on a daily basis will set you back about $20/week and plenty of hours. If you’re coming home and jumping right into your activities, no money and zero hours. For me, I usually get home and change, let the dog out, get the mail, and tidy up before I start on my evening’s activities, so I’ll estimate 30 minutes per day, or 2.5 hours a week, to get myself settled down after work.
What things are done to “escape” from your job? Anything you do to vent or unwind? For example, a night on the town or night shopping, or even weekend trips. These are things you “earned” by working the job and are using them as a getaway, although the irony is that spending the money chains you to your job longer.
About once a month, when it’s been a really rough day, I go out with a friend or coworker at a local restaurant to vent, which usually amounts to $20 (so $5/week average) and an hour or two (.5 hours per week). I’m just going to throw 2 extra hours a week here for escape television. I enjoy my shows, and would be watching them anyway, but life’s not black and white.
Daily stressors are part of why you’re paid to do the job. Any time I’ve started to feel unhappy in a job, I’ve taken the opportunity to make a career move or look for something new. I don’t want to stay in something that I feel like I need an escape from.
This one is tough, because I’d travel anyway. I enjoy seeing the world and spend so much time exploring when I visit new places. The book suggests that if you’d be traveling anyway, skip these costs.
The focus of this piece is on the trips you take or extra costs to unwind from work stress. For example, the all-inclusive resort and extra costs that go with it because you are too tired or stressed to plan anything else. (Ironically, this is exactly what we did for our wedding...)
Last year, I spent about $3,000 traveling. I can’t even count the hours, because it’s over weekends, holidays, family visits, and all sorts of goodies and trips, probably a good 15 plane flights at least. Which were an “escape”? But the spending has a big plus sign next to it (meaning I get a lot of happiness from it and it aligns with my values), and my house is still making me money while I’m gone anyway... at this point, rather than get caught in any more weeds, I’m going with $0 and zero. The point of this exercise isn’t to get tangled up, and I’m going round in circles.
Oh boy, this one’s no fun! I got sick three times last year from coworkers. That’s right, three times, each cold lasting an entire week. Productivity declined big time as I gave my body the rest it needed (especially after work, since I was trying to catch up on all the extra sleep). Assuming 6 hours each evening of lost productivity, at 5 days, that’s 30 hours each time, or 90 hours a year. We’ll just assume 2 hours per week on average.
When I’m sick, I order Chinese food (it’s my comfort food, especially the leftovers) at $10 a dinner, so another $30 for the year. I’m one of the people who will only go to the doctor if I’m dying, so $0 for copays. For ease, I’ll just assume $1 a week, which additionally covers Tylenol or tissues or whatever else from the drug store.
Other Job-Related Expenses
Here’s the section for daycare, the pool cleaner, the gardener or lawn service, the housekeeper, laundry or drycleaning, or any other services would go here.
One thing that didn’t end up in any of the other categories is networking. Once a month, my Young Professionals Network goes out to happy hour or another activity to network. I’ll add in 1 hour per week (4 hours per month) for traveling, networking, etc. and $5 per week (since average cost per event is $20) to include this.
Also not on the list is working out, which is required to keep down the extra pounds after spending all day sitting at my desk or in meetings. At least we have bicycles and a home gym (so no fees or extra time to commute), but it’s 4 hours a week.
Final Result – my “Real” Hourly Wage
I’m at just under $100/week in extra costs to work. $58 of my $89, or 65% of my costs, are directly related to commuting. This is why it’s so important to find a commute that’s as short as possible while still maintaining the quality of life you desire.
Everyone has 168 hours in a week. About 60 of mine are taken up by sleep. Another 60 are taken up by work or other work-related activities. That leaves only 48 hours for extra activities, like reading and spending time with friends and working on the blog. Are there activities I have been doing lately that I may want to give up or re-prioritize?
This exercise was an amazing reminder of how valuable both time and money are with regard to life energy. I’ve always practiced mindful spending but calculating the break down so precisely is a much different view.