On £50k a year? That’s £10 per hour!

ID-10099666 It takes some serious effort to crack that £50,000 per year barrier.

It puts your earning power higher than roughly 90% of the population of the UK.

You probably spent years in education and followed it up with some real hard graft in the workplace to get there. Maybe you did a masters or a certificate in your free time to improve your human capital. You definitely put in some overtime.

Now you’ve arrived, you need to stay on top form to hold on to the prize.

If the boss calls in the evening, it’s probably a good idea to have a chat with her. Keeping on top of emails (even at the weekend) will make sure your working hours are most effective. If you take your paperwork home, you can stay committed to the job but still perhaps see your kids before they go to bed.

You are a dedicated worker and give the company your best, most productive, hours and all of your creative output.

Just one question: why would you do all this for the same hourly rate as you could earn as an office temp? OK – that sounds nonsensical, so let me elaborate.

Your real wage

In Your Money Or Your Life, Joe Dominguez and Vicki Robin introduced the concept of the real hourly wage. The idea is that most people’s answer to the question

What do you get paid?

is actually a meaningless number. Saying that you get paid £50k a year leaves out way too much information. To work out what you’re really getting in return for all of those hours of sustained effort, there are a few other things we need to consider.

Somewhat taxing

Tax is the elephant in the room, particularly in the UK.

I’m going to try to make this point in a completely non-ideological way. It doesn’t matter if you think that progressive taxation is good or bad. I’m not trying to argue for or against the NHS or debate other aspects of our social welfare system. I’ll just give you the facts.

If you earn £50k and have no student loans, a recent payslip will confirm that you usually take home around £3027 per month. Multiply by 12 and you’re around the £36,325 per year mark.

Taking this information at face value, your usual answer to what do you earn? is obviously a large overestimate. You’re losing around 27.5% of the headline figure to the government. You will never see the £50k.

OK, we’re down to £36,325. What else do we need to take account of?

Costs of doing business

Can you think of anything that you currently pay for because you have a job?

The most obvious candidate for most people is the cost of commuting. Whether you use public transport or own a car specifically for the purposes of getting to work, the costs can soon mount up.

Let’s think about commuting by car as an example. HMRC allow you to claim up to £0.45 per mile for business travel in your own vehicle. The tax man isn’t known for letting you get away with too much so it’s reasonable to say that £0.45 per mile is probably a pretty good estimate of the true cost of car use (taking into account, fuel, servicing, repairs depreciation etc).

Many higher earners live in nice suburban areas rather than in town, close to work. I’ll assume you live 15 miles from work. You therefore perform a 30-mile round-trip every workday. If you get 5 weeks of paid leave (+ public holidays) every year, you’ll commute to work roughly every weekday for 45 weeks (5 x 45 = 225). Your total cost of commuting then is around £3040 a year.

Let’s assume you have to pay to park too. A very good deal for a full day’s parking in a typical city centre might be £5. We need to bump up the commuting cost by another 225 x £5 = £1125. That means that just getting to work knocks another £3040 + £1125 = £4165 off our annual income total.

£36,325 just became £32,160!

Dress to impress

If you have a professional job, chances are you don’t turn up in jeans and a t-shirt.

Look at what you wear to go to the office. Would you wear those things by choice? Are high-heels and power suits more comfortable than your casual clothes? Do the clothes make you more productive or are you just following the rules?

I’d guess that, absent the job, you wouldn’t have bought the business wardrobe.

I’m going to assume that you spend £1000 a year on maintaining your professional appearance. This incorporates buying clothes, professional hairdressing, dry-cleaning, cosmetics and the like.

OK we’re down to £31,160.

Waking up and winding down

You’ve been successful in your career so clearly you’re ‘worth it’.

You deserve a little treat every now and again… and again, and again!

If you stop for a nice coffee every morning on your way to the office, it’s probably because you ‘enjoy’ it. You can certainly ‘afford’ it. Have you ever considered that your morning caffeine hit is perhaps just a bit of self-medication, designed to get you ready for the quite unnatural experience of sitting behind a desk and concentrating for the remaining daylight hours?

Would you enjoy/need the double-shot espresso if you didn’t have to run meetings, keep an eye on office politics or get through another meaningless report?

At the other end of the day, a nice cold beer or a glass of wine can really take the edge off a stressful day. Perhaps

I enjoy the occasional drink

has been nurtured by years of corporate stress into

I can’t cope with this amount of shit without getting a warm boozy glow from at least a couple of glasses of wine every night

I’ll be conservative and assume that you are only afflicted by one of these mild work-related addictions. Let’s go for the coffee.

Let’s say you have a double espresso from Starbucks every weekday for 45 weeks every year. That’s roughly £2 x 225 days = £450.

