Work From Home, Work 67% Less For The Same Money

Written by Paul Piotrowski - Saturday, November 15th, 2008

Have you ever wondered just how much your job is costing you? I know, it sounds like an odd question, but there is an actual price associated with having a regular job which most people never consider.

Ever since I’ve started to work from home, I’ve noticed a significant reduction in my living costs. I don’t have to drive to work, so I don’t have to fill up my car as often. I’ve actually been eating leftovers from dinner instead of going out for lunch every day. I haven’t felt the urge to go out and relax and unwind as often because I am relaxed all the time now that I’m in full control of my own schedule.

The other day I was thinking about this and wondering just how much not going to work is saving me. Then, this morning I got an email from a reader of mine who wrote an article on his Blog related to Money Beliefs ( http://www.mind-manual.com/blog/index.php/2008/11/15/money-beliefs/ ) and in that article he mentions a book called Your Money Or Your Life which I’ve never heard of before but I skimmed through the main points of the book and there was one section which really resonated with me.

The book talks about the REAL cost of having a job. Using some of the principles and examples mentioned in the book I decided to put together a quick spreadsheet to figure out just how much a job really costs compared to working from home, such as for example running a Blog or doing consulting from home.

As an example, I wanted to compare two individuals:

(A) Person A – Works a Mon-Fri 9-5 Job. Makes ~$18/hour.
(B) Person B - Work from home. Makes ~$18/hour.

I wanted to find out realistically just how much PERSON A actually makes in TAKE HOME money that they actually have in their hands for spending at the end of the day.

And then I wanted to find out how much work would PERSON B have to do at around the same hourly wage to have the SAME amount of TAKE HOME spending money at the end of they day.

The results were shocking. In my example, I found that PERSON B could make the SAME amount of TAKE HOME spending money working 67% LESS than PERSON A.

Of course the exact amount will vary depending on some of the assumptions that are made, but I based my assumptions on a fairly realistic picture. Here were my assumptions for PERSON A:

I assumed that Person A spends approximately 45mins driving each way to and from work. For some people this may be less, such as for example only 15mins each way, while for others it may even be more like 1hour each way. For my version of the spreadsheet I put 45mins each way per day, and I assumed $60/week for EXTRA gas costs compared to if I stayed at home.
I assumed that it takes Person A approximately 30 minutes per day getting dressed for work, and an average of $15/week in work clothing costs. That’s about $120 spent every 2 months on wardrobe upgrades for work. I think that’s pretty conservative.
I assumed that Person A is spending an extra $5/day on meals at work (Lunch, Coffee etc.) compared to if they ate at home and about 1hour/day in going out for lunch or preparing/packing meals compared to working from home. For some people the dollar amount per day might be higher and the time amount lower or vice versa.
I assumed that Person A spends an extra 1.5 hours per day unwinding from the stresses of work and commuting per day and an additional cost of $20/week on that. Maybe they buy some beer to unwind at the end of the week.
I assumed that Person A spends 1 hour per week and $50 on “Escape Entertainment” such as going out for dinner and a movie once a week because they haven’t seen their spouse all week due to being at work. Think in terms of spending 2 hours and $100 going out every other week and dividing it by two to get a weekly rate. For many these numbers will be much higher.
I assumed that Person A will need to take at least 5 days more vacation per year, costing at least $1,000 so as not to lose their sanity having to work at a job they don’t really like all year. That’s breaks down to about 1 hour per week and $20/week in expenses for that.

Now, I know these may not be 100% accurate for everyone, so you can do your own calculations but I think the figures are quite conservative from my experience. For example, most people have to take a vacation from work for at least a week extra per year or they lose their sanity. If you worked at home, you could simply take any day off you wanted to and go to the park where you can relax for free.

Not to say that people who don’t work at jobs aren’t going to go on vacation, but when you love what you do and you’re less stressed out than being at work, then you don’t really NEED a vacation as much.

Based on these assumptions (which may be different for you), take a look at the differences:

Notice that the person working at the job isn’t REALLY working 40hours per week. That may be how many hours they’re getting paid for, but the real cost to them to work at that job is 73.5 hours per week! Also, assuming a $39,000/year salary, the person thinks they are making $750/week but really they are only making $297.50/week in TAKE HOME spending money after all work costs and taxes are deducted. That means they aren’t really making $18.75/hour at their job…they are actually making $4.05/hour!

If you look at the annual numbers, they end up having to invest 3,822 hours per year into their jobs to earn just ~$15,470 in TAKE HOME spending money.

If Person A was to find a job working from home at the same hourly rate in comparison, they could make the same ~$15,470 working only 1,248 hours per year. That’s only one THIRD as many hours!

