How Much Do I Earn a Year?

For the past week and a half I’ve been in the middle of the desert, far removed from internet access, mobile phone service, electricity, running water or sewage. (Sorry if I haven’t responded to your comments yet!)

Regular readers to this blog might notice I’ve taken a huge number of trips this year: I spent one month in New York this past spring, two weeks in the Caribbean this summer, and now I’m camping for 12 days.
how much do i earn a year
I balanced these “big trips” with lots of “mini-vacations” — I visited New Orleans three times this year (January, March and June), where I picked up a few lessons about time management, and I’ll be in New Orleans again in September just before I fly to Chicago for the financial bloggers conference.

I travel frequently thanks to the fact that I work for myself: I never ask for time off. My time belongs to me, and no one rubber-stamps how I spend it.

Unfortunately, the fact that my time off is – allegedly – “unpaid” startles too many people.

The concept of “paid time off” – if you’ll allow me to be blunt – is one of the greatest deceptions of modern life. I’ve heard countless friends say: “Can you imagine? I get paid while I’m on vacation!”

Well … no, you don’t. (Sorry to break the news!) You get paid a flat rate for committing 49 to 50 weeks per year to working for your boss. You boss “budgets” that flat rate into a series of payments that flow to your bank account at regular intervals.

You’re not “getting paid to go on vacation.” You’re getting paid to work. Period. Your boss schedules these payments in regular installments. Paid vacation is an illusion – a clever ‘marketing’ ploy that makes employment seem more desirable.

Doesn’t “paid vacation” sound more appealing than “getting paid in installments for work I’ve already done”?

RETIREMENT IS ALSO AN ILLUSION …

The same, by the way, is true for “retirement benefits.” Some people believe that a drawback of being self-employed is that you miss out on retirement benefits, such as a matching 401(k).

But pause and think about that for a second: fundamentally, a matching 401(k) is simply a “bonus” that you receive for participating in the retirement program.

Too many people think: “I get paid $50,000 a year plus a 401(k) employer match of up to 3 percent, plus 3 weeks paid vacation.” This is the wrong way to view your compensation. It’s too vague about what your time is worth.

Try conceptualizing your pay this way: “I earn up to $51,500 a year in exchange for working 49 weeks per year.”
how much can i earn
As a self-employed person, you’re not missing any benefits – you’re simply responsible for earning enough money to match, or beat, what you earn at a conventional job.

If you earn $50,000 at a conventional job — Can you earn $51,500 working 49 weeks each year for yourself?

If you earn $40,000 at a conventional job – Can you earn $41,200 working 49 weeks each year for yourself?

Earning $60,000 at your job? You need $61,800 working for yourself. Earning $30,000 at your job? Earn $30,900 working for yourself. You get the idea.

WHAT I SAVE ON GAS, I SPEND ON HEALTH CARE

To be fair, there are several disadvantages to being self-employed: no secure paycheck, no discounted health insurance, and no vibrant office full of co-workers telling jokes and trading gossip (which is what I miss the most).

The main drawback is the risk. Some months you’ll get paid well, other months you’ll make next-to-nil. Live below your means and you’ll be fine.

But health care is also a downer.

You can value your company health insurance as part of your “salary.” If your company pays your $250 health premium each month, then your goal as a self-employed person is to earn an additional $3,000 annually to compensate for this.

Unfortunately, buying your own health insurance is much more expensive than company group coverage – that’s just the nature of health care in America. There are two ways to deal with this:

#1: Raise your self-employment goal of bumping your pay from an extra $3,000 yearly to an extra $4,000 to $5,000 yearly.

#2: Figure out how much you save by not commuting to work or buying fancy office clothes (I blog in my pajamas). Add that to your health bills.

Let’s look at a conservative scenario that imagines you live close to your office and you drive a fuel-efficient car.

If you drive a meager 5 miles to your office each day – 10 miles roundtrip – this puts 2,450 miles on your car each year (10 miles/day x 5 days/week x 49 weeks/year).

At a low estimate of 25 cents per mile (this is less than half of the IRS cost-per-mile estimate of a whopping 55.5 cents per mile, including depreciation, but we’ll assume you drive a super fuel-efficient car that has already depreciated), this short commute costs you $612 a year.

Add another $600 for buying work-appropriate clothes, and you’re paying $1,200 a year – an extra $100 a month – for the honor of being someone else’s employee. Save this money by working for yourself and apply it towards your inflated health care costs.

The Bottom Line: Your job ‘benefits’ are worth less than you might think. The biggest benefit to your job is reducing the risk of not earning enough; the biggest drawback is eliminating the possibility of earning — or traveling — more.



Do More by … Doing More?

“Work expands so as to fill the time available …” – Cyril Northcote Parkinson

Do more by … doing more?

Today I’m going to share a piece of contrarian advice: You can maximize your productivity by increasing the obligations on your plate.

Conventional wisdom says that you should limit your obligations. Focus on just a few things. Say “no” to requests.

That’s good advice … but only after you’ve reached a certain “busy-ness” threshold.

But what about Average Joe, who’s only moderately busy? Sure, some days seem more packed than others. He wakes up at 7 a.m., grabs a cup of coffee and a piece of fruit, and drives to the gym. He runs on a treadmill from 7:30 to 8:15, jumps in the shower, and arrives at the office at 9 a.m.

