Life's a ... Business!
Whether you realize it or not, your life is a business just like any other business.
After all, your life shares the following traits with traditional businesses:
Product: Your talents, abilities and skills.
Sales & Marketing: Selling your talents, abilities and skills to employers or customers.
Finance & Accounting Department: Budgeting and forecasting your household income an expenses, paying accounts payable, etc.
Research and Development: Furthering your education and improving your skill set.
Stockholders: Members of your household who stand to gain or lose from your decisions.
There is only one major difference between your life business and traditional business.
While traditional businesses are engaged in the pursuit of monetary profits (more revenues than expenses), your life business is engaged in the pursuit of happiness profits (more good feelings than bad feelings), or at least it should be.
If you are chasing after monetary profits, it's likely at the expense of your happiness profits. But that's a topic for another discussion.
Revenues Do Not Equal Profits
If you agree that your life is a business, then aside from the obvious question (is your life business successful?), it's important to recognize that revenues (monies received) do not equate to profit.
Profit is what's left after you deduct all revenue-generating expenses. As this relates to your life business, to place a profit value on one hour's worth of your time, you must account for any work-related expenses, which will leave you with what I call your Real Hourly Wage (RHW).
Benefits of Knowing Your RHW
Knowing your RHW has several benefits:
Benefit #1: Knowing your RHW allows you to compare one revenue-generating scenario with another more accurately. For example, one opportunity might pay more than the other, but require more gas and commute time.
Benefit #2: Being fully aware of your RHW will allow you make more prudent buying decisions, but only if you take the time to calculate how many hours you will need to allocate to working to make each purchase. The Real Hourly Wage Calculator will help you to do that as well.
Benefit #3: Once you've used the Real Hourly Wage Calculator for calculating your RHW you should discover that you can increase your RHW simply by trimming the costs associated to your work. These cost-trimming measures might include opting for bag lunches instead of dining out every day, carpooling or public transportation, and so on.
The bottom line is this. Your life is a business. Successful traditional businesses take the time to accurately forecast the monetary revenues and expenses of their decisions before they make them.
Knowing and staying fully aware of your RHW will help you to more accurately forecast the emotional revenues and expenses of your decisions before you make them. After all, if the time you allocate to work is generating emotional losses, you will need to be very fussy when it comes to exchanging that time (money) for goods and services that will yield enough emotional revenues to offset those losses.
How to Calculate Real Hourly Wage.
To calculate your true hourly wage, you will use the following real wage rate formula:
|(A) Total After-Tax Income|
|(B) Value of Benefits Paid By Employer|
|(C) Work-Related Expenses Paid By You|
|(D) Total Hours Allocated to Earning Income A|
Formula Variable Definitions
(A) Total After-Tax Income: Total income paid by your employer for a given pay period, less Federal, State, Local, Social Security, and Medicare taxes withheld from your paycheck.
(B) Value of Benefits Paid By Employer: This would include benefits such as health insurance, 401K matching contributions, paid time off, company stock options, etc.
(C) Work-Related Expenses Paid By You: This would include expenses such as child care, dry cleaning of required work attire, work commute, dining out, office gifts, etc.
(D) Total Hours Allocated to Earning Income: This would include time spent working, unpaid breaks, getting ready for work, unwinding from work, commuting to and from work, escaping from work, etc.
Of course, the easiest way to calculate your true hourly wage rate is to use the RHW calculator on this page.