“I was going to live on my salary or go down swinging”
For every dollar you spend you’ll need to earn two back. That is why saving and investing every dollar you can is so critical.
You have to earn two dollars because that dollar saved comes with expenses, but most of us have never really looked at the expenses of work. We think of work mostly in terms of our theoretical income.
There are expenses though. Lots of them. Your travel to work, the tax on that income, the property tax, your costume tax (suit and tie or the nice shoes and blouse), some food and the other things.
Most people don’t understand their real income per hour is nothing like what they see printed on their weekly pay check.
For starters say you earn $45 per hour. That sounds pretty good and works out to around $1800 per week gross. That’s based on a 40 hour week.
First deduct the tax and look at your net income. Let’s use a rate of 30% which is common (but may not be what you pay in tax). That drops your after tax take home pay to $1260. If you were still working the 40 hour week then your real rate of return for your work falls like a stone to $31 p/hr. Problem is that if you work in the western world you probably don’t work 40 hours. Turns out you work 55 and each day includes an hour commute to work in peak that’s 65 hours.
You are straight down from theoretical $45 p/hr to a little under $20 p/hr. Starting to sound a bit pathetic isn’t it?
Now deduct the MBA you are studying for at night to get a better qualification. Say you spend 2 hours on that 4 weekdays and 6 hours on the weekend you just dropped your rate to less than $16 bucks p/hr.
Now things are looking grim, but we haven’t even begun to consider the costs of working. You may buy your lunch for $10 per day and buy about $100 of new work clothes every week to keep your corporate wardrobe looking neat. You need a tank of gas for $70 or a train or bus ticket and we’re hitting $13 p/hr.
There are some costs we haven’t even considered. What about the time and money you spend to decompress. Say you sit watching TV for an hour after work in a semi vegetative state drinking a whiskey. Add those costs in. What about those costs of that MBA you are studying. Maybe you’re job requires you to pay some professional registration expenses. What about all those cell phone calls to home to sort out issues in your lunch break?
The reason I call it a McJob is that you think you are earning a hefty swag, but when you think about it you aren’t earning much more than you could get in some low ball menial job where you can walk from home, go home for lunch and wear track pants all day.
Do the calculation yourself and share in the comments below. It really puts that job of yours into perspective.