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# How Long You Need to Work to Buy the Things You Want

Eating out, a trip to the cinema, a new pair of shoes… these are just some of the things we regularly spend our hard-earned cash on.

They all come with a price tag so we know how much we’re paying, but do you know how much you have to earn to buy them?

We earn our money by giving up our time, usually about 35 hours per week, in exchange for an annual or hourly salary. But working out how long you need to work for to pay for something isn’t as simple as comparing it to your hourly rate. This is because the amount we take home per hour isn’t the same as the amount we earn per hour.

A percentage of our earnings gets taken off our pay cheque before we even see it in order to pay for taxes and other expenses. These taxes cover the costs of services such as the NHS, police force and security, state welfare and more. The amount is deducted from any earnings over £10,600 (for the tax year 2015/16).

We all know our base salary, but do you know how much of it you actually get to take home?

## Knowing How Much You Really Earn

Using an online salary calculator tool is the quickest and easiest way to work out how much you take home.

This one by NatWest works for full-time, part-time and contractual workers. By inputting your salary, age, number of hours worked (if applicable) and other factors you can quickly see just how much you earn per hour – and how much you actually get to take home with you.

#### For example:

An individual aged 21+ who works 35-hour weeks on the minimum wage of £6.70 per hour will take home £5.40 per hour after taxes.

A full-time employee on an annual salary of £20,000 earns £9.58 per hour and will take home £7.93 of this after taxes.

Remember: If you are paying back a student loan or pay into a pension, the amount of your salary you take home will be less. In these instances it is important to work out how taxes and other payments will affect your take home pay.

The calculator takes this into account so you can work out your take home pay based on your own personal circumstances.

## Putting It Into Context

Knowing how much you take home per hour, day, week and month may be a more helpful number than your gross salary and can help you make much better financial decisions.

Now that you know how much you earn per hour, you can work out how many hours work you would have to do to pay for certain things.

Doing this can be a useful way of thinking about purchases as it helps put money into a context that’s personal for you.

#### For example:

An employee earning the minimum wage (as above), takes home £5.40 per hour. Therefore, to pay for a meal out that costs £20, they would need to work for 3 hours and 42 minutes to pay for the dinner.

Similarly, an employee earning an annual salary of £20,000 would need to work for just over 63 hours to pay for a £500 holiday.

### Cutting Back On Costs

Once you know how much you earn per hour, one of the easiest ways to make better buying decisions is to work out how much time you are paying with. Is the £2.70 latte you buy every morning worth the 30 minutes of work you will have to do that day to afford it?

When you start viewing your money not as an arbitrary figure but as the time you put in to earn it, it’s possible to make better spending decisions. Thinking of purchases in this way can put the way you spend your money into a whole new perspective. In turn, it can help you to cut back on things that you don’t deem worth it.

### Spending Less on Non-Essentials

Next time you think about buying a new phone, car or dress, why not try thinking about how much you would be willing to spend in terms of time?

Working out a time budget – rather than the usual purely monetary budget – by asking yourself how long you would be willing to work in order to pay for the item you want to purchase.

Then you can work out how much you’re really willing to spend, rather than just pulling a figure out of the air, or based on how much we think we should spend, as we so often do.

#### For example:

If you want to buy a new pair of shoes and are willing to work no more than three hours for them, how much would that equate to in monetary terms?

If you are working 35 hours on the minimum wage, you would be happy to spend £16.20 (£5.40 x 3) on the shoes.

If you are a full-time employee earning £25,000 per year, you would be willing to spend £28.68 (£9.56 x 3) on your new shoes.

A £40 pair of shoes would require the first individual to work 7.5 hours (i.e. a full day’s work) and the second to work 4.2 hours (i.e. over half a day’s work) to afford them.

This method may seem a little overwhelming at – and even shocking, when you how much time you need to give to get some of the things you want – but can really help you work out if a purchase is worth it.

Once you’re aware of how much you truly earn, you’ll be able to make much better decisions when it comes to how you spend your money.