There is quite often a cost to any kind of earnings you make, it’s known as the ‘cost of doing business’. This applies to your salary also.
While I was out of town recently, I started thinking about the true value of the money I earn. Although most of us know our annual salary, how much of that salary is wasted by simple expenses that occur as a result of working that job?
Everything we do in life seems to have a cost implication. By not knowing our daily, monthly and yearly expenses that arise from working, how can we truly be sure of our actual annual salary?
Let’s take a look at the costs that arise from our daily job and look to find ways to reduce them in order to boost up the money in hand we have each month and in turn year.
An example using a salary
For the sake of discussion, let’s assume we are talking about a salary of $40,000 + super. Taxes on this salary amount to $5,550 – meaning we have $34,450 as a starting salary.
Daily expenses that dramatically reduce your salary
$1,200 worth of coffee
Each day I buy a coffee and toast at work. That is $5 so I can simply get away from my desk in honesty and costs me over $25 per week ($1200 annually on a 48 week work schedule).
Our salary is now $33,250
$2,400 of lunch
On top of this, I tend to spend at least $10 per day on food – once again due to the laziness of not making at home and wanting to get away from my desk.
That is $50 per week and $2400 per year.
Our salary is now $30,850
$1,920 to simply arrive at work
Each day I also catch the bus to work (or train depending on how late I am). This costs me around $8 per day, $40 per week and sadly $1920 per year.
Our salary is now $28,930
$1,560 to have work drinks
Each week the average Australian spends a further $30 on alcohol or even more when attending drinks with friends and work.
On this basis we are spending around $1560 on alcohol a year.
Our salary is now $27,370
$2,600 to be lightly entertained
Assuming we spend a little money on entertainment each week, say a budgeted $50 which is still quite conservative, our salary reduces even further.
$50 a week means $2600 annually.
Our salary is now $24,770
Do you still feel comfortable about how much you earn?
After doing these calculations for myself, I sure didn’t. Every time I purchased something I would tell myself that is only a fraction of my monthly earnings so it ‘wasn’t a big deal’. In truth, it was much more than a fraction. I was spending far more money than I realised in just simply existing in my daily grind.
I soon realised that this is likely the reason that many people (myself included) tend to go back on any given month if they have access to credit. The reality is we take on expenses, such as car loans, based on our full salary yet never properly account for that actual salary we earn after all of the things listed above.
The true trick to avoiding this problematic situation is to understand your true disposable income.
Getting a pay rise isn’t so hard now
You can basically get an instant pay rise of many thousands of dollars by simply looking to reduce those above expenses. Some may have less daily expenses or in many cases; even more.
A nice and easy way to give yourself a pay rise. As we say at Savings Guide;
It not how much you earn, it’s how smart you are with the money that you have
What other ways contribute to making a salary far smaller than first thought?
Tell us in the comments below.