Another way to look at this is that a $39k/year job salary pays you $3,250/m Gross, but if for example you wanted to work from home earning an income from a Blog or from Affiliate Marketing or some other at-home business, you would only have to earn about $1,924/month Gross from those endeavors to make the exact same amount of money at the end of the year.

As I mentioned above, your assumptions will be different so the figures will change, but if you’d like to calculate how much your ACTUAL hourly rate is and how many actual hours you work per year, you can download the spreadsheet here and do your own calculations:

JOB COST SPREADSHEET (Right Click and Save As)

What to Take Away From This

The purpose of this spreadsheet is not to depress you with the fact that your $18/hour job is actually only paying you about $4/hour. The point of this spreadsheet is to help you realize that once you’re ready to leave the job world behind, you won’t necessarily need to make as much money per month working from home or in your own business as you did at your job to stay on top of your expenses.

Some people wonder what’s the point of working from home doing something for $18/hour when they’re already making $18/hour at a job, and this spreadsheet can really show you that you may be able to work up to 67% less and make the exact same amount of money for your family working from home. Or you could just work the same amount of hours as you’re used to and just make more money.

Either way, it’s a good idea to be aware of the differences in working from home vs working at a job.

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Comments:

RT Wolf says:

November 15, 2008 at 5:41 pm

Good stuff. Another two things I’d like to mention from the same book: one of their case studies saved more money and had more time by leaving his full-time job and finding a part-time job making less annually, similar to what you found.

Another interesting excersize was to calculate exactly all the money that you’ve made in your whole life. It was very interesting because for some people it will indeed add upto more than 100,000 dollars, maybe even a million dollars. It was quite a bit lower than that for me, but still instructive. It really made me wonder where all that money had gone and why I don’t have much to show for it.

Cheers!

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Ted says:

November 15, 2008 at 6:47 pm

I know your right, though probably not down to $4 an hour. I worked from home for 3 years and the cost of going to work was my internet connection.

I went from a job not much over minimum wage to charging $75 an hour for web design work. As this hourly rate was 7 times my day job rate, as long as I could bill 6-8 hours a week I was in happy land. Then the boom died.

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Jeremy Day says:

November 16, 2008 at 10:30 am

Hi Paul,

Great post. Thank you for taking the time to make the graphs and everything. Being a visual person I love them.
I would think that this is also a strong argument for moms to stop working and start a business where they can stay at home with kids. Or for dads to start a business at home if mom has the career she enjoys more.
Sure, some of the estimates will vary and I think some of the estimates like clothing allowance is high. But some careers require a lot of expensive clothes. What thing you didn’t really mention was the tax advantages to a business. This could help you save even more.
I am frugal as it is but I would say I could save 20-25% of my income by working at home because of job related expenses.

Cheers,
Jeremy

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Joy says:

November 16, 2008 at 8:30 pm

That is actually a really good book. I read it a couple of years back. It makes you think about the real cost of stuff…not only in the financial sense of the word but in terms of life.

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Paul Piotrowski says:

November 17, 2008 at 12:29 am

@Joy: Yes I know what you mean. It’s not just about the money/finances. I’ll have to pickup that book.

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Desk Coder says:

November 17, 2008 at 12:47 pm

I was going through your list of 6 expenses for Person A, and I was like No, I only drive about 10 minutes to work, No, I don’t spend that much on clothes for work, No, I don’t spend money on food at work. But then you got me, the stress down time. My job gets worse and worse everyday, and if my wife would keep her money spending in check, I would quit my job. I can only imagine what I would get done if I could do 8 hours of work for myself a day.

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RT Wolf says:

November 17, 2008 at 1:16 pm

Desk Coder, if I may offer some advice. You may want to read It Pays to Talk: How to Have the Essential Conversations with Your Family About Money and Investing. I have not read this book, but it sounds like it might help.

http://www.amazon.com/Pays-Talk-Essential-Conversations-Investing/dp/1400049601

http://www.gettingfinancesdone.com/blog/ also talks about talking to your partner about money issues. I would also suggest you read Your Money or Your Life.

Good luck.

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Paul Piotrowski says:

November 17, 2008 at 9:51 pm

@Desk Coder: Even if you only drive 10 minutes to work each way, are you counting the time you’re driving or the actual time it takes you to get to work? Meaning, are you counting the amount of time it takes you to find your car keys, set the alarm, lock the door, walk to your car, get in the car, start it up, defog the windows, find a good CD to listen to, get out of the driveway, drive to work, stop for a coffee on the way,stop at the gas station, get to work, park your car, get out of the car, walk inside, chat with a co-worker arriving at the same time, get to your desk and sit down? If you leave your house at exactly 8:00am, and you’re sitting at your desk at work at exactly 8:30am “on the clock” getting paid, I count that as 30 minutes of your day spent on “Getting to Work” even if you were only technically in “traffic” for 10 minutes.

