How much is your job really costing you?

Published September 23, 2015   Posted in How to Save

Whenever we, as human beings in need of money to maintain our livelihoods, think of our jobs and what they provide for our lives, one of the more common elements is, of course, how much they pay us to do those jobs.

Unfortunately, far too few of us take the time to learn about the flip side of that equation – how much money WE are spending in order to do those jobs.

How much is your job really costing you?Effectively, we’re slowly and mercilessly killing our hourly wage by spending more than we think in order to maintain our jobs.

If you’ve ever read Your Money or Your Life, you know this to be a calculation of your real hourly wage, and the math is pretty simple.  If you work 40 hours a week and bring home $950, then divide 950 dollars into 40 hours to determine your hourly wage – in this example, $23.75 an hour.

But that’s not the real story, is it?  Of course not.  If it were, then I wouldn’t be writing this blog post. The truth is most people – me included – spend money in order to work.  The money we spend decreases our effective hourly wage.  Every dollar that we spend because of our jobs cuts into our profits from doing that job.

And the sources of these cuts are dreadfully incestuous, too.  They come out of nowhere, and most of us have no idea that our jobs are causing us to spend a ton of money on crap that we wouldn’t ordinary buy.  Most of us don’t think about WHY we are making some of the purchases that we are. More of them are job-related than we probably realize.

What if I told you that your real hourly wage can easily be cut in half by hidden (and not-so-hidden) job-related spending?

Your Job or Your Money

Let’s dig in here a little bit and consider some of these sources of expenditures and what their weekly drains are to our job-related profits.  Some are obvious, like gas and car maintenance, but others are much more stealthy, like that vacation you took to “get away from it all”.  Let’s face it – the responsibilities of your job are probably part of what you’re trying to escape from.

The numbers that I am using below are purely hypothetical.  Consider these as an example and substitute your own best guesses.  The larger point, as you will soon see, is that our jobs cost us a lot of money, and our hourly wages take a gigantic hit because of it.

Cars and transportation – this is probably the most obvious source of drain to our hourly wage. We may all have cars even if we didn’t hold jobs, but what about your daily commute?  The oil and tire changes due to the miles that you’re putting onto your car?  The pothole you hit on the way home from work, requiring a new fender or wheel?  Toll roads.  Parking fees.  If you don’t drive, bus or train fees.  Even within Cars and Transportation, the most obvious money drain category of job-related spending, hidden expenditures are everywhere and the costs go up, fast.  When I commuted for a living, this easily set me back around $90 a week, all-in with car maintenance included.

Food – some of us like to be social and grab a bite to eat during lunch with a few co-workers. Clearly, this adds into our food-related expenses for our job.  Don’t forget that morning coffee you buy on the way into work, or the bag of chips or cookies that you pick up on your way home after a long and stressful day because, well, you need to relax and unwind.  Let’s average around $30 a week for food, assuming we bring our lunch at least some of the time.

Unwind and decompress – if you’re a human, you probably want time to relax away from your job. For some of us, that might mean food. Or an adult beverage. Or buying a new book or movie. However you satisfy your need to unwind, these costs too cut into your real hourly wage.  The more stressful the job, the more potential it has to destroy your profits from work.  If this is a tough one to quantify, think about what you do when you get home from work.  How many of those things are directly, or indirectly, costing you money?  Let’s assume $25 a week is spent on items to help you decompress from the job and relax at home.

Wardrobe – most organizations require something other than a t-shirt and shorts.  Button-down shirts, blouses, jeans or khakis, dress shoes.  And don’t forget that all these clothes need to be washed, which requires the use of soaps and other detergents.  Also, hair cuts or hair styles can also be a part of these expenditures, too.  Let’s say this amounts to $20 a week averaged over a year of buying new clothes and keeping yourself generally hygienic enough to work daily at your job without grossing out your co-workers.

Our “away” time – even if we enjoy our jobs, they always, at least to some degree, account for our need to get away.  This could mean a vacation to somewhere, or a membership to a country club, exercise equipment or your weekend jet ski.  You may find that you’d do or have these things anyway, even without a job.  But those numbers are exceedingly tough to quantify.  The truth is if we didn’t have a job, there would be much less to get “away” from.  Averaged over the year, let’s assume $15 in this category.

