Is thinking about your hourly rate really a good idea?

I have read many books on personal finance, and some advocate thinking about your hourly rate.

For example, if you earn 300,000 JPY per month and work an average of 160 hours, then that comes to 1,875 per hour.

Further, it is sometimes suggested that if you work unpaid overtime, then that should be factored in. For example, if you worked 180 hours, then the new number would be 1,666 yen per hour.

Some authors even advocate that you should count only take home pay, so if you only actually receive 240,000, then you should divide that by 160 or 180 to arrive at 1,500 or 1,333 yen per hour.

Although I haven’t seen it mentioned, I suppose you should add in your bonus payments?

The point of all of this is to see what your time is worth. I think that’s a fine goal. It reminds me of the “per unit” pricing on supermarket labels.

• If someone you know makes a lot more than you, but works more nights and weekends, then this will help you feel a bit better about getting paid less.
• If you are the one working all of those nights and weekends, this will let you see if all of that extra work is really worth while.

This can also be a good thing to keep track of over time to make sure you are moving in the right direction – up.

Then I see it taken too far.

For example, one popular blogger says that if you make decent money, then you shouldn’t clean your house. After all, paying a maid to come and clean your house once per week might cost only 5,000 yen, and it would take you 2 hours to do it.

The idea is that if you make more than 2,500 per hour, then those two hours would cost more 5,000 yen of your time. You’re better off “saving money” by paying someone else 5,000 yen.

A similar argument is made for labor savig devices such as robot vacuum cleaners and diswashing machines.

After all, if you spend 30,000 on a robot vacuum cleaner and it saves you from an hour of vacuuming every two weeks, then it saves you 26 hours per year. Theoretically, that’s 65,000 yen of time you got back – for the low, low price of 30,000 yen!

There is a problem here, though. If you are a freelance web designer, lawyer, or some other time of professional who can actually use those extra hours to earn more money then the argument might hold. Most people aren’t, though.

For example, the average salaryman in Japan works with flex time, or fixed hours, and either way has deemed overtime. They would have to work 30 or 60 hours of overtime per month before they actually start getting paid for it – and that’s assuming you were that busy, and the company would approve the overtime.

Likewise, managers and executives don’t typically receive overtime at all in Japan. They are the ones likely to have the highest hourly rate, but they don’t actually get paid by the hour.

Sure, indirectly, putting in more effort may mean that you do a better job, receive a better rating, and get a larger bonus or a raise – but this is a very indirect connection.

Likewise, I have often heard it said that the time you save could be spent on self improvment. That’s not wrong – but again, taking a course in English or getting your project management certificate doesn’t guarantee a higher salary any time soon.

Chances are, if you don’t have time to do these things, you can make the time by watching less youtube, spending less time on social media, or giving up some other low value activities.

So sure, I advocate for buying a washing machine and some other things to alleviate household labor – but the idea that it’s always okay to pay for someone else to do something just because they get paid less than you do simply doesn’t make sense to me.

Unless you can actually bill the hours you spend cleaning your house, cooking, hanging up your laundry, or vacuuming your room, then at the end of the day you are just convincing yourself that it’s okay to spend more money.

Spending money means saving and investing less money, which means lower wealth.

This seems to me to be a trap that middle income peopel fall into.

1. Low income people don’t even consider paying someone else to do their work, and know they can’t afford fancy toys.
2. Actually wealthy people with more money in the bank than most people make in 10 years – well they can pay others to do things for them and buy all the toys they want without it affecting their wealth in any material way.

It’s the people in the middle who start to think they are “worth more” than others, and should start outsourcing their life to the lowest bidder.

Don’t get me wrong, I can see the appeal. I don’t love vacuuming or scrubbing the floor either. I also think that maybe it isn’t a sin to call in someone to help you clean every once in a while – just recognize it for what it is. It’s an extravagance, not a sound financial decision.

It’s been said that humans are not “rational”, but “rationalizing” – which is to say we will often decide what we want and then come up with a reason why it makes sense.

At the end of the day, money spent is money gone. If you paid 5,000 someone to clean your house every week for 1 year, that would be 260,000 yen per year.

If you realistically could have earned more than that by using the time saved, then great! If not, you just lost 260,000 that you could have used to get out of debt, pay down some of your mortgage, fortify your emergency fund, invest, or spend on other luxuries.

So should you calculate your hourly rate and keep it in mind? Absolutely. Should you use it to justify spending yet more money? In many cases, probably not.

How can it be useful? Well, say you are looking at buying a new toy – say a smart phone. For example, as of today, the iPhone 17 Pro will set you back 179,800. If you make 300,000 per month, it’s tempting to think “Oh that’s less than a month’s pay”, but if you look at your effective hourly pay after taxes and social insurance, you may see that you actually need to work over 119 extra hours to afford the phone. Besides that, it’s that much less you can save or invest. It you look at this number and decide it’s worth working for three solid weeks and giving up the investment opportunities, then that’s up to you – but at least you’ll be making an informed decision.