Getting Real with Wages

How much does your job pay?

This isn't as simple as it sounds. Just try comparing two hypothetical job offers from different companies. At first glance:

Job A:
Gross Annual Pay: $60,000

Job B:
Gross Annual Pay: $50,000

Well, that looks easy. But let's look at a few other variables. What if Job A (the higher-paying one) is in a metropolitan area, where you either will pay a lot to live close by, or spend a lot to commute from far away? What if Job B is located right near affordable housing, so you can afford to walk and have low housing costs? Now the picture changes a bit.

Also, take a look at the time involved. How much time your job really takes is not the same as how much time your job pays you for. If you didn't have a job, would you commute? Would you take a long lunch with your business group? If not, tack that time onto your total. (This raises my "forty hours per week" up to about fifty.)

The excellent book Your Money or Your Life, by Joe Dominguez and Vicky Robin, contains a more detailed treatment of this idea. But while it's useful to arbitrate between two competing job offers, it's maybe more interesting to compare a potential career with the one you've got. Maybe working at a different job, closer to home, wouldn't net you as much money—but it might save you enough in transportation costs to make up the difference. Maybe a lower-stress job would pay less, but if you enjoyed it more, maybe you wouldn't have to take such expensive vacations to "get away from it all." It's worth considering.

(As an interesting aside, note that you are taxed on earning more, but not on spending less—spending ten dollars less is about equivalent to earning twelve or thirteen dollars more, depending on your tax bracket.)