Stress and ickiness – the more stressful our jobs, the greater the likelihood that we will work ourselves until we are literally sick.  Expenses in this category include medicine or prescriptions for your job-induced headaches, weekly massages or any expense related to a medical or health issue from work.  Averaged, let’s assume around $20.

The Catch-all – here, any other job-related expense gets tracked, like daycare for your kids, a therapist (that was hired due to job-related issues), any shopping that you might do while at work because you are bored or otherwise actively disengaged.  Let’s use $30 on average (this could add up to MUCH MORE if you’re paying for daycare for your child or pets).

The “Holy Crap” moment

If we add up our expenses from all the categories above, we get a total of $230. Remember, that is a weekly figure – in the hypothetical scenario above, we are blowing through $230 every week due to our job.  Now, let’s see what effect this has over our hourly wage.

Before these costly hits, our hourly wage was $23.75, which was the result of dividing 40 hours worked by the number of dollars that we make in a week, $950.

To determine our real hourly wage, subtract the total weekly job-related expenses from our wage and try the math again.  Now, instead of using $950, we will use $720, which is the difference between 950 and 230.

What is our real hour wage: 720/40 = $18.  We’ve gone from making $23.75 an hour down to an effective $18 due to the expenses incurred simply to work.

And honestly, I was fairly conservative with some of those expenses.  Many would find their Food category significantly higher than $30.  Go out for lunch five days a week for an average of $10 a meal and you’re already at $50, and that doesn’t include the morning coffee or snacks throughout the day from the vending machine, nor any of the treats that you allow yourself after stressful days or significant achievements.

These costs can easily add up to draining half of your hourly wage away, leaving you with something a bit more modest to be proud of.  Most people can expect a least a third of their wages to be stripped away due to job-relates spending. If you work from home, maybe less.  If your commute is long and tedious, there is a good chance that it’s quite a bit more.

Have you tried calculating your real hourly wage?  How much are your job-related expenses taking from your life?

We track our net worth using Personal Capital



Comments

60 responses to “How much is your job really costing you?”

  1. FIbrarian says:

    Great post and a subject I was thinking about just the other day. I was offered some overtime at work however the catch was that it was at a different location to where I normally work from which was much further away. The additional travelling costs sucked up about between 5 and 10% of the net extra that I’d make for actually working it! That doesn’t mean it wasn’t still worthwhile but its something you definitely need to bear in mind.

    I think I shall need to have a good look at calculating my “real” hourly wage. I’ve been kind of assuming my spending will stay pretty constant both in and out of work however you make a great point that actually going out to work can end up costing you a lot as well. Perhaps my final retirement numbers may need a bit of jiggling round!

    • Steve says:

      Hi FIbrarian – I think many early retirees find that they actually spend LESS in retirement than they spent while working, for precisely this reason. We do tend to spend quite a bit on our jobs – both time and money. But once that is eliminated from our daily routines, we really get to spend money on what truly makes us happy and then save the rest.

      I’m looking forward to seeing just how much I will save. 🙂

  2. I’d rather not calculate this 🙂 I have eliminated transportation costs as I walk to work now, but to do that I live in NYC close to my office. I’ve tried to reduce the housing costs by living with two roommates. I definitely wouldn’t buy as many lunches out if I didn’t work, that’s for sure! These are great examples on why my expenses could decrease one I stop working.

    • Steve says:

      Hey Fervent – for someone living in one of the most expensive places in the country, you definitely seem to be managing your expenses pretty well. The no-car thing is a big one, and roommates always do help keep your rent low. There are a lot of people in your city that make less than you, but probably spend twice as much…by choice.

      Keep up the good work. You definitely put your money where your mouth is. 🙂

  3. Maggie says:

    This is a great calculation! We definitely try to keep all these costs at bay, but even being aware of them, you can’t avoid them all. But you also spend money on all the peak costs of things during work. You have to make sporadic errand trips instead of doing them all when it’s less stressful/less crowded, etc. You pay a premium on trips away to utilize the weekend, but still get back to work. We look forward to not have a job telling us when we can and can’t do things!

  4. I recently took an extended maternity leave which included unpaid time off from work. It would have been harder to justify an extra month if we had just looked at the full amount of the missing paycheck. Instead, we took into account all of the money I would save on commuting, parking, food, and the big one, daycare. All in all, taking advantage of this special opportunity to spend some additional time at home with my kids made complete sense.

