Why you actually make less than minimum wage!

So I've recently read a book called "Your
Money or Your Life" by Vicki Robin, it's a personal finance book about how to become FI (Financial Independent). It layout a 9 step program on how to achieve FI, which I am proud to say that I've been doing a lot of the steps already. One of them was tracking your net worth and your monthly cash flow. I use an app called Mint to track my cash flow, it can be linked to your bank account and credit card so you have a dashboard of all your finance. You can then login to their website and it gives you a history of your monthly cash flow, it is very cool especially if you love looking a past statistic of your finance like me.

Anyway, back to my topic today, in this book one of the steps was to find out your true hourly wage. The reason for the exercise was to make you realize what your time is truly worth and give you a different perspective about working.


Here what you do, you take your posted hourly wage, that's the number you are told when you get hired. So let say you make $28/hour which is close to the average hourly wage in Toronto in 2016 according to Stats Canada. To make this example easier to visualize I am going to convert the hourly wage to a daily wage using a 7.5 paid work hour. Therefore at 28/hour, you make $210 a day. The first person you paid before the money even reaches your bank account is the tax man, so at $28/hour your average tax is about 23%. I used this calculator.

Then you start adding in your daily expense that you attribute for having to work at your current job. For this part, you have to be brutally honest as to rather or not the expense will exist if you didn't have to work. For example, will you have to buy a coffee and bagel at the coffee shop if you had time to make breakfast in the morning if you didn't have to work? Will a $5 breakfast become a $1 homemade meal? These are the things you have to consider and be honest, this will give you a clear picture of how much you are spending to sustain your job. Below is an example of expenses I can think come up for someone living in a suburb of Toronto and working downtown.

• Wage(For 7.5 paid hour @ $28/hour): $210/Day
• Tax (23%): -$48.3/Day
• Commuting (Go Train): -$12/Day
• Car Insurance ($150/30Days): -$5/Day
• Gas to Train Station: $2/Day 
• Car Usage (Maintenance and Repair): $1/Day
• Coffee/Breakfast/Snack: -$3/Day
• TGIF($20/Week): -$4/Day
• Random Dine-Out or Take Out cause too lazy to cook ($20/Week): -$4/Day
• Buying Lunch cause too lazy to pack your own food days ($20/Week): -$4/Day
•  
• Total Expense: $83.3/Day
• Net Wage: 126.7/Day or $17/Hour

I haven't factored in the time you spend on commuting and other time spend because of your job. Let say you get paid 7.5 hours with half an hour for lunch. So now you are actually spending 8 hours at your job. Now if you add in 1.5 hours of commuting to your job, that's 9.5 hours total spend on your job. Then let say you add in another half an hour of decompression time at the end of your hard work day, this will bring our total to 10 hours/day.

If we take $126.7/Day and divide it by 10 hours/Day we get $12.67/Hour. The minimum wage in Ontario right now is $14/Hour.

What does this show you? A lot of things actually, it might show that you can just quit your job and sustain your lifestyle off a minimum wage job close to where you live and get more time back to yourself. It could show you how little you are valuing your time and might decide that it is time for a change. This will definitely show you how much you are paying in upkeep for your job.

In conclusion, I suggest everyone give the book "Your Money or Your Life" a read. Also, I think we should shift our mindset and stop using wages as an absolute measure of success because it doesn't tell the full story. Value your time and trade it wisely.