Advertiser Disclosure
Advertiser Disclosure: The credit card and banking offers that appear on this site are from credit card companies and banks from which receives compensation. This compensation may impact how and where products appear on this site, including, for example, the order in which they appear on category pages. does not include all banks, credit card companies or all available credit card offers, although best efforts are made to include a comprehensive list of offers regardless of compensation. Advertiser partners include American Express, Chase, U.S. Bank, and Barclaycard, among others.

How Much Does Your Job Really Pay? – Calculating Your Hourly Wage

If you’re like most Americans – about 70%, according to a 2017 Gallup poll – you’re not that happy with your current job. Maybe you’ve fantasized about quitting to do something more satisfying, like starting a small business or becoming a stay-at-home parent. But in the end, you’ve stuck with your dull job because, well, you need the money.

If you’re in this position, here’s something to think about: chances are, your job isn’t bringing in as much money as you think it is.

Most jobs have work-related expenses that erode the value of your paycheck, such as commuting costs, meals, and a special wardrobe. Parents also have to worry about paying for someone else to watch their kids while they’re at work.

On top of that, your work week is probably longer than you think it is. If you have a 9-to-5 job, you probably spend quite a bit more than 40 hours a week on it. Commuting time, work performed outside of working hours, and time spent getting ready for work each day all add to the amount of time you devote to holding down a job.

When you add it all together, there’s a good chance your job is paying you a lot less per hour than you realize, perhaps even less than minimum wage. Once you see what your real hourly wage is, you might discover you could actually make more money doing something you’d enjoy.

Finding Your Real Hourly Wage

Calculating Man Pen Notebook Table

To see how different your real pay can be from your nominal pay, let’s take the example of an imaginary worker named Brandon. Brandon earns $50,000 a year as an insurance agent. Since he works a regular 40-hour week, about 50 weeks a year, he figures his job is paying him $25 an hour. Let’s break that down and see if he’s right.

1. Deduct Your Expenses

Like most workers, Brandon has many expenses related to his job – some obvious, some less obvious. These include:

  • Taxes. When Brandon gets his paycheck, taxes take a big chunk right off the top. His wife Denise also earns $50,000 a year, giving them a combined income of $100,000. However, as this tax calculator from SmartAsset shows, federal, state, and local taxes, plus payroll tax for Social Security and Medicare, eat up around 20% of that. This cuts their joint income down to about $80,000. So, after taxes, Brandon is bringing in $40,000 per year.
  • Child Care. Brandon and Denise have two young children. Their 3-year-old daughter is in day care, which costs them $200 a week – a typical amount, according to a 2017 report from They pay another $200 a week for an afterschool sitter to look after their 6-year-old son for 15 hours a week during the school year. During the summer, he goes to a day camp that costs $315 a week, the average cost according to All told, Brandon and Denise pay $21,380 per year for child care.
  • Pet Care. Brandon and Denise also have a dog that needs to be walked at least once during the day. They pay a neighbor $10 a week for this service, 50 weeks a year. That takes another $500 off their joint income.
  • Commuting Costs. Brandon’s daily trip to work is about 10 miles each way. He makes the drive by himself in a midsize car that gets about 30 miles to the gallon, and he pays about $3 a gallon for gas. On top of that, he pays $10 a month for a parking pass. This all adds up to an immediate cost of $50 a month, or $300 a year, just for gas and parking. However, if you factor in all the costs of owning the car, based on the AAA estimate of $0.59 per mile on average, it comes to $2,950 per year.
  • Work Wardrobe. Brandon has to look professional for his job. His office dress code is on the border between professional and business casual, so he usually wears a suit during the winter and slacks with a shirt in summer. He estimates he spends around $300 a year on clothes for work, plus another $120 to have his suits dry cleaned. This brings the total cost of his work wardrobe to $420 per year.
  • Meals. Brandon sometimes takes a brown bag lunch to work, but when he’s in a hurry, he eats out. This happens about once a week on average and costs about $10 each time, adding up to $500 a year. On top of that, Brandon and Denise often rely on takeout meals and convenience foods because they don’t have the time to cook meals from scratch on weekdays. This costs them around $100 a month, or $1,200 per year.

All told, Brandon is paying a total of $26,950 to keep his job. This includes the full cost of child care and pet care, since Brandon and Denise wouldn’t have those expenses if they weren’t both working full-time. Subtract that from his $40,000 after-tax income, and his job – which he doesn’t care for all that much – is contributing only $13,050 a year toward their household expenses.

Your job-related expenses might not look the same as Brandon’s. For instance, your commuting costs could be lower because you don’t own a car, so all you pay for is a monthly transit pass. On the other hand, you could have additional expenses that Brandon doesn’t have, such as union dues, subscriptions to professional journals, a laptop so you can work on the road, or grooming such as manicures and haircuts to maintain a professional appearance. Subtract all these costs from your earnings to figure out how much your job is really paying you.

