How to work out the real cost of items

How many hours do you need to work to pay for that?

When we think about how much something costs we typically look at the discount or ticket price. Have you ever worked out how many hours you need to work to pay for something? When you look at it this way, it changes how you think.

What’s your real hourly wage?

You probably know your salary or hourly rate. What is it after tax? You can find out with this calculator on the ATO website. It is this amount you actually have in your hand to use for your cost of living and anything else. If you make $60,000 a year according to the simple ATO tax calculator you will pay around $11,047 in tax, leaving you with $48,953 in the hand. Obviously, your tax deductions will vary this amount but I’m trying to keep it simple here.

$48,953 works out to be $24.77 an hour if you work 38 hours a week.

What’s your cost of living?

How much do you have left after your cost of living (COL)? People talk about their budgets all the time but few talk about their cost of living. They are similar, but not the same. Your budget is working out how much you can afford to spend in different areas, planning to save, invest etc. You can read more about how to budget here. Also, how to budget as a single mum/single income family here.

Your cost of living is based on your budget. Basically, add up all your expenses to work out how much it costs you to live. Rent or mortgage, food, insurance, bills, everything you have to pay to live. Include an amount for savings as well!

How much is left? The amount left is your discretionary money, as in money you can spend if you want to (or invest). For example, if you add up all your expenses and they cost $45,000 a year, you only have $3,953 left for discretionary expenses.

So how much does it really cost?

It’s up to you if you base things on the income before the cost of living or income after. Income after is probably a lot lower which means you have to work a lot more.

Basing it on the after-tax income, before the cost of living, if you wanted a new iPhone, you’d have to work 65.76 hours to get it or nearly 2 weeks straight without other expenses. But since we all have to live, if you’re using your wage after the cost of living, it would take you almost 6 months!

Now, you don’t have to base it on something so expensive. You can use this trick for anything such as takeaway. For example, that $50 pizza delivery will cost you 2 hours of work.

This isn’t to say you can’t spend on those things. It simply means thinking about how much time and work are you willing to trade for the things you think you want? Most of the time, the things we think we want now aren’t the things we really want in our lives.

So what are things really worth to you? What do you really want in your life?

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