Working for a salary is a problem. Making money is great, but over time you’ll come to realize that salaries, even generous ones, don’t pay you what you’re worth. I make in the neighborhood of $65K annually. While this is a good salary for my education-related field, I also live in coastal California, where the cost of living is much higher than elsewhere in the U.S. (my rent is $1300 and gas is averaging $4+ for several years running). Since I max out my 401K, the pre-tax contributions lower my tax rate, so I take home about $50K per year which covers all my living expenses, investments and some savings at the end. Figure that I get about 2 weeks of vacation a year, so I’m working 40 hours a week for 50 weeks, 2000 hours. Divide $50,000 by 2000 and you get $25 per hour. Go ahead and figure out your hourly wage, and if you’re an hourly employee don’t forget to deduct taxes to figure out your actual take home pay.
Doing a rough calculation like this has forced me to reassess what my time is really worth and how much my time is valued by my employer. I worked for minimum wage or close to it from ages 15-17 ($5.25-$7.75), as a lifeguard from 17-19 ($13) and from 20-25 as an hourly employee at my current workplace ($14). Since graduating with my bachelors and masters degrees, working full time for over 4 years and gaining a boatload of experience, my salary has risen about 10% since I started my salaried job. Accounting for taxes, I’m making about twice what I was as a lifeguard in high school. Is it unrealistic to expect 7 years of college and $40,000 in debt to help raise my wages more than $11 per hour? Working full-time also adds the benefits of health insurance, a gym and a couple of weeks of vacation each year, which is worth something, but how much? It’s difficult to put a monetary value on professional growth and the unique experiences my job has afforded me, but these have brought diminishing returns past the initial few years as I’ve gotten to be very good at what I do.
I’ve decided that $25 per hour, plus the benefits is nice, but I’ve outgrown the job. A 10-20% raise might entice me to stay a year longer, but then again without a greater incentive I know I’d still be restless. The problem with most salaried positions is that your pay isn’t directly related to your performance. As you get better at your job you’ll be able to get your responsibilities done is less time and more efficiently, but you’ll only make more if you get promoted and/or get a raise, two inconsistent variables that are often minor and few and far between. Even if you add much greater value to your company or organization, you’ll probably just get verbal appreciation and laudatory performance review that doesn’t lead to a tangible reward. Is trading the prime 40+ hours of your week to be stuck in one place for an average salary really a good investment of your time?
At the end of the day you have to decide if you’re satisfied with your work and whether the satisfaction you get from it is in line with your salary. If you’re happy with the job and you can pay the bills with some money left over to save towards your goals, then you’re golden. If you’re like me, you recognize the value of gaining experience in a regular job, but sooner or later you realize that the game is rigged and you’ll never be paid what you’re worth. The sooner you realize this the faster you can start to look for a way out to work for yourself and untether from the timesheet grind. Here are some great suggestions for ways to make money as your own boss. Making money through the internet is by no means easy, it takes hard work, but the rewards in freedom and time are well worth it. I’ve just begun to explore my options online, but since my time and independence are important to me, I’m willing to put in the work. By the end of July I’m scheduled to take a 6-month leave of absence from work, travel to my ancestral homeland in Eastern Europe, and experiment with different ways to make money independently. I don’t want to completely cut ties with work, since it will still offer some opportunities in the future, but there’s no way I’m coming back to the same grind. It’s sink or swim.
What’s your plan to get paid what you’re worth?