2. Add Your Benefits

Although Brandon’s job has its costs, it also comes with some benefits that aren’t included in his $50,000 salary. For instance, his workplace provides:

  • Health Care. Brandon’s job provides him with health insurance. His health plan covers only him since the kids are covered under Denise’s insurance. Brandon’s employer covers most of the cost, so Brandon’s share is only $1,200 per year. If he didn’t have this coverage, the family would have to pay $2,100 per year to add him to Denise’s health plan. Thus, the health insurance he gets from work is saving him $900 per year.
  • Retirement Matching Funds. Brandon has a 401k plan at work, and his employer matches the first 1% of his salary that he donates to the plan. Since his salary is $50,000, these matching funds are worth $500 per year.
  • Free Coffee. Although Brandon pays for lunch at work, he doesn’t have to pay for coffee. The office has a coffee machine, and there’s always a full, steaming pot to keep workers energized. Brandon drinks two or three cups a day, which would cost him about $1 to make at home. This saves him about $5 a week, or $250 per year.

All told, the benefits from Brandon’s job add about $1,650 to his salary. So, his job’s total value to him – including benefits but minus the expenses he pays to keep the job – is $14,700 per year.

Your job benefits, like your job expenses, probably aren’t exactly the same as Brandon’s. For instance, you might pay more or less for your workplace health plan, or you might not have a health plan at all.

To figure out how much your job benefits add to your salary, look at your paycheck to see how much you’re contributing for benefits such as health care and dental care. Then, figure out how much you’d have to pay for these benefits if you didn’t have a job, either through a spousal plan or the state health exchanges created by the Affordable Care Act (Obamacare). Next, subtract what you’re paying now to get the dollar value of your company’s health plan. Also, look at how much your employer provides in retirement matching funds and other perks, and add all that to your adjusted earnings to figure out how much your job is really worth.

3. Calculate Your Real Hours

At this point, Brandon knows that his job pays him $14,700 per year with all his expenses and benefits factored in. He also knows he works a 40-hour week, 50 weeks per year. That’s 2,000 hours per year, so he figures he’s actually earning $7.35 an hour – barely higher than the federal minimum wage of $7.25 per hour.

However, the reality is even worse, because Brandon’s job eats up more of his time than the 40 hours a week he spends in the office. For instance, he spends time on:

  • Work Off the Clock. Brandon only spends 40 hours a week in the office, but he isn’t always able to leave work behind when he comes home. On average, he spends around 40 minutes a week making phone calls, following up on leads for clients, or simply stressing about work-related problems on his own time. That adds up to another 33.3 hours of work per year.
  • Commuting. Although Brandon’s daily commute is theoretically only 10 miles, it takes him about 20 minutes on account of rush-hour traffic. That adds up to 40 minutes a day, or 200 minutes a week. Over the course of a year, he spends 166.7 hours fighting traffic to get to and from work, and these are some of the worst hours of his everyday life.
  • Getting Ready for Work. Brandon suspects that if he didn’t have this job, he wouldn’t spend as much time getting dressed in the morning. He probably wouldn’t shave every day, and he’d throw on some jeans and a T-shirt instead of carefully buttoning up a shirt and tying a necktie. Add in the time he spends fixing his lunch in the morning, and it all averages out to about 15 minutes a day, or 62.5 hours a year.
  • Maintaining a Work Wardrobe. Brandon has to spend some time each year shopping for professional clothes and taking his suits to the dry cleaner. He also has to polish his work shoes and get regular haircuts to maintain his professional look. None of these tasks takes very long by itself, but over the course of a year, they add up. All in all, Brandon figures he spends about 10 hours a year to maintain his work wardrobe and appearance.

All told, Brandon spends 272.5 hours of what should be his free time taking care of things for work. So, instead of 2,000 hours per year, his job takes 2,272.5 hours. That cuts his hourly wage down to about $6.47 per hour, significantly below minimum wage.

Like Brandon, you probably spend a certain amount of time on work-related tasks when you’re not at work. Think about how many hours you spend doing work or thinking about work outside of business hours. Add in the time you spend commuting, getting ready for work, and maintaining your work wardrobe.

Add all that to your official work hours to figure out how many hours you really devote to your job each year. Then divide your real earnings, which you figured out in the previous step, by this number. The result is your true hourly wage. Your real hourly wage may be higher or lower than Brandon’s, but there’s a good chance it’s lower than you thought.

How to Earn a Better Real Hourly Wage

Get A Better Job Woman Ipad Cup Search

For Brandon, looking at these numbers is a real wakeup call. He’s never been crazy about his job, but he’s never thought seriously about quitting because he assumed his family couldn’t get by without his income. But seeing how little he actually brings home per hour makes him wonder if he could make more by staying home, looking after the kids, and doing some online freelance work in marketing, something he’s always wanted to try.

Of course, your situation may not be the same as Brandon’s. Maybe your job is worth it to you even if you’re not earning that much per hour because you love the work or your coworkers. If you aren’t that happy in your job, however, and you’re not earning much at it, it’s worth asking whether you could put your time to better use. Here are some other options you could consider.

