Wednesday, March 2, 2011

Figuring Out Your Hourly Wage- Part 1

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I would say that I spend a good chunk of my day is spent on money saving activities. According  to some of my  friends, too much time. "Come on," Penny, they chide, "is all that work really worth saving a few pennies? Your time is worth more than that. Instead of wasting your time on that nonsense, spend your time on something productive that actually makes money."
Are they correct? Am I really spending my time inefficiently? To figure  that out, I'd have to calculate how much money I could potentially make via working versus how much money I could be saving in the same duration of time.
How Much Am I Really Making An Hour?
Consider this. Where I live, a good chunk of the jobs available pay $5.60 an hour. Having a college degree in many cases means that you can earn the lofty amount of $6.80 per hour. A decent job round these parts can earn you as much as $11 per hour. (Yes, there are some professions that pay even more, but those are few and far in between.)
In order for a certain task to be financially more worthwhile than working, it would need to save at least $5.60-$11 in an hour. Right?
Not quite.
Whatever your base salary, you aren't taking home that amount in cash. You first need to pay taxes on that money, including federal, state, city, social security, etc. Depending on your tax bracket, you can end up paying as much as 45% of your income in taxes (and possibly higher). Because of our low income, my husband pays 6% income tax, bringing home $6.40 per hour instead of $6.80. If he'd officially be making $11 per hour, after the 11% income tax, he'd end up with only $9.70 per hour.
But that $6.40, or $9.70 isn't even what someone would really bring home with those salaries.

Transportation costs to and from work (unless you're lucky enough to have a job within walking distance) also needs to be factored in. If you're busing to work in my area, you'd either be paying $3.54 or $5.90 per day on busing. That amount of  money needs to be deducted from your total daily wage to find out how much you're really earning.
 In my area, people in my area commute between 1 and 1.5 hours each way to their 8 hour a day job. (For a period of time, when I couldn't find any other job, I was at a job with a commute as long as this.) When you're spending so much time out of the house commuting to and from your job, it would only be logical to figure out how much you're actually making for each hour you're out of the house. (To do this, calculate the total money earned in a day (after taxes and transportation fees) and divide that by the total hours out of the house, including commuting time.)

But even that smaller amount isn't factoring in childcare. Where I live, childcare is rather cheap- only $1.90 an hour per child. As I have 2 children, that would usually be costing $3.80 per hour for both. I did find a babysitter willing to give me a discount for both my kids, so I only ended up paying $2.70 per hour. If you're a mom, any income can only be taken home once you've paid for childcare.

Ok, this is getting complicated. A chart will show how much money I potentially would be making after all the deductions.

This is assuming an 8 hour work day.

Starting Salary After Tax After Cheap Trans. After Expensive Trans. After 1 hour commute (each way) After 1.5 hour commute (each way) After babysitting (with discount) After Babysitting (no discount)
$5.60 $5.25 $4.80 --- $3.85 --- $1.15 ---
$5.60 $5.25 $4.80 --- $3.85 --- --- $0.04
$5.60 $5.25 $4.80 --- --- $3.49 $0.79 ---
$5.60 $5.25 $4.80 --- --- $3.49 --- -$0.32
$5.60 $5.25 --- $4.51 $3.61 --- $0.91 ---
$5.60 $5.25 --- $4.51 $3.61 --- --- -$0.20
$5.60 $5.25 --- $4.51 --- $3.28 $0.58 ---
$5.60 $5.25 --- $4.51 --- $3.28 --- -$0.53
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
$6.80 $6.40 $5.95 --- $4.77 --- $2.07 ---
$6.80 $6.40 $5.95 --- $4.77 --- --- $0.96
$6.80 $6.40 $5.95 --- --- $4.33 $1.63 ---
$6.80 $6.40 $5.95 --- --- $4.33 --- $0.52
$6.80 $6.40 --- $5.66 $4.53 --- $1.83 ---
$6.80 $6.40 --- $5.66 $4.53 --- --- $0.72
$6.80 $6.40 --- $5.66 --- $4.11 $1.41 ---
$6.80 $6.40 --- $5.66 --- $4.11 --- $0.30
~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~
$11.00 $9.70 $9.26 --- $7.41 --- $4.71 ---
$11.00 $9.70 $9.26 --- $7.41 --- --- $3.60
$11.00 $9.70 $9.26 --- --- $6.73 $4.03 ---
$11.00 $9.70 $9.26 --- --- $6.73 --- $2.92
$11.00 $9.70 --- $8.96 $7.17 --- $4.47 ---
$11.00 $9.70 --- $8.96 $7.17 --- --- $3.36
$11.00 $9.70 --- $8.96 --- $6.52 $3.82 ---
$11.00 $9.70 --- $8.96 --- $6.52 --- $2.71

I do realize that there are flaws with this chart; it can't be 100% accurate. Some jobs chip in for the costs of transportation. Other people drive to work, raising the costs of their transportation. Some people have a shorter commute. Some people have to commute farther. Some people only work part time. Some people work a longer day than 8 hours. Some people get free or discounted childcare. The list is endless.

But the point I wanted to show was-
Once you've factored all these things in, the tax deducted and paying for transportation and the amount of time you travel to get to work, you're not left with much money. And then if you need to pay for child care on top of all that- you can see over there on the right- you may end up paying the babysitter more money than you're actually making, or be left with under a dollar per hour earned!
This is actually one of the main reasons why I decided not to work outside the home. It makes no sense for me financially. (In case you're thinking that just unskilled professions make that little, I wanted to point out that social workers make $6.80 per hour after a degree, as do graphic designers, dental assistants, medical receptionists.)

In the chart I didn't factor in all the other work related expenses like clothing, or convenience foods because you're too tired.

So, basically, in order for money saving techniques to actually be worth it financially, they need to save more than negative 53 cents per hour. Ok, slightly kidding there, but if something saves more than $1.50 per hour, I'm pretty much set, and if I can save more than 4 dollar per hour, then it would be smarter for me to employ money saving techniques than it would be for me to work at jobs that pay pretty well.

How much money can I save in one hour? For that, you'll have to wait for part 2, in tomorrow's post.

I know that numbers for you will be much different for you than for me, but have you ever figured it out? After income tax, transportation costs, and childcare, how much are you actually making per hour? And then once you factor in travel time, and other time spent out of work on work related activities (such as preparing a lesson plan and grading papers if you're a teacher), how much do you actually make an hour?
Do you find that it's worth your time financially to work outside the house when you have small children and would need to pay for daycare? Why or why not?

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