    • Steve says:

      I can completely see that, Harmony. You’re right, daycare is a huge expense that you were able to save during that time. Well worth the extra time home I bet!

      Thanks for stopping by.

  5. The real cost of our jobs sunk in for me when I went through this calculation after reading YMYL. It is amazing how much money we spend to cope and deal with the stresses of our jobs. Steve, I think you are very conservative in your example.

    We changed our life radically when we reviewed this math. This was years ago when we had a newborn and one other child not yet in school. It made more sense for my wife to stay home for 5 years, eliminate one car, and save day care expenses on two kids – instead of her working. Some people might find this true for them without the kids’ example when they review the cost of their cars, commuting, vacations, entertainment, meals, etc.

    This could be a real revelation for someone. Nice article!

    • Steve says:

      Thanks Bryan. Yup, all those expenses probably did add up to a salary for your wife. It’s actually pretty incredible, isn’t it? The money that we spend to work.

      I agree, I was pretty darn conservative in those estimates, but I didn’t want the article to come across as sensationalized. Perhaps I should have used higher numbers, though. 🙂

  6. That is a great list of calculations — the assumptions are spot-on. We’ve been so much happier since we stopped commuting and started full-time working from home — no more commute expense, not to mention the traffic stress and time getting ready for work every day. (Because time is in short supply, too!) Now, anytime we leave the house for work, we’re getting paid for the mileage, which is a pretty sweet little racket. 🙂 But we also realized that we were putting a ton of wear and tear on the car, driving for work, and so now we fly everywhere we possibly can, even if it’s just a few hours’ drive to a meeting site. Less headache than driving, and we aren’t trashing the car that we plan to keep forever, one day enlisting it to pull our R-Pod! I also love that working from home means we need far fewer work clothes, and our decompression activities are less costly ones, like hiking or vegging on the couch. I know not everyone can get a job working from home, but we highly recommend it for a bunch of reasons, *especially* if you don’t plan to work forever, and are just biding your time until you’ve collected enough paychecks to retire early!

    • Steve says:

      Very, very well said, and here here! Working from home really is a whole lot better than I ever would have imagined, but now, I don’t think I could ever bring myself to commute back into an office unless I had no other choice in the matter. No commute. Fewer clothes to buy and maintain. No lunches out. And whenever the job gets more stressful, I simply walk over and give the dogs some attention. What a stress relief they are!

  7. Mrs SSC says:

    Lets see… daycare ($225), car mileage +toll + parking (157.50) +maids ($64) + food($20) + clothes ($10) + stress ($40 – its been high lately) + marital stress arguing because neither of us have time to relax ($20) = 536.50/week. So my job costs about $13.40 an hour. I’m sure I’ve been conservative though!

  8. Joseph Beckenbach says:

    I’ve run this through with job offers and potential employers/clients. It helps filter out some of the more excessive trouble spots in my life, and makes sure I’m quoting high enough to not regret having made an agreement.

    Amy Dacyczyn (the Frugal Zealot, author of “The Complete Tightwad Gazette” of a few decades ago) noted this calculation can also encourage one parent to stay home with a new child, by comparing the trade-offs for one-worker versus two-worker. Often it costs less overall to have one parent stay home. It was close enough to even that my wife and I decided she would stay home at least a year after each daughter was born, while I focused on earning the primary income.

    • Steve says:

      That sounds like an excellent plan of attach, Joseph. It’s very true that daycare is expensive, so staying home does very often present a viable alternative to working.

      Thanks for reading. 🙂

  9. Due South says:

    I think to be more accurate one should add to the 40 hours the number of additional hours your job “takes” from you – ie unpaid overtime worked, hours spent commuting, time spent preparing to go to work etc. The resulting hourly wage become even more alarming.

    • Steve says:

      That is absolutely true, Due South. This article was assuming only 40 hours, but anything in addition to 40 hours that isn’t compensated absolutely makes this number even more frightening.

  10. Jim Wang says:

    Another cost worth thinking about, thought not quantifiable reliably, is how much your job is costing you from the tail end of your life. There are some stressful jobs out there (probably have a higher “decompress” cost) that are probably invisibly taking days and months off your life, in addition to the time you spend dealing with it.

    • Steve says:

      Absolutely spot on, Jim – I agree, the stress that aggravation inherent in some jobs is definitely shedding days off of our lives, no doubt about it. You’re right, it’s not easily quantifiable, but it’s definitely a factor.

