Life Energy - Real hourly wage
Step 2a of the Your money or your life programme is a fairly simple question: How much are you trading your life energy for? The answer however, is not that simple, especially if you have random working habits and extremely variable income like me.
What is life energy?
Life Energy is a concept from Your Money Or Your Life, by Joe Dominguez and Vicki Robin
In terms of finances, we trade part of our time for money, which in turn we use to buy what we need (and don't need, but that's another story).
For each unit of time we work, we receive a certain amount of money in return: Our wage.
Real hourly wage
As we know how much time we work, we can easily calculate how much we earn per hour: wage/hours.
Say you earn € 500 per week and works 40 hours, so your hourly wage is 500/40 = € 12,50.
But you also have a 1,5 hour a day commute and the bus ticket is costing you € 5,00 a day. And that magazine subscription to keep up with developments in your field. € 104 a year, 4 hours reading a month. Etcetera, etcetera.
With these your total hours spent on work is: 40 hours working + 7,5 hours commute + 1 hour magazine reading = 48,5 hours a week. And you spent € 25 bus fare + € 2 magazine subscription; this is subtracted from your wage: € 500 - 27,00 = € 473,-.
Your real hourly wage therefore is € 473 / 46 hours = € 9,75 per hour instead of the more obvious € 12,50.
Self-employed with extreme variable income
Being self-employed it's not that straight forward. Although when it comes to earnings, i've got a good overview, but i'm totally lost when it comes to hours.
Starting in 2001 i spent an awful lot of time working, 9-10 hours a day, seven days a week. Although prices per project were good, the huge amount of time made my hourly wage way below minimum. In 2003 i changed my working habits and was able to do the same amount of work in a more or less normal working-week time, making my hourly wage pretty decent. However...then 2005 came around. Albeit i've made normal hours, due to circumstances the year ended with a negative income. Hourly wage: minus something. 2006 was a year with hardly working and even less income. Last year i've worked about 6 months and earned a very decent income. This year, although i haven't done much yet, the income is good. Hourly wage way over € 100 per hour.
Additional work related expenses are not that straight forward. Take fi our car which is both for private and business use; what part of the costs should be subtracted to calculate my real hourly wage? Or the phone, what percentage is business costs? Etc.
All in all, even if i wanted to it's impossible to calculate my real hourly wage as i simply don't have all the figures needed.
Estimating my real hourly wage
As the real hourly wage is a means to evaluate expenses, it doesn't have to be exact. An approximation will do too.
The money part is fairly easy: As annual income i'll use my profit (or losses) as determined by my accountant. As this figure is my income minus expenses, my work related expenses (the bus fare & magazine subscription) are automatically put into the equation.
The how much work and work related time is harder. But as i'm trying to get at an approximation, it doesn't have to be that precise. I simply use the normal working year (1726 hours in the Netherlands), which is the number of hours i could (or should) have worked.
Given the huge differences in income over the years, i also average out over the last 5 years to get at a workable hourly wage, so both good years and bad years are included.
For me it means i'm at just 8 euro per hour. WOW, that's shocking indeed. I did expect it to be higher than that, around € 15,-/hour.
The positive nonetheless is that as we've more or less led a normal life, earning 8 euro per hour apparently is enough for us.
What is it good for?
Your real hourly wage is a tool to measure value of things against your life energy. It's an effective way to determine if expenditures are worth your time, both when it comes to buying something new and with evaluating your spending habits.
Fi buying the latest Angels of Light album costs me € 10,00, which is just over an hours of Life Energy. Now i need to answer the following: is this CD worth one hour of my life? Yes, it is, so i buy the album.
Or looking at our phone bill, about € 50,- a month for two mobile phones and ISDN landline. 6,25 hours life energy. Is keeping our current phone worth that much life energy? No, it isn't, so we're going to change that when we move.