Our yearly total has fallen to £30,710.

Opportunities lost

Do you plan what you’re going to eat for the week in advance or just call into Tesco Express on your way home? Do you look for good value or just convenience?

I’m guessing that if you’re putting in the hours at work, coming home and planning meals or writing shopping lists doesn’t sound too appealing.

When we (family of 3) started paying attention to how we bought groceries, the bill came down by £100 a month. That’s £1200 a year! Being forever stuck at the office then can be seen through the lens of opportunity cost.

You’re too busy to use the money you are earning efficiently. We’ll use my grocery saving figure as a guide to the cost of this inefficiency.

How about lunch times?

If you were at home, you’d nip into the kitchen and rustle up a sandwich which would cost maybe £1. Because of the all-consuming nature of your job, you don’t feel that packing a lunch before you go to bed every night is a good use of your time.

You therefore pop to M&S or Pret for lunch every work day at a cost of about £6. The added cost compared to making lunch at home is thus around £5 a day

Let’s multiply that by 225 to get an annual figure: £5 x 225 = £1125 £30,710 – £1200 – £1125 leaves £28,385 for the year.

Living on peak

You have a 9-5 job. The problem is, so does everybody else. Which means that whenever you want to do something, everybody else wants to do it at the same time – the weekend!

An increase in demand whilst supply stays the same usually leads to the price going up. Consider how gym memberships work. Gyms have to incentivise people to use them in the day (‘off-peak’) by lowering the costs for members who use them during these times. If you want to work out in the ‘rush hour’ (i.e. as everybody is on their way to the office), you’ll need an ‘on-peak’ membership.

You also have to squash your leisure activities to fit your work patterns. If, for example, you were free to fly back into the country from your holiday at your convenience, you could wait for a good deal. However, if you’re constrained by ‘getting holiday’ and getting back to the office you don’t have such fine-grained control over your costs. It’s hard to quantify the cost of this phenomenon but I think I can justify bringing our annual total down to £27,500.

Workin’ 9 til 5

So far I’ve discussed why your headline salary is not a good description of ‘what you get’. Now let’s think about what you give. You might have a nominal contractual obligation to work 40 hours every week, but what other time do you spend on your job?

Time wasters

You probably commute every day.

How long do you spend getting the ice off your car? How long do you spend staring at brake lights in rush hour? Do you always get a parking space straight away? I’ll be conservative and add an hour to each end of the day. Your 40 hour week just became a 50 hour week.

How much does your work encroach upon your personal life?

Do you leave your work at the office or is your Blackberry a constant companion? Do you respond to work-related emails outside office hours? Do you feel obliged to attend work functions? Do you maintain any relationships just for the sake of your career?

I’ve heard many rants over the years from people who feel somewhat annoyed that they are regularly expected to go to meetings and training courses in far-away cities for no extra compensation. Fair enough, they get a bit of subsistence allowance but what about the Sunday afternoon you spent driving from London to Newcastle or the 4am start required to get the early flight?

I’d say that the average person in a high-responsibility, professional job would struggle to average less than 5 hours of work-related activities per week which they perform outside of normal office hours.

So, we’re up to 55 hours a week.

Head space

Do you find it difficult to completely forget about work?

Do you ever find yourself thinking about the presentation you need to give on Monday when you should be playing with your kids? Who will be there? Who do you need to suck up to? Who do you need to take care not to offend?

How about dwelling on toxic working relationships? I bet you’ve rehearsed the speech you’d like to give to your condescending co-worker a million times. Maybe you’re going over that speech at 11:30pm on a Tuesday after a busy work day. You should be asleep (as you need to be up at 6 tomorrow… for, well, work – obviously) but you just can’t let go.

Work and its side effects can easily spill over into the rest of your life. But how much of your supposed leisure time is ruined by the psychological fallout from having a stressful job?

Let’s say another 5 hours.

Do the maths

Your real work-week then takes up about 60 hours.

Let’s be honest, if you work in finance or corporate law, that’s probably a massive underestimate, but let’s go with it.

There are 52 weeks in a year. Knock off 7 for annual leave and statutory holidays to give 45 weeks a year. Taking our numbers from above into account, you probably work 45 x 60 = 2700 hours per year.

After subtracting our estimate for the costs of having your job, your hourly rate is then £27,500 divided by 2700 which is £10.19

OK, so I pretty much made half of this up. But I’m sure you’d agree that my numbers are not ridiculous. You thought that you were doing pretty well but the truth is you trade your precious life away for a shockingly small amount of money.

Are you getting a good deal? How many more of those precious hours do you have left to live? If you want to get out, maybe I can help you – click here now for more details.


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[Image “People Working For Peanuts” courtesy of MisterGC at FreeDigitalPhotos.net]