A different way of looking at income

Posted by FrugalPinoy on Feb 6, 2009 in Earning and Income | 5 comments

How much do I get paid per month?  This is the common question we ask ourselves when looking for new jobs or business ventures.  The “per month” way of measuring income has always been the default approach.  But is it the best one?

When I was listening to “The 4-Hour Workweek” audio book for the first time, the writer, Tim Ferriss, proposes a better question which changed the way I perceived income:

How much do I get paid per hour of work?

Why is this a better question? Let me answer that with an example:

Jose earns P100,000 per month, working at a high profile job for 10 hours a day, 5 days a week.  He works 10 hours a day because apart from the actual time in the office, he does overtime and takes some work home.

Maria, on the other hand, makes P50,000 per month, working 12-hours a week as a freelance web designer.

Based on the details above, this means that Jose makes only P500 per hour, while Maria makes P1041 per hour(*).  Apart from that, Maria has a lot of “free” time on her hands, which she can use to spend quality time with loved ones, pursue hobbies, and even look into other income streams.

“So what?” you might say.  Jose still makes more per month.

That may be true, but unless Jose is truly passionate about his job and never thinks “I’d rather be doing something else” or “I’d rather be somewhere else”, then he’s just trading his life for money. Rita Mae Brown said it best, “Don’t trade the stuff of your life, time, for nothing more than dollars. That’s a rotten bargain.”

If we look at income this way, then it seems like entrepreneurial ventures, consultancy, and freelancing sound like the best way to go.  Corporate telecommuting is also a good option, provided that your boss doesn’t require time-based logs of your work, and that you are productive enough to get the most tasks done in the least amount of time.

Try to do this exercise for yourself and see how much you get paid per hour.  What are your results like?  Was it less or greater than what you expected?

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(*) Of course, if you’re a service provider like Maria, this doesn’t actually mean that you should charge clients by the hour.  In creative fields, that’s never a good idea because you can easily be exploited.  Charging by project milestones is the best way to go.  To know your hourly rate for yourself, note the overall fee you received and divide it by the number of hours you worked.

Image by Steve Woods