Education Income & Savings

Your Real Hourly Wage: How Much Your Purchases Really Cost You

Your hourly wage is not what you think it is. Calculate the hours you need to work to afford any expenses you want to make. To better value your time and money.

Building up precautionary savings and then wealth starts by cutting back and spending less.

More importantly, it means spending wisely. This means distinguishing between needs and wants, identifying what brings us the most and responding to those needs or wants as fairly as possible.

Easy to write, not so easy to achieve. There are many pitfalls: temptations, fatigue, loss of alertness and willpower, promotions, … And we soon confuse needs and desires, let ourselves be convinced by a well-formulated argument, be too hasty, …

A parry could be to change the currency you are planning to spend in.

Of course, in practice, you will continue to pay retailers and creditors in GBP.

On the other hand, in your internal calculations, in your reflection filters, in your choice criteria, you could use another currency.

This currency is time.

Calculate your expenditure in hours and days of work.

Rather than saying “this £800 plasma will make my living room look very nice”, you could say to yourself “this plasma of 10 days of work is going to clutter up my living room”.

Because £800 is a lot. But 10 days of work is a lot.

Because these 10 days are about a resource that is definitely consumed and lost: time. Your time.

And these 10 days also involve transport time, putting up with difficult or intrusive work colleagues, responding to requests from your bosses, doing boring, useless or stupid tasks.

It also involves meals that are not balanced enough and eaten far too quickly, morning stress to avoid being late, the urgency of returning home for your evening obligations, and evenings that are cut short and that you don’t enjoy enough.

In addition to being time definitely consumed and lost, 10 days of work is all of this.

And that’s all that you’re going to use to afford that plasma screen …

Right now, we’re thinking twice, aren’t we?

Calculate your real hourly wage

To be able to convert GBP into working hours, you need 2 things:

  1. your real net hourly wage
  2. your actual working hours

Your real take-home pay

Here’s how to calculate your real take-home pay:

  1. Take your pay slip: your net monthly salary is listed at the bottom.
  2. Ignore any extras you might receive: 13 or 14 months’ salary, profit-sharing, variable or target-based compensation. All this will constitute a bonus that you should only use for your savings and investments.
  3. Remove all expenses related to your salary activity: transport, meals, clothes, coffee and sweets from small breaks, …

Your actual working hours

If you punch in, you will make the mistake of believing that your hours of work are as stated in your employment contract.

And if you punch in, you will think that your working hours are the hours you spend at your place of work.

No, they are not.

Your hours of work do include the hours you spend at your place of work. But they do include the hours you spend commuting to and from work.

The only good way to calculate this is as follows:

  1. Write down the times you leave in the morning and return home in the evening, then average them: you now know your real daily working hours.
  2. Multiply this figure (your actual daily hours) by your average number of monthly working days (usually 22 for traditional full-time): you now know your actual monthly working hours.

Also add any average preparation time related to your work: special outfit, make-up, hairdressing, etc…

And don’t forget to add the few hours of work done outside your workplace: meeting, demonstration, training, …

Your actual hourly and daily wages

Now you can make 2 calculations and get 2 key figures :

  • your real hourly take-home pay: divide your real monthly take-home pay by your real monthly working hours.
  • your real daily take-home pay: divide your real monthly take-home pay by your average number of working days in the month.

Normally, these 2 figures will be much lower than what you could imagine or read in your contracts.

Armed with these 2 figures, you can now convert all your expenses into hours and days of work.

My personal case

Today, I no longer have a salaried job. These different calculations and figures no longer apply to me.

But there was a time when I had a traditional salaried job. So I made this calculation.

And I fell on my ass…

I had a relatively comfortable salary of £2800 per month. Yet my real hourly wage was less than £10 per hour. The fault lies in the endless hours of transportation.

It had also made me realize what I was wasting with all my daily expenses.

Separately, the sums are derisory. When put together, they are much less so. Especially when you realize that you work 2 days a month for very little …

Conclusion

Money has no intrinsic reality. Your time does.

Your time is the most valuable resource you have. When it’s gone, it’s definitely gone. You can’t get it back, you can’t get it back.

Your time is tangible, limited and irreplaceable.

Knowing how much an hour of work really earns you makes you aware of the time-money exchange you are making.

And the previous calculations provide you with the real exchange, not the fictitious exchange that was presented to you at the signing of your employment contract.

In the context of your expenses, knowing your real hourly wage allows you to really become aware of the time-product or service exchange you are about to make.

Very often, the reality of the ineptitude of the exchange you are about to make will jump out at you. And you won’t make that expenditure.

Another factor to consider is how you will use the product or service. If it’s an investment or a work tool, the expense must surely be taken into account.

In the long run, you will have less and less need to make this time-to-money and time-to-product or service conversion. You will have acquired a scale of value that you will apply instinctively.

But at the beginning, this will allow you to realize concretely the envisaged expenses and the committed sums.

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