Question 1

What is a real hourly wage?

Accepted Answer

Your real hourly wage is what you actually take home per hour after subtracting all the time and money costs of holding the job — taxes, commute, childcare, work clothes, lunches out, unpaid prep — divided by every hour you give to the job, including unpaid commute and decompression time. It is almost always lower than the hourly rate on your offer letter. The framing comes from Vicki Robin and Joe Dominguez's 1992 book Your Money or Your Life.

Question 2

Why is my real hourly wage so much lower than my pay rate?

Accepted Answer

A $50/hour job that costs you 10 hours of unpaid commute per week, $25,000/yr in childcare, and a 28% tax bracket can quickly fall to $20-25/hour real. The pay rate ignores time you spend getting to and from work, costs you would not incur if you stayed home, and the share of every paycheck that goes to taxes.

Question 3

How can I use this number to make better decisions?

Accepted Answer

Compare two jobs (or a job vs. a side gig vs. staying home) on real hourly wage rather than salary. Use the number to evaluate purchases — at $20/hour real, a $400 gadget costs you 20 hours of life, not the abstraction of $400. And use it to estimate the cost of a long commute or expensive childcare arrangement before you commit to one.

Real Hourly Wage

Your Job

Nominal Hourly

Real Hourly

Net Cash / Year

Total Life Hours / Year

What Your Hour Is Worth

Where the Money Goes

Annual Breakdown

Use This Number