How much does it cost to work?

It can be surprisingly expensive to work full time.

Of course, the income itself  usually more than makes up for the expense. And I’m certainly referring to a two-income situation since a household will always need income from at least one wage earner. But let’s imagine a two-income scenario where having two full time wage earners requires the following extra monthly expenses that would otherwise be unnecessary:

  • Child care. In Portland, full time child care for a baby ranges from $800-$1,200 a month. More for a nanny. (Being a couple of DINKY’s–dual income no kids yet–my husband and I haven’t had to face this expense yet.)
  • Work clothing for two people. I estimate that this expense is $75 more than it would be in a one-income family.
  • Gas. I estimate an extra $50 for this, but it could easily be more.
  • Second car. A car payment, insurance, and maintenance on a second car could add anywhere from $200 – $500 a month, depending on the car. Of course you don’t need a second car (we only have one) but many people do depending on where they live.
  • Conveniences. Such as take-out, prepared foods, car washes, trips to the dog groomer, and maybe even a cleaning service, lawn maintenance, or dog walker. I think I can safely estimate $100 for this category, although for many people it might be much higher.
  • Work lunches. If you don’t pack leftovers or inexpensive meals, this is a daily expense. Even if it’s only occasional, it can add up. I’ll guess $30 in this category, more if you buy lunch every day.
  • Gifts for co-workers. Definitely varies, but averaged over a year it might be $10-$15 a month, more or less depending on specifics.
  • Dry cleaning. This could easily be $20 a month.

Those estimates add up to $1,285 – $1,990 a month. Obviously every situation is different and those numbers are only estimates. Perhaps you have family to watch your kiddos for free, or you don’t need the second car either way.

On top of those expenses, a household with two incomes pays more taxes. Oftentimes, the difference is significant and places a family in an entirely different tax bracket. This is too difficult to provide a general estimate for because it varies so much based on the particulars.

In addition to estimating the costs of working, it’s also a good exercise to add up the hidden income, or total compensation, your job provides in the form of benefits. In many cases these added benefits may completely make up for the added costs of working. How much would you have to pay for health, dental, and life insurance without your job? What about retirement funds? If your company provides retirement funds, or matches your contributions, that may negate the added expense of working.

On the other hand, if your employer doesn’t contribute significantly to either insurance or retirement, your cost of working may not be offset by these other benefits.

Of course, there are numerous intangible benefits of working that may be difficult to place a dollar value on such as a sense of fulfillment and purpose, interactions with others, intellectual challenges, and enjoyment. Then again, maybe you get those benefits from places other than your job like your family, friends, and hobbies.

Sometimes I like to play with these calculators to help determine the actual real costs and benefits of working:

  • Pay Check City. On this site you can see how various allowances and non-taxable deductions affect your take-home pay. You can estimate what you’ll make if you add another dependent (have a baby, for example) or have to pay more for health insurance. Just make sure you enter the correct state at the top of the form.
  • MSN Money Calculator. This estimates the value of a second income. In some cases the results of this are very startling.

Have you calculated the full associated costs and total compensation of your job? Are there other costs and benefits of working that I missed?

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