Our Salaries: What Are They Really Worth?

A couple weeks back I posted about how to determine your actual hourly wage to factor in the various benefits, costs, and actual time associated with your job.  So this week I thought it would be worthwhile to show how we ran the numbers for our own income.

This post is partially inspired by the excellent post by The 76k Project: We Should be Talking About Our Salaries. Here’s Why.  After reading that post, I realized that I have been only telling half the story.  Namely, I’ve preached about saving money and paying off debt, without ever revealing our income.  So, in an effort to be more transparent I am detailing our income and how we calculate our true hourly wage here.

First, let’s take a look at our combined salary and our “standard” hourly wage:

Our combined salary is $192,747.  This is based on 40-hour work weeks, for a total of 2,080 hours of work each a year (grand total of 4,160 hours).

Dividing our salary by the work hours results in our “standard” hourly wage:

$192,747/4160 hours = $46.33 per hour

Now let’s factor in wage adjustments.  I’ve added notes to the right of each category:

Category	Yearly Amount	Notes
Salary	$192,747.00	Combined Base Salary
401k Employer Match	$7,709.88	4% for each of us
Bonus	$3,000.00	Only one of us is eligible for a bonus, this represents conservative number
Health Savings Account	$1,000.00	My employer contributes this towards my HSA if we enroll in the high deductible healthcare plan
Cell Phone Reimbursement	$959.96	We each get about $40 a month in cell phone reimbursements
Health Premiums	-$4,892.68	We each have healthcare premiums deducted from our checks
Daycare	-$19,656.00	Kids are expensive
Clothes	-$740.00	Based on average wear and tear for “work only” clothes
Commute	-$1,437.18	Factoring in round-trip miles, vehicle fuel mileage, and gas at $2.50 per gallon
Total Adjustments	-$14,056.02	…bit of a haircut here, eh?
Adjusted Combined Income	$178,690.98

Adjusting your Income is only half the battle.  Next we need to consider the real time spent working.  As you can see below, this goes well beyond the typical 9 to 5:

Category	Yearly Hours	Notes
40-hour work weeks	4160	Our salaries are based on 40 hours per week, with no paid overtime
Unpaid Overtime	293	I typically work between 45-50 hours a week, while my wife is usually at 40
Paid Vacation & Holidays	-360	45 paid holidays and vacation days between the two of us
Commute	396	Our round trip commute time is roughly 50 mins each which includes dropping off and picking up our kids from daycare
Morning Prep	534	It takes us between 1 and 1.25 hours to get ready for work each day
Decompress	294	This is time after we get home to get changed and shift our mindset off of work (This is all me.  My wife is blessed with the ability to get her mind off work immediately… I’m so jealous)
Total Adjustments	1156	Yikes that’s more than 145 days of extra work!
Adjusted Work Hours	5316

via GIPHY

Ugh! That is so many hours.  That works out to 30% of the year.  Take out 8 hours a night for sleeping and that jumps to 46% of our waking hours!!!!!

Now, to arrive at our true hourly wage we need to divide our adjusted income ($178,690.98) by our adjusted work hours (5,316)….

… which results in a “true” wage of $33.61 for each hour one of us works.

Now that we know our true hourly wage, we can use this information in a couple ways.

What Do Our Purchases Really Cost?

We can evaluate our day to day purchasing decisions.  We have a much clearer picture on the real cost in terms of hours of our lives we are exchanging for the things we buy.  This is powerful because we get a better sense of whether we are receiving fulfillment in proportion with the time traded in.

For instance, a typical date night dinner with drinks usually runs us about $70.  With our true hourly rate of $67.22 ($33.61 each) we would have to work a little more than an hour (roughly a half an hour each)… to me that is well worth it.  However, I know we’ve spent $764 per month this year on retail items.  Meaning we need to work 11.4 hours each month just to pay for these purchases.  Is it worth it?  Not nearly as much as the date night dinner, that’s for sure.

Comparing Job Opportunities

As an example, we both have short commutes (relative to the vast majority of folks we know).  If we took jobs farther away then our commuting costs would jump quickly.  Additionally, my car gets relatively good gas mileage at about 32 mpg.  My fuel costs were more than double with my old pickup truck.

Also, our 401k match and healthcare premiums significantly impact our true wages.  This analysis underscores the need to have a solid understanding of the value of these items when weighing job offers.

Some jobs pay time and a half for overtime work (ours do not, and at our income level these jobs are few and far between).  However, if we were compensated in such a way it would add roughly $14,000 to $15,000 to our annual income!

Oh, and for God’s sake people, USE YOUR VACATION!

If we didn’t use our vacation it essentially drops our true wage $1-$2.

Anyways, if feels good to get this information out there.  Getting all the legwork done setting up the spreadsheets and making the assumptions will make any future calculation much easier for us.

Thanks for reading!