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How do you calculate the "cost of working"?

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How do you calculate the
"cost of working"?


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If someone asked you how much you earned per hour at your job, how would you determine the answer? Would you take your weekly salary and divide by 40 to calculate an hourly rate? What about the time you spend commuting to and from your workplace? If it's an hour each way, five days a week, maybe you should divide by 50 instead.

The point is very few people actually calculate their "cost of working". If you make $1,000 per week is that $25.00 per hour? To see the whole picture you need to consider two broad areas: 1) how many hours per week do I spend on work related tasks beyond the 40 hours I'm compensated for, and 2) how much money do I spend on work related items and how much money do I pay to other people to perform tasks I would do myself if I had the time? Lets look at hours first.

Consider the situation of Joe Accountant, a cubicle dwelling office worker not unlike Dilbert of cartoon fame.

. Activity Hours .
. Basic work week. 40 .
. Commuting time 5 .
. Work brought home. 10 .
. . ____ .
. Total 55 .

What we thought was 40 hours is actually 55 hours per week.

Now let's look at the salary side of the equation. Joe earns a salary of $1,000 per week or $52,000 per year. What's he left with after a few expenses?

. Item Dollars ($) .
. Base salary $52,000 .
. minus taxes (14,000) .
. minus commuting costs (2,000) .
. work clothes (1,500) .
. day care (2 children) (10,400) .
. . __________ .
. Total $24,100 .

Let's do some arithmetic. Joe works 55 hours per week for 48 weeks per year (He gets 2 weeks vacation and 10 paid holidays, that's why its 48 weeks rather than 52.) 55 times 48 equals 2,640 hours per year.

How much is that per hour? $24,100 divided by 2,640 hours equals $9.13 per hour. That's a big drop from the $25.00 per hour Joe thought he was making.

Chapter 2, Page 67 of the book (Your Money or Your Life, Penguin Books, 1992) has a checklist and goes into some detail as to what you should consider when calculating your "cost of work.".


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Copyright 1998 John P. Greaney, All rights reserved.

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