How much do you save (per hour)?

I find a great tool in convincing myself to save more money is to look at it on an hourly basis. I currently work for a set salary. I have to first translate that into an hourly wage. There are 2080 work hours per year so I divide my annual salary by 2080. In this example I will use a $50,000 annual salary.

A $50,000 annual salary works out to be $24.04 per hour. That is a pretty good wage and should easily cover basic expenses and then some. Next we have to annualize the various amounts that we save. This includes cash savings, IRA's, 401(k)'s, etc. Here is an example:

  1. 6% of salary goes to 401(k) (includes company match) which is $3,000 annually.
  2. $50 per month goes to emergency fund which is $600 annually.
  3. $50 per month goes to travel fund which is $600 annually.
The total annual savings is $4,200 annually. This number represents less than 10% of the total salaried income. If you divide that total by 2080 you see that they save $2.02 per hour. This means that $22.02 of the salary goes to taxes, expenses, needs, wants, and other spending. If you follow the general rule of "you need to save at least 20%" then that hourly number should be $4.81 per hour. This means they need to more than double their current savings by cutting expenses where they can and increasing contributions to their various savings vehicles.

This is a great exercise and it shows you not only how much you save from 1 hour of work but can also reveal how much of your salary you use for "today" and how little you use for "tomorrow". All of the millionaires and financially independent have very high "tomorrow" figures. I am working on increasing mine to 20% (at least!).