Combined with the other steps of the YMOYL programme, your life energy/real hourly wage is a powerful tool in both cutting expenses and becoming aware of cost when buying something new.
buy viagra 25mg
#2 - 4 april 2012, 09:23
Wow crazy you posted this topic. I have worked so much overtime recently. During the month of May and half of April, I worked 5 all-nighters… as in 30+ hour shifts… And I work in IT building server racks. We simply had incredibly unrealistic deadlines that we had to meet with minimal man power. It without-a-doubt takes a toll on your body, but I am still pretty young so it’s not a huge deal for me. The money…Wow… the money is amazing.. and extra $100 to my 401K and an extra $500 cash for three paychecks straight! And that’s after tax dollars!For me, sometimes I jump at the opportunity, sometimes I’m like “NO”!… All depends on how much I have been working, what else I have going on, etc…
florida auto insurance
#3 - 10 april 2012, 07:28
HOW…. on …. Earth …. do you expect anyone to tell you that? If you are THAT naive about business, you better just forget the whole idea.A location in a bad area in a small town might cost $500 a month, a shop in a nice area in a larger town might cost over $5000 a month. Then you have operating expenses, which will again vary greatly. You have business license, accountant fees, insurance fees, and how are you planning on working with any displaying artists? How much will you take from any sells? Are you going to charge for wall space? I hope you don’t think your Father "doing photography" is going to finance and support this whole thing.This question is simply another variation of the never ending "what do I name my photography business" questions seen on here almost hourly by totally clueless people as pertains to business knowledge. An art gallery is a business much like any other. I suggest you get in some business courses / classes if this is something you want to pursue in the future.steveReferences :
homeowners insurance
#4 - 22 april 2012, 06:44
My employer gives out OT perhaps 3 times a year. And they didn’t like doing that if they could avoid it.Now, there is no OT because of massive budget cuts… No pay raises this year, even if you deserved one by working hard. And, we are getting 12 days without pay soon for the entire year. Overall, it’s not looking good where I work other than we do still have a job for now.
affordable life insurance
#5 - 3 may 2012, 06:05
So eloquent and thoughtful…Mindsets like yours, in which employers feel entitled (compelled even) to “make (their) profit regardless,” are a significant factor in the paradigm we want to change. We also want to challenge many of the basic assumptions of economics, including the circular reasoning that is the concept of profit maximization. It is not a necessary outcome that paying your workers a living wage – what ultimately amounts to taking an interest in the success and well-being of your community – will result in higher prices and less employment. If you aren’t a savvy enough businessperson to figure out a way to balance your basic income needs with affordable prices and reasonable wages, while complying with a fair and coherent regulatory scheme, maybe you should be an employee as opposed to an employer.Also, the term you use – ‘basic economics’ – is essentially meaningless. You use it as a scientist would use the term ‘basic physics,’ but economics is not a pure science. In our society, it’s more akin to a religion. When you say ‘basic economics,’ you’re almost certainly referring to the free market economics model worshiped in the business programs of most Western institutions of higher learning (although I’m sensing some sort of online degree from you). That model is normative, not descriptive, and it is only due to greed, selfishness, and moral and intellectual laziness that it has managed to thrive thus far. Believe it or not, there are alternative economic models that don’t begin with the assumption that personal profit and economic growth are the only measures of value. Once we start teaching those models in our business schools, employers like yourself will become the rarity.
Surendra
#1 - 4 april 2012, 00:01
Wow crazy you posted this topic. I have ewrkod so much overtime recently. During the month of May and half of April, I ewrkod 5 all-nighters as in 30+ hour shifts And I work in IT building server racks. We simply had incredibly unrealistic deadlines that we had to meet with minimal man power. It without-a-doubt takes a toll on your body, but I am still pretty young so it's not a huge deal for me. The money Wow the money is amazing.. and extra $100 to my 401K and an extra $500 cash for three paychecks straight! And that's after tax dollars!For me, sometimes I jump at the opportunity, sometimes I'm like NO ! All depends on how much I have been working, what else I have going on, etc