    • Jim,
      When I first read the title of this post, that’s what I thought it was going to be about. I had one of those super stressful jobs up until 15 months ago when our daughter was born. I quit the craziness to be a stay at home mom and writer then. It’s been one of the best decisions we’ve ever made. Not only are we saving lots of money from those hidden job costs, but I do feel like I’ve probably added years to my life by cutting my stress level by 90%. There are some things that money just can’t buy!

      • Steve says:

        Hi Dee! That’s very, very true – the non-monetary costs are every bit as important as the monetary ones. There are definitely things in this world that money can’t buy. 🙂

  11. Great post, many people fail to account for the costs that eat into their return on investment of their time.

  12. […] by a new follower of mine; Steve from ThinkSaveRetire. More specifically, it’s inspired by this recent post of […]

  13. bamfmoney says:

    Don’t forget all of the wedding and baby showers that you are supposed to contribute to for people you don’t even know.
    Some places like to have breakfast day where people rotate who buys the group breakfast.

    I took a stand against participating in any of those activities years ago. Didn’t align with my goals.

    • Steve says:

      Ha! I agree, some of these “forced shared” costs get a little out of hand some times. I’ve never had a situation where I was “encouraged” to buy the group breakfast, though. That’s way over the top!

  14. Noelle says:

    This is a very good exercise to do, and a real eye-opener. Though you did quantify a lot of the extra costs due to work, you didn’t quantify all the extra hours!

    That 30 minute commute takes another 5 hours out of your week, the half hour you need in the morning to look presentable at your office (another 2.5hrs), the 30 minutes you need at the end of the workday to just decompress and put your feet up after a long day (another 2.5hrs)… And not to mention any company dinners, networking events and volunteer committees that are involved with your job.

    In your calculation you really need to divide by 50+ hrs per week (often times a LOT more) to get your “real” hourly wage!

    • Steve says:

      Hi Noelle – I actually purposely kept the hours out of the post just for simplicity sake. But you’re right, the additional hours sitting in your car or public transportation every day is definitely a huge time and money waster as well, no doubt about it!

      Thanks for reading! 🙂

  15. Kurt says:

    For a few years, I was in a mode of joining the guys for a post-work happy hour several days a week. I wonder how much that cost me! 🙂

    • Steve says:

      Hey Kurt – yeah, for me it was lunch during the day rather than happy hours (though there was an occasional happy hour or two here and there). I don’t even want to know how much all those lunches ended up costing me. Ugh. 🙂

  16. Jover2 says:

    Last December, I took a 30% pay cut to take a job where I get to work from home. I originally expected to save some money on “cars and transportation” and “food” since I used to eat lunch out 5 days a week. In truth, I believe I have saved in each of the above categories, and I am actually “keeping” about 30% more of my paycheck than I used to keep from my 30% higher paying job!
    My Roth IRA is almost fully-funded, and I’ve contributed the same amount to my P2P taxable account. Loving the results of this change to working from home.

    • Steve says:

      That’s an excellent point, Jover. That pay cut may not turn out to be much of a cut at all if you’re also reducing your work expenses. It definitely looks like you made the right move. And, your taxable income goes down as well.

  17. Emma says:

    Great post and a great way of thinking outside the box!
    I’ve not worked in a traditional job now for nearly 2 years and I can honestly say my cost of living is so much lower. Looking presentable for a corporate job is expensive! Now I just get dressed in regular clothes and sit down at my computer at home with my home-made coffee, having spent zero cents on my commute.
    My husband will be returning to the traditional work environment next year (we have been travelling around the world and now we are home and expecting our second baby) but we have already decided that he’s better off to take a lower paying role closer to home – walking or cycling distance – than a higher-paying role with a long commute.

    • Steve says:

      I’m right there with ya, Emma. I usually wear gym clothes while I work because I too work at home. This is part of the reason why a lot of early retirees (or retirees in general) find that their expenses shrink even more than they had anticipated after they finally call it quits.

      Jobs are expensive!

  18. Tim says:

    There is a fact that going to work does cost us more than it wouldn’t otherwise in some cases. However, you do still have to eat whether you are at work or not so that is a somewhat fixed cost that won’t change. Eating out well that is a preference. You do still need a wardrobe to go out in public of some sort.. Albeit, not as fancy as a work wardrobe.. but again it all depends on your tastes and where you shop. Transportation unless you live and stay at home all the time will still cost you regardless if you are going to work or not. Unwinding and decompression… I just see that as fun expenses and books and movies can be obtained for free from the library… As a side note my weekly cost of going to work is between $14-$19 depending on if it is a 4 day or 5 day week.

