Whats your hourly rate?

tobedifferent

Sorry if this has been posted before it is something that I read about in the Tightwad Gazette book and I thought that I would post it as it really has helped me get my head round my budget and how to keep in control of it. It helps me to see which money saving activities are worth my while and which are not.

The first part can also be useful if you are looking to move to a lower paid job that is for example closer to home or less hours.

First off you figure your hourly rate from your main source of income, I work 37 hours a week, I get a total of 6 weeks for holidays and bank holidays but are not counting these as working days as its my work the rest of the year that pays for these, if you get what I mean. So with earnings of £19K it would appear that my hourly rate is £11.16. That sounds a lot better than I thought, but unfortunately thats not what I get.

Going to work costs me in other ways, firstly I need particular clothes, business suits etc. Now I am getting very tight lets say I only spend £5 per month, I also have to drive to work, the majority of my miles are commuting so I will add on £35 for petrol and £5 wear and tear, I also have to pay my own business insurance, that costs me around £10 on top of my standard insurance. So I have £55 worth of non reclaimable expenses, add Tax, National Insurance and Union Dues (I don't count insurance or pension) and I get £13860 a year. You should add in here any childcare, work meals etc ajnything you pay out of your own pocket which is directly related to work.

Now onto the hours, I work and am paid for 37 hours a week, but I have to get home and back, this takes an hour a day, we have to have an hours unpaid break so being at work costs me 47 hours per week.

So my true hourly rate for doing the job is £6.41 pence. If you are considering changing jobs check out the income tax calculator at https://www.thepru.com to get an accurate figure of tax etc on your new salary.

How this has really helped me is in getting my head round the small savings. I used to think why bother reusing tea bags to save 1p? A Pack of 240 Asda Tea Bags is £2.48, but i'll say 1p per bag, I like my tea strong so I use 2 used teabags for each cup, by doing this I get 50% more out of the box. But it only takes a second to reuse a tea bag, it takes no longer to put it on the plate that it does to chuck in the bin, so it take me one second to save 1p. However when the time comes when I have spent a whole hour of my life reusing tea bags my 'wage' for that hour will be £36, or the equivilant of 5.6 hours at work. If you like weak tea your hourly wage for reusing tea bags would be £72.

Naturally it will be sometime before you have spent an hour doing this but its not the point, it shows that those little 'why bother' things that take virtually no time and saved perhaps only a penny add up to big things. Add to this all the things like taking a shorter shower, using less cleaning and beauty products, using microfibre cloths instead of buying kitchen roll all add up to bigger things. If you can save £1 a day doing tiny things thats £365 a year you can put against your debt.

I've used this method of thinking in other ways, I used to get a bagel and philadelphia at Macdonalds for breakfast as it was 'only' 85p. Now I pick up bagels and cream cheese at the supermarket when I do my shopping. 5 bagels and some soft cheese from Asda costs £1.66, as I cut out the walk and wait in macdonalds I only spend an extra minute making my own. I save £2.59 per week or 52p per minute giving an hourly wage for that activity as £31.08.

But even a low hourly rate can be worthwhile. I'm going home for Christmas, I can drive or take the megabus, to drive will cost me a total of £50 and take 7 hours total. To megabus including the buses to and from the depots will cost £13 and take 20 hours in total ( I have to go via London wait and then get another bus). This is only £2.85 per hour, I work from home doing chatline and could easily do an additional 10 hours with the extra time at £4.95 per hour and make £12 more by driving. But if I did not have this option and nothing else could earn me a guaranteed £2.85 per hour so its the way to go.

Incidentally I went to a wedding weekend recently and theorised that even if I was fit to drive all the way home the next day I would not get any work done when I got home and therefore kipping on the bus was the frugal if long option!

This has really helped me and I hope it can help someone else too.

TBD

in-trouble_3

over min wage and weekends certainly over min wage

mjdh1957

Wow, what an interesting concept. Never thought of things in that light before.

Food for thought....

Seaxwyn

Thanks tobedifferent for that interesting and thought-provoking post.

climbgirl

Yes, I find it really helps make decisions about buying things, I saw this method on Oprah some years ago now. You work out your discretionary income rate (basically your hourly rate after you've paid for everything essential - food, rent/mortgage, bills, clothing, transport). So you have the rate that is essentially yours to do with as you will. £6.41 in your case (or thereabouts!).

So when you want that new handbag/mcbagel/starbucks/trip abroad, ask yourself how many hours you will have to work to earn the discretionary income to pay for it. If you're still ok about buying it after that, then go ahead. But on the other hand if you baulk at spending 10 hours of your life working to get that bag, it helps you walk away!

Snaggles

I don't think I dare work mine out

tobedifferent

climbgirl wrote:

Yes, I find it really helps make decisions about buying things, I saw this method on Oprah some years ago now. You work out your discretionary income rate (basically your hourly rate after you've paid for everything essential - food, rent/mortgage, bills, clothing, transport). So you have the rate that is essentially yours to do with as you will. £6.41 in your case (or thereabouts!).

So when you want that new handbag/mcbagel/starbucks/trip abroad, ask yourself how many hours you will have to work to earn the discretionary income to pay for it. If you're still ok about buying it after that, then go ahead. But on the other hand if you baulk at spending 10 hours of your life working to get that bag, it helps you walk away!

This is a different concept to the one I have outlined but it sounds very useful in its own right. The one i've detailed outlines your total take home pay (before your mortgage) etc and then calculates how much you "earn" by making savings.

The method you have outlined looks at disposable income you have left and works out how much per hour that is. I'm going to have bash at working this one out, scarily i think from my full time job its actually nothing! My second job is a lifesaver, what I'll have to do is work out how many hours extra I work before I break even, then how much i make an hour, hmmmm, an extra 10 hours on top of the 80 or so I work for a handbag?? No thanks!

immoral_angeluk

I only get £4.85 so I dread to think what my 'true' wage is.. especially after childcare etc.

tobedifferent

Don't spend too much time thinking about your take home rate from work. See how big those savings can be and what they can really do for you. Thats the main point of this exercise!

climbgirl

tobedifferent wrote:

This is a different concept to the one I have outlined but it sounds very useful in its own right. The one i've detailed outlines your total take home pay (before your mortgage) etc and then calculates how much you "earn" by making savings.

Yes, didn't mean to imply they were the same, sorry!

I think you should be thinking about how much your actual take-home pay is as well as savings to be made. If you're earning £4.85 an hour but spending £5.05 in order to get to work (on childcare, transport etc) then you need to think about why you're working or get a better paid job!

James&Shell

Im on £7.00 a hour thats quite good round here in sunny Great Yarmouth!!

"Never have worked out what is Great about Yarmouth maybe we should seek advise with trading standards as its not great where im Sitting!!!"

James