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158R | Your Real Hourly Wage and Savings Rate Calculation

Brad and Jonathan introduce you to the importance of calculating your savings and your true hourly wage.

Savings Rate Calculator

Looking for the savings rate calculator mentioned in this episode? Click here!

Meal Planning

Jonathan recently introduced Brad to a new dish, a sweet potato enchilada recipe. The meal is delicious and falls under the two dollars per person per meal guideline.

This [has] never been about deprivation. It should not be about deprivation. It’s the fact you can do so much more for so much less and you’re probably taking that fact for granted. Apply a little bit of intention to your grocery budget. And if we’re going to take some time to apply some intention to our grocery budget, we should probably apply a similar level of intention to all of our life, other aspects of our life.

If you are interested in finding many of these affordable and delicious meals, then here’s a free download for Laura’s top recipes.

Listen: A Live Case Study with Physician on FIRE and Allison Goddard

Trailblazing With Kim

Kim, from The Frugal Engineers, shared her story on the podcast this week. If you have not had a chance, check out the full episode with Kim here.

She built a life for herself beyond what was expected of her. The reality in her community is that most people did not graduate high school. Kim broke that narrative and secured a full scholarship to a boarding school in her state. With this education, she climbed the rescue ladder out of poverty into a different life.


Kim also mastered the skill of finding mentors. In the coming weeks, we will explore the concept of finding a mentor that can help to transform your life. In many ways, Kim was open to new ideas that allowed her to build an unexpected life for herself.

It’s these little experiences, where, again, if you are open to serendipity, you just don’t know where life is going to take you. But, my advice, I can give you this advice from a place of a deeply, deeply personal place, where I was someone who wasn’t open to new experiences, I wasn’t open to meeting new people…It’s amazing the good that has come to my life…by just being open to these experiences, by meeting new people. It has really, honestly transformed my life in a dramatic way.

Whether you need an accountability partner or a mentor, consider the idea of being open to new ideas.

Unraveling Your Story

Kim attributed her successful storytelling abilities to journaling. After years of journaling, she understood the story she told herself–about herself. With that understanding, she had a lot of power. The ability to pitch yourself in an interview is a skill that many find difficult to cultivate.

Everything comes down to “Do you understand the story you tell yourself–about yourself.”

One way to practice talking about your story is through a blog. Even if you don’t have a profit motive, a blog can be a great way to build your talent stack and learn more about yourself.

Real Hourly Wage

After Kim figured out that her real hourly wage was around $12, she decided to make a change. Instead of working for a company, she decided to become a contractor in order to harness more of her hourly wage. After all, clients were willing to pay $90/hour, so she was not content with making $12/hour. She built a practice on the side to create a soft landing when she decided to go full time with her business.

The idea of a real hourly wage comes from Vicki Robin’s book, Your Money or Your LifeIn the book, she breaks down the finer points of calculating your real hourly wage. However, you can make the calculations with the information below.

First, you need to determine your take-home pay per pay period. Then, determine the number of workdays you work in each pay period.

Time Expenses

Next, find out how many hours you work per day. That doesn’t include just “on the clock” time. You also need to think about these questions:

  • How many minutes of a commute do you make each day?
  • Do you have any unpaid breaks?
  • How many minutes does it take to get ready?
  • How many minutes does it take to decompress after work?

Hidden Expenses

Also, think about the expenses that are created because of work including:

  • The number of miles you put on your car to get to work.
  • Any fees, fares, or tolls you pay to get to work.
  • Do you have to cover any daycare expenses while you are at work?
  • Do you have any dining out expenses with coworkers that are unavoidable while you are at work?
  • Consider any unreimbursed work expenses such as a uniform.
  • Do you pay any union dues?
  • Are there mandatory office gifts to buy?

Now, subtract all of your expenses from your take-home pay per pay period. Then divide that number by the number of hours that you put in each pay period. That is your real hourly wage.

Unfortunately, this can be a depressing number. However, it is important to understand where you sit. You can take these numbers to evaluate the work environment that you find yourself in. Consider making adjustments to your situation to achieve a real hourly wage that you are comfortable with.

Community Feedback

Let’s talk to MK to hear what the community has to say this week.


Jen wrote in to ask about calculating a savings rate. Here’s our most common-sense way to approach your savings rate.

First, determine the amount you are saving. Savings can include any of the following:

  • Your employer match
  • Your contribution to your retirement accounts
  • IRA contributions
  • HSA
  • Taxable accounts
  • Savings account
  • The principal portion of your mortgage

Next, calculate your total income. Of course, include all of your savings. Generally, your total income is everything that you make after taxes.

Finally, divide your savings by your total income to see your savings rate. There is some grey area to the components of a savings rate. However, if you do it consistently, that is what matters most.

As long as you do [the calculations] in a uniform manner, that’s what matters for you. Right, you’re trying to compare across years for your own life.

The goal is to compare your savings rate across time to track improvements. Don’t get bogged down in the details, just calculate based on what makes sense to you.

Almost everyone that is just starting on their path to financial independence needs to calculate their savings rate right now.

You might find that you are doing well. Or you might find that you are paycheck to paycheck. Whatever you find, you can use your savings rate as a benchmark for improvement. As you improve your savings rate, your FI date will become more attainable.

Listen: How To Calculate Your Savings Rate


Cassandra first called in 2017, and she leaves a voicemail with an update. She shares their journey to become debt-free, options and salary negotiations after maternity leave; and that the future now holds opportunities because of getting on the path of Financial Independence.

Listen: Impact–The Stealth Wealth Community

Dousing The Flames Of FIRE?

Jonathan mentioned that mainstream media seems to be picking up the idea of hating on FIRE. Remember to block out the noise and stay focused on the positives. The math works, but it is up to you to take action.

If you’re looking for good news, you’re going to find it. If you’re looking for bad news, you’re going to find it. So why wouldn’t you look for good news? This is just such an obvious strategy for life! And to me, you can make changes. You can take in information and you can take action and move forward.

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Choose FI has partnered with CardRatings for our coverage of credit card products. Choose FI and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. American Express is a ChooseFI advertiser. Disclosures.
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