- 1
**Understand your real hourly wage.**Most people are familiar with their hourly wage, but chances are very good your real hourly wage is less. Your real hourly wage deducts all the costs associated with doing your job from your income, and divides the result by all the hours you spend doing work related tasks.^{[2]}- For example, you may earn $30,000 per year but, when you deduct your taxes, costs to commute to work, costs to eat at work, and clothing costs, you are left with a smaller net salary each year. After expenses, you may earn $20,000, for example. When you divide this by the number of hours you spend on
*all*work related tasks (working from home, for example), you would get your real hourly wage. This may be less than the hourly wage you see on your pay check. - When you know your real hourly wage, it can give you perspective on how much you are spending. For example, you may make $20 per hour, but your real hourly wage may be $10. This means when you eat out and buy a $20 meal, you are really trading in two hours of work, instead of one.

- For example, you may earn $30,000 per year but, when you deduct your taxes, costs to commute to work, costs to eat at work, and clothing costs, you are left with a smaller net salary each year. After expenses, you may earn $20,000, for example. When you divide this by the number of hours you spend on
- 2
**Calculate your total annual income.**In order to calculate your real hourly wage rate you must first calculate your total annual income. This is because your annual income is the starting point from which you will subtract the costs, time and other expenses that comprise your real hourly wage.^{[3]}- If you are a salaried employee you should use your yearly salary amount as your annual income.
- If you are paid based on an hourly wage rate you should multiply your hourly wage rate by the total number of hours you expect to work in the upcoming year.
- If you are an hourly employee you should make sure to include any paid overtime or other pay received for work completed beyond the agreed-upon number of hours you work each week.
- For example, if you make $30 per hour, and expect to work 40 hour weeks all year, your annual income would be $62,000 (or 40 hours per week X 52 weeks in a year X $30 per hour).

- 3
**Calculate the total annual amount of employment benefits.**Employee benefits are added to your actual annual earnings because they are valuable goods/services that you are benefiting from without paying for.- Does your employer offer health insurance, life insurance, dental and vision and/or discounted gym memberships?
- Does your job provide you with a free or subsidized computer or cell phone? How much would you pay for these items on your own?
- Does your employer match your 401(k) contribution or provide other retirement benefits?
- Add these amounts to your total annual income.

- 4
**Determine your annual income tax expenses.**Federal, state and local income taxes greatly decrease the amount actually received each pay period. Calculate the total amount of taxes paid each year by multiplying your annual income by each relevant tax percentage rate. Or look at your W-2 for the previous year in order to get an estimate of your projected income tax expense.- Use this formula to determine the percentage of gross income paid in taxes each year: Projected Tax Rate = 100 - (net income/gross income).
- If your tax rate is 25%, and your annual income is $62,000, your after tax income would be $46,500.

- 5
**Calculate all of the expenses associated with your employment.**To determine your employment related expenses, consider the things you spend money on that you would not need to if you didn't work. Major categories include transportation, food, clothing, and childcare.^{[4]}- Transportation costs related to travelling to and from work can have a big effect on your real hourly wage. Sit down and estimate how much money you spend each month on gas, public transportation and other travel-related expenses associated with your job. Multiply these monthly expenses by 12 in order to create a good estimate of your yearly transportation work-related expenses. If you want to be precise, find out the gas mileage for your vehicle (40 cents per mile), for example, and multiply this by the number of miles to your work.
- The costs associated with sending your child to daycare or school should be factored in when calculating your real hourly wage. Make sure to include annual costs for childcare services such as tuition and babysitter fees.
- If you are required to purchase equipment or uniforms in order to perform your work duties, these costs should be included when calculating work-related expenses.
- Estimate how much money you spend per month on food that you consume during your lunch break, or while otherwise on the job. Multiple this monthly amount by 12 in order to determine your annual work food costs.
- Calculate how much money you spend each year on vacations and other work-related decompression expenses, and when applicable subtract the amount of paid vacation time used for vacations each year from this total expense amount.
^{[5]}

- 6
**Tally up all of your work-related expenses.**Create a rough estimate of the cost of each work-related expense discussed above. Add together the costs of work-related food, transportation, clothing, childcare and any other similar cost in order to determine your total amount of work-related expenses. - 7
**Deduct your total expenses from your after-tax annual earnings to determine your real income.**Take your after-tax earnings ($46,500, for example), and subtract your work-related expenses.- If your after-tax earnings are $46,500, and your total work-related expenses are $10,000, your real income would be $36,500.
- $36,500 would be your
**real income**, or how much you truly have to spend on your own personal expenses and interests.

## Wednesday, March 23, 2016

### How to Calculate Your Real Hourly Wage:

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