    • Steve says:

      Hey Tim! The key is to determine how much of the things that you spend money on are because of your job or not. For example, it is true that you’ll still need to eat, wear clothes and find some means of transportation even without a job. But with a job, those costs do tend to be quite a bit higher for most people – higher than many people think. 🙂

      Thanks for reading!

    • I really like how you showed the “hidden” costs of work in this article. The cost of commuting drives my husband CRAZY! He tries to bike it once a week, but it’s 12 miles each way. He’s hoping to build an e-bike using parts from Ebay to reduce the expense. Other than that we’ve found free or inexpensive ways to cut costs in the other areas–because we want to get out early! Working doesn’t have to cost as much as you calculated, but it often does.

      • Steve says:

        Hi Kalie – it’s sad, but also true…work very often costs more than most people realize, me included, especially back when I was commuting into an office every day. Working from home has dramatically decreased the costs involved in maintaining a job, which is an awesome perk of this particular job.

  19. […] How Much is Your Job Really Costing You? (Think Save Retire) […]

  20. It would probably make me sick to my stomach! However, to combat this by using my downtime at work (when computer is loading up or at lunch or when work is slow, etc.) to try to invest in myself by reading, writing on my blog, writing research article for Seeking Alpha (which, actually pays for decent articles). I think people tend to waste so much time on social media or surfing the web during their downtime that they could be using to better themselves. Anyway, good write up!

    -DP

    • Steve says:

      Hey DP – yup, using your free time at work for something more productive is definitely a good idea, though so many fail to do so. But, I’ve found that those who DO take the time to better themselves clearly step ahead of their co-workers almost without even trying. It’s an interesting phenomenon. 🙂

  21. […] pick (That’s me Mr.CBB) goes to Think Save Retire for a post they recently wrote titled “How much is your job costing you?” This is a topic my wife and I have discussed many times because there are pros and cons to […]

  22. […] at Think Save Retire wrote a revelation-savvy post entitled How Much is Your Job Really Costing You? This is a subject that people often don’t think about, but really, most jobs have a huge […]

  23. Cava says:

    This is a great article! Reading it was very dizzying but in a good way lol! As I was reading my mind was going in all directions as I scrambled to mentally run numbers and scenarios. I had a hunch this was the case but, I never truly envisioned all the ways our wages are cut into. Thank you for this eye-opening perspective. I”m going to be job hunting soon so I will make sure to use some of this math in calculating my salary lol!.

  24. Jessica says:

    This is so true! At my last job I spent a fortune on professional clothes, cabs home, and on things that I thought I deserved as a reward for my hard work. Once I left that job, my spending automatically went down.

    • Steve says:

      Congrats on the decrease in spending by changing jobs, Jessica! Even if you took a pay cut to change jobs, with the reduction in spending it might have netted you MORE in savings. 🙂

  25. great post, totally agree with your views of the hidden costs of work. I feel lucky to get a free parking at work but all the other stuff definitively adds up.

  26. […] have written before about how expensive our jobs are. We pay a heck of a lot more money than we think to work (think about work clothes, food, cars, […]

  27. Rudy SMT says:

    Hi Steve,

    This post is simply amazing.

    I never read anything like this so far, and I read a lot.

    My job as a chef was so stressful, that I was blowing US 5.000 per year in partying and drinking to chill out.

    Now that I’m retired, I hardly drink anymore. Not only that but my high level of Uric Acid was related to the job. Now the value are under the average.

    My motto is “don’t work more than necessary”.

    Great post, I’ve to share it.

    • Steve says:

      Thanks for your comment and kind words, Rudy! And thanks for reading – looks like you’ve got life figured out. Your motto is my motto! 🙂

  28. […] How much is your job really costing you? Steve – Think Save Retire […]

  29. The Tightwad Gazette No 2 Promoting Thrift As A Viable Alternative

    […] time on social media or surfing the web during their downtime that they could be […]

  30. public storage oceanside ca

    How much is your job really costing you?

  31. http://bbpc.co.kr/

    How much is your job really costing you?

Leave a Reply