Do you have any idea how much time and money you are spending on your employer? Most people I have run into have absolutely no idea what it costs them to go to work everyday for someone else. Below, I will illustrate what the typical employee spends on their employer each year.For this article, we have to make certain assumptions on which we can base our calculations. You can adjust these assumptions to fit your situation and come up with your own calculations. I created a little Excel spreadsheet to make the calculations, but you can do it by hand too.Here are the assumptions:Your salary = $40,000 per year (hourly that is about $20.00)You work 40 hours/weekYou have 2 weeks of vacation per yearYou work 5 days per weekIt takes you ½ hour to drive to and from workIt takes you 45 minutes to get ready for workYou spend about $6.00 per meal to eat lunchYour car gets 20 miles to the gallonWork is 10 miles away from homeGas is $2.89 per gallon where you liveWith the above assumptions in mind, you can see that the job looks pretty typical. Not too high paying, couple of weeks vacation and about a half-hour’s drive away. Many people drive more, many people drive less. I know lots of people that would want to snatch this job up.So here is the breakdown of what it costs you to go to work for this employer in this scenario.* Annually, you will spend $1,500 on lunches (and probably gain some weight too)* You will spend $722 on gas and put 5,000 miles on your car. Those of you who lease cars will quickly realize that another 7,000 and you are over the limit paying.30 cents per mile.* You will freely spend 250 hours (over 10 FULL 24-hour days) in your car driving to and from work. (at $20.00 per hour that costs $5,000)* You will freely spend 187 hours getting ready for work (over 7 FULL 24 hour days) ($3,740 at $20.00 per hour)Your total annual costs of time (at $20.00 per hour) and real dollars will be somewhere around $12,222.50.Take that amount off the $40,000 that he pays you and you have $27, 778.50.- Then take out taxes (at $40,000 *15%) of $6,000- And insurance that he makes you pay ($100 per check *26 checks) $2,600.- State taxes of 2% $ 800- Social Security and Medicaid Taxes 7.5% $3,000That leaves you with a “profit” of $15,378 to pay your electric bills, gas bill, rent or mortgage, cable, food, etc. A total of $1,281 per month to live on.I don’t know about you, but rent is more that that amount each month.What is the point of this article? The point is that working for someone for $40,000 guarantees that you will freely give them almost 500 hours per year by driving to and from work and getting prepared. You will also spend over $2,000 on meals and fuel to get there and work for them. That $2,000 is after tax, so it really costs you about 22% more than that or about $2,440 to pay for those items.If you owned your own business, much of what I describe above would be tax deductible. You could write off your miles to and from a jobsite. Meals that you have to eat out because you are working could also be a write off in many cases. Hours to and from work could be considered when billing clients and charged appropriately. And, you decide when you want to leave or come in.Working for yourself is the most satisfying way to earn a living and the most tax-advantageous.
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