Either way, if the numbers I presented aren’t accurate for you, download the spreadsheet and run more realistic numbers for yourself. You might be surprised how quickly it all adds up.

Also, don’t blame your wife’s spending habits for you still being at your job. You alone control your destiny. We are always 100% responsible for what happens in our lives, even if our wives have the “I need 1,000 different pairs of shoes and 300 different purses” gene.

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Money Money Money says:

November 18, 2008 at 11:26 pm

Fantastic post. You have summed it up very well. The most important thing about working from home is not only the economics but also the fact you control when you want to work. I feel uncomfortable working in the morning so i usually sit to work in the night

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Joyce says:

November 19, 2008 at 9:29 am

Most people go to work for insurance for their family, hopefully you can save what you don’t spend on a regular job and use that money to get good insurance coverage? would it be enough?

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LWeng says:

November 21, 2008 at 5:12 am

That’s so true. There’s also a mental aspect as well. The feeling of imprisonment when you’re at work, and looking forward to the weekend. The dread of having to wake up early, not being able to stay out at night on weekdays. There’s a large emotional cost there. Another cost I’d say is the cost of potential. When you have your own online business, the potential is unlimited and you can get successful very fast. But when you’re at a day job, you have to go a slow and restricting path.

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Murali says:

November 21, 2008 at 8:18 am

A home business owner can work with a company and sell their goods, so they do not have to worry about products and in some cases orders. However, the main point to a home business is the person is not given work to do.

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Anna Conlan ~ Healing and Insight says:

November 22, 2008 at 7:21 pm

Great post – I definitely save a lot of money and time by working from home and I am really glad I miss the daily commute, which is crowded and unpleasant here in London. But I guess there are also other business expenses, like paying for heating, which I wouldn’t have to pay for if I worked outside of home.

But weighing it up, I still think it’s a better use of my resources to work from home.

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UploadPro.org says:

November 24, 2008 at 1:23 am

While working from home definitely saves me a lot of money, at times I feel extremely lonely as there are no other colleagues that you will see everyday. The lack of human interactions often frustrates me. It’s not helping when most of my friends are actually working full-time now too.

How do you guys tackle such a problem?

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TheMoneyac says:

November 24, 2008 at 7:00 am

This indeed is a really interesting research. I must say that the person who is working at home probably is more happier than the person who has job, unless the person really loves it’s job. Working from home is so much better, if we assume that the person B is an affiliate marketer – you can sleep how long you want, wake up when you want, work when you want, you have the freedom, you are the boss of your own time and money.

Great research, made me thinking…

Cheers,

The Moneyac

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Paul Piotrowski says:

November 24, 2008 at 11:43 am

@UploadPro.org: What you describe is quite common. A lot of people stay at jobs that aren’t fulfilling them, or that they don’t really like simply because their “buddies” work there. One way around this is to get your “work” done at home in a structured way, and then find ways to interact with other peers in the same line of business.

For example, lets say you were a Blogger. You could find other Bloggers in your area that work from home and get together a few times a week to share strategies, mingle, help each other out etc. You could put together a mastermind group or something like that. All that stuff is still possible, and even more probable now that your schedule is “wide open”, you just have to get more creative and organize it yourself instead of counting on the convenience of people being in your work environment.

Don’t forget…anyone you were “really” friends with at work, you’ll still be friends with. Anyone you lose touch with was probably just a “co-worker” and not a “friend”.

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RT Wolf says:

November 24, 2008 at 1:59 pm

You made an excellent point there, Paul. Just cause you’ve been around someone for years doesn’t mean they’re a friend. I realized this after high school ended and I didn’t talk to any of those people again, and after leaving each of my jobs. Only one guy has made it to my buddy after meeting him at work, actually. I have strict definition of what “friend” means to me, too.

UploadPro.org, this is an opportunity to become more conscious of your social circle and your social skills. You may choose to join a group with similra interests (like in blogging like Paul said) or take up a new hobby or sport that involved at least some interaction such as biking or rock climbing. Good for your physical health, too. Try getting involved in “extra curricular” activities. You may not be in school anymore, but that doesn’t mean some of the principles don’t apply. Enjoy! I would highly recommend spending a bunch of time with other people, elsewise a lot of bad stuff can happen including lowered productivity and just depression. Time to meet new people!

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TIM TYUS says:

March 8, 2009 at 4:04 am

I CAN DO THIS JOB

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