He clocks out at 5 p.m. and drops by the grocery store for 30 minutes on his way home. From 6 p.m. to 11 p.m., when he goes to sleep, he enjoys five leisurely, unstructured hours of making dinner, hanging out with his 15-year-old son, surfing the Web and watching TV.

He tells himself he’s being productive by watching the news. It makes him a more informed citizen. And of course he’s also being productive by clipping coupons during the commercial breaks. He’s saving money, right?

Yet at the end of the evening, he finds himself wondering where the time has gone.

He’s so efficient in the morning — shaving in a few minutes. Getting dressed for work quickly. Showering at the gym quickly. He has a routine, and it’s down pat.

But in the evenings, Joe realizes, he’s not moving at the same speed.

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Joe Packs His Schedule.

Now let’s pretend Joe signs up for some other obligation — a side business, perhaps, selling puppy toys online. Suddenly his evening needs to be more carefully planned. He compresses cooking dinner and spending time with his teenager into a two-and-a-half hour affair from 6 p.m. to 8:30 p.m., during which time the father-son duo bond over conversation about cars, sports, school, and their usual conversations.

Afterwards, his teen slinks off to his room to play video games, while Average Joe works on his side business. He devotes two hours each night to the business, then spends another 30 minutes on household chores: watering the plants, unloading the dishwasher, shaking out the rug. He hits the sheets at 11 p.m. for a full eight hour night sleep.

How Busy Are You Really?

By scheduling a commitment into a wide, unstructured block of time, Average Joe learns to use that block of time more efficiently, rather than letting it pass by before wondering, at the end of the night, how his evening disappeared.

By setting limits — and forcing himself to work inside these limits — Joe ruthlessly culled his priorities. He blocked out chunks of time for the things he found most important: 45 minutes on the treadmill, 30 minutes at the store, 2.5 hours with his son, 2 hours building a side business, and a solid 8 hours of sleep.

Don’t Be Productive. Be Intentional.

What if you scheduled your evening in the same way? Pretend you’re in high school again:

  • 6 pm – 7pm is Dinner period
  • 7 pm – 8 pm is Paying-my-Bills, Checking-my-Credit-Score and Opening-my-Mail period
  • 8 pm – 9 pm is Reading a Book period

Heck, you don’t even need to be productive. You just need to be intentional.

That’s the beauty of not being in high school anymore: you can schedule yourself for an hour of watching romantic comedies while eating chocolate ice cream straight from the carton, followed by another hour of chatting with your best friend on Skype.

It doesn’t matter that you’re not “achieving” anything (I’d argue that you’re achieving lots: expanding your movie repertoire, bonding with a friend, savoring ice cream life.) What matters is that you treat your time with full intention. You don’t just wonder how the evening slipped away.

Readers, have you “scheduled” your evenings? What have you found?

Three Mantras for Small Biz Owners

Remember this when starting your business ...

I took part in a pretty dynamic, thought-provoking Twitter chat tonight in which a lot of small business owners shared ideas about how to take the leap to starting your own business.

I want to share 3 of the best quotes from that chat, and accompany them with a sentence or two about how you can apply that advice to your own small business (whether it’s an actual “business” that sells a product, or a side gig like tutoring, for which you still have to promote your service, manage your time, demand payment from clients, etc.).

These 3 brilliant snippets of wisdom were all said by @caroljsroth, author of The Entrepreneur Equation, carolroth.com:

If a few people aren’t laughing, you’re not dreaming big enough.

SO TRUE!!!! Now can I make a confession? I am embarrassed to call myself a blogger — because I don’t make a living from it yet. I feel like an imposter. (Who calls themselves an “aspiring blogger,” anyway?) I’m afraid that if someone asks what I do and I reply, “I write Afford-Anything.com,” they’ll laugh.

But you know what? My dream is for this blog to become big. HUGE. My dream is to start an entire Afford Anything movement. I want 1,000,000 readers to this blog. I want 200,000 email subscribers. I want this to spawn books, magazine articles, a television show. I want nothing short of a cultural phenomenon.

Are you laughing? Good. That means I’m daring to dream big. And so should you.

Be willing to take a couple steps backwards to make a huge leap forward.

Again, this is entirely true. The biggest barrier to risk-taking is comfort. If you’ve got a comfortable life, with a comfy job, comfy income, comfy home, comfy shoes, you’re at risk of not taking risks.

USA Today recently reported that the Great Recession and layoffs spawned record numbers of people to start businesses. Why? Because with 10 percent unemployment, and an even greater percent of underemployment and low wages, people stopped feeling comfortable. And that’s when the real fun began.

Your time is valuable — if you don’t think so, no one will.

Small business owners who sell a service — such as freelance writing — often charge extremely low rates, which they justify by telling themselves that they’re in a business with very little overhead. After all, a freelance writer just needs a laptop and an internet connection, right? And some incidental office supplies?

What that freelance writer isn’t considering is his or her time — hours of her life which she’ll never get back. Hours which could have been devoted to doing something else, whether it was pursuing more highly-paid work or relaxing and enjoying life.

Our lives are short and our time is valuable — so value it.