1. Find a Different Job

Knowing your real hourly wage is invaluable if you’re thinking of changing jobs. Comparing two jobs can be complicated since you have to look at lots of different factors separately, such as pay, benefits, and commute time. Calculating your real hourly wage allows you to combine all those factors into one number, so you can clearly see which job really pays you better for your time. All you have to consider then is the hourly wage and the satisfaction of the job itself.

For example, suppose Brandon is looking for a marketing job, but all he can find is an entry-level position that only pays $32,000 per year. At first glance, that looks like a lot less than his current job.

However, the new job is at a company that provides on-site day care – including all-day care for younger kids and afterschool and summer programs for older ones – for just $800 per month. This would save Brandon and Denise $11,780 a year in child care costs. Factor in the reduced taxes they’d pay with Brandon’s lower salary, and the difference between the two jobs shrinks to less than $1,000 per year. With that small a difference in income, it definitely makes sense for Brandon to switch to a job he’d enjoy more.

2. Freelance

Another way to boost your real hourly wage is to quit your job and become a freelancer. Working from home eliminates many of the expenses associated with a 9-to-5 job, such as commuting costs and work wardrobe. It also eliminates commuting time and getting-ready-for-work time, so every hour you spend on your work can be an hour you’re actually getting paid for.

One business expense that won’t go away, however, is taxes. In fact, as a freelancer, you’ll pay more in tax on each dollar you earn, because you’ll have to cover the entire cost of the Social Security and Medicare payroll taxes you currently split with your employer. But even with this extra cost, you could still end up earning more in real wages per hour working for yourself than you do working for someone else.

For example, suppose you have a job in publishing making $40,000 a year, or $34,500 after taxes. You decide to quit and become a freelance writer, which drops your income to $35,000, or $30,500 after taxes. However, you work only 30 hours per week to earn this income rather than 40, and you also save $2,000 a year on train fare and $500 a year on meals. Assuming you work 50 weeks a year, this move raises your real hourly wage from $16 per hour to over $20 an hour.

3. Stay Home With Your Kids

Maybe you’d like to quit your job to become a stay-at-home parent, but you don’t see how the family can get by without your income. However, once you factor in all the work-related expenses that have to come out of that income, you might be surprised at how small the loss really is. In fact, in some cases, it could be so little that you’d actually come out ahead by quitting your job.

For example, suppose that, like Brandon, you’re a married, working parent. Your job pays $30,000 a year, or about $24,000 after taxes. Like Brandon, you’re paying $21,380 a year for child care and $2,950 a year in commuting costs. Giving up your job would allow you to save over $24,000 per year, which is more than it actually pays.

This is an extreme case, of course. But even if your work expenses aren’t eating up your entire income, you could still come out ahead by staying home with your kids if you can also earn some money working from home, either as a freelancer or with a home-based business. Even a side business that would normally bring in only a little extra income could be enough to make staying home a profitable choice.

Final Word

For many people, it’s a bit of a shock to see how little they really make per hour at their 9-to-5 jobs. However, for others, their real hourly wage comes as a pleasant surprise. You might discover that, once you factor in both your benefits and expenses, you’re actually making more money than you thought – and more than you could reasonably make anywhere else.

That doesn’t mean that doing the math to find your hourly wage was a waste of time, however. Whether your hourly wage turns out to be high or low, it’s always useful to know what it is. Knowing what you really earn per hour at your job makes it easier to look at other money-making – or money-saving – opportunities and see how much they’re worth to you.

For instance, if someone offers you the chance to get in on a multi-level marketing (MLM) scheme, you can look at the real hourly wage and compare that to what you’re earning at your current job. If you do some research and find that the average rep for this company makes $1,000 a year after expenses and puts in 200 hours of work, you can see that this works out to $5 an hour. So, even if your real hourly wage at your current job is only $8 an hour, the MLM doesn’t look good by comparison.

On the other hand, if you’re trying to decide whether to start cooking at home instead of eating out, you could crunch some numbers and discover that every time you cook dinner at home, you save $15 for about 30 minutes of work. That works out to a real hourly wage of $30 an hour. Even if your real hourly wage at work is $25 per hour, it’s clear that cooking at home is a good use of your time.

Have you calculated your real hourly wage at your current job? Was it lower or higher than you expected?

Amy Livingston is a freelance writer who can actually answer yes to the question, "And from that you make a living?" She has written about personal finance and shopping strategies for a variety of publications, including,, and the Dollar Stretcher newsletter. She also maintains a personal blog, Ecofrugal Living, on ways to save money and live green at the same time.

31 Ways to Reduce or Avoid Overwhelming College Student Loan Debt

Roughly 7 in 10 college students graduate with student loan debt averaging around $30,000. If you want to dodge that bullet, follow these education strategies before you enroll, during your college years, and after earning your college degree to reduce or avoid student loan debt entirely.

Read Now