The New Hourly Rate Definition

This is a guest article by The Financial Blogger.

People are often comparing their salary to friends, family or colleagues. We always have this temptation to know how much others make and how they can afford everything they have. For some, this is called envy — if you don’t do anything about it but just sit and whine, then it is considered envy. However, if you ask questions and try to find a way to make more money, then it becomes ambition.

Hourly Rate

Photo by Brooks Elliott via Flickr

I have been looking at people who are making more money than me to try to find ways to improve my financial situation. I noticed that most of them were not only making more money but they were also working longer hours! Making $100,000 a year is nice. But if you have to work 65 hours a week to make it, that’s only $29 per hour.

To compare everyone equally, I decided to redefine the hourly rate concept. Based on the fact that we all have 24 hours a day, it is up to us to convert this time into income. So instead of making $29 per hour, a person making $100,000 a year is making $11.42 per hour — this is our true hourly rate.

This way of looking at your income is depressing at first; especially if you are making less than $50,000. However, it also leads you to the solution of making $100,000 a year. If somebody really wants to make that much, he could simply work a ridiculous amount of hours and will make it. However, if he is smart, he will work in a way that money continues to grow even when he is sleeping. This is where passive income will come into play.

I want to make $100,000 a year and more. However, I am not ready to spend so much time away from my family in order to achieve it. Some people would say that it’s a choice. I say that it’s only an additional parameter in my plan to make such income. By earning alternative income, you can make more money without working much more in the end.

At the beginning, you will definitely work for nothing, and it will be more work than just your job. But if you look at your true hourly rate on a 24 hours / 365 days basis, it won’t matter. Even if your alternative income sources only generates a few hundred dollars a month, your true hourly rate will improve. Working on passive income would not be considered a waste of time anymore!

7 Comments

plonkee
September 4, 2008, 12:11

No, I don’t think that’s our true hourly rate. You aren’t getting paid to sleep apart from your earnings on your investments.
I think that working out how many hours you actually put into a job, and using that to calculate your hourly rate is a pretty good way of comparing your job to other jobs though.
B Smith @ Wealth and Wisdom
September 4, 2008, 12:44

I think your idea is close but misses the mark. You are correct that we should consider our hourly rate. Often your hours go up as your salary goes up. It doesn’t do you any good to make six figures if you spend all your time working!
I touch on this in my posts All that glitters isn’t gold… and How almost having a nervous breakdown changed my life. Balancing life and work is a key focus of what my blog is all about.
Where you miss the mark is with the idea of using 24/7 as your basis. The idea is to get paid more for less work. When you use 168 hours a week instead of work hours you lose the life balance concept. The idea is that a guy making $100k for 80 hours a week is paid $20/hour. This is the same rate as the guy making $50k for 40 hours a week. Once you make enough to cover your expenses and desired lifestyle the rest is gravy. And if you have to work extra to make it it actually lowers your standard of living!
Four Pillars
September 4, 2008, 22:59

Hi Mike – pretty good post!
I think working less for more money is the way to go. Not sure exactly how to implement that plan though.
Mike
Data Entry Lady
September 5, 2008, 8:48

Very good summary. My mantra has always been “work smarter, not harder.” Kudos on not selling out the importance of family time. Man does not live on bread alone . . .
The Financial Blogger
September 6, 2008, 8:21

Thx for the comments guys! I was quite sick this week, so it’s the first time I open my computer since last Monday!
The thing is that I believe that most people tend to under evaluate the time they spend at work (especially for people who make 6 figures). This is why I thought it would be fun to compare everybody on the same level.
It is true that nobody pay you to sleep but if you are smart enough to make money while sleeping, you are in the right way!
Pinyo
September 8, 2008, 10:27

@The Financial Blogger — Thank you for your guest post and I hope you feel better soon.
@B Smith — I understand where you’re coming from, but I think there is a benefit in thinking this way. Many people who think “more money, less work” never get past the thinking stage because they don’t want to make that initial time investment.
By thinking this way, even if I have to invest 100 hours to earn $10 — that’s $10 more than I used to have. Of course, a good business model would dictate that I’ll turn this into a worthwhile venture and not spending crazy hours to earn just a few dollars.
Make Friends, Earn Money
October 29, 2008, 6:51

I also think about the non financial rewards that you can get such as job satisfaction, quality of life and the opportunity to spend time with family and these can also have financial benefits in the future