What is your time worth? Just knowing this simple fact can boost your income.

I got an email today from someone trying to figure out if they were getting paid the proper amount for a one shot job they were doing.  She used the wrong term to describe the job she was talking about, so I had no idea of what the customary rate of pay should be.  But, the amount she was getting didn’t sound like a lot of money for any job.

No matter what the job was, I suggested first figuring out the value of her time and making sure whatever she does, she makes at least that that amount.  The quick explanation of how to figure out what I’m talking about is:

1. How much do you want to make in a year?
2. How many hours do you want to work (you can figure it weekly, but don’t forget to subtract vacation, sick time, etc.)?
3. Divide #1 by #2, and you should get your desired hourly income.

If someone offers you less than that doing some job, don’t do it, and tell them how much you should get based on the above results.  Notice, I didn’t say in #1 how much do you make, but how much do you WANT to make.  The idea is to always increase your income by cutting out the things for which you make less than the desired hourly wage.  Obviously, this doesn’t always work when you are working for someone else, as you may not be able to dictate your job responsibilities.  But, for us folks working for ourselves, it can be extremely valuable.  Anything that can be done by someone else for less than that hourly rate you calculate should be outsourced, and you should spend that time doing something that exceeds that rate.

My own philosophy is that the ‘going’ rate for a task is usually irrelevent as far as work I’m going to do.  It is not as important as my own rate.  For example, if I want to make 100,000 per year, working 40 hours per week with 2 weeks off, here’s how I’d figure my rate:

(40*52) – (40*2) = 2000 hours per year worked.  (working 52 weeks times 40 hours – 2 weeks of vacation time)
100,000/2000=50. per hour  (annual salary divided by hours worked)

So, in this example, my minimum rate for working is $50/hour.  If someone wants to hire me to be a babysitter, they are going to have to pay me my $50/hour instead of the $5 per hour they can pay the kid down the block.  If you can actually achieve the goal of not doing anything that pays you less than your minimum rate, you will earn much more than the goal, as some of those things you do will pay you more than your minimum.

Then, next year, when you figure out your rate, base it on what you made the previous year.  It will be a higher minimum, and your income will go up once again.

Whoever offers a job may not have enough money to pay you what you should should get.  It’s your decision to take the job on or not.  For example, if it is your family or a friend making the offer, you may want to do it anyway.  It isn’t worth a family fight in order to get paid a few extra dollars.

Chances are that some tasks you do will be less than your minimum rate.  It’s hard to avoid.  But, as long as you concentrate on cutting out the low value tasks and doing more of the high value ones, you can’t help but increase your income.