lunatechian (lunatech-ian)

one relating to, belonging to, or resembling lunatech

Your spending power is less than what you think

Your income is not as much as you think it is.  Let me show you why  using the numbers from the US Census Bureau for Santa Clara county

Median household income (in 2013 dollars) is $91,702 .However, note that this is not the amount that comes into the bank.  The employer deducts the  federal tax from this. A rough estimate of the income tax would be 27% (standard deductions, no dependents). This leaves $66942.46 .

After the Federal government takes its cut, the state government levies the state tax on the income. For California this would be 8%. This leaves $61587.06 .

Now let us calculate how many hours someone needs to work to get $61587.06 into the bank. A workday is 8 hours. Mean travel time to work in(minutes), is 25 minutes. Let us assume that he/she gets 21 days of vacation. This means that including the commute hours, subtracting vacation hours and assuming 5 days a week, he/she work 2069.55 hours annually.

So, your hourly earning rate is 61587.06/2069.55 = $29.75. Read that again: the median hourly earning rate is $29.75 . If you do not account for the tax cut and the time you spend in commute, you will believe that your hourly earning rate is 46.65 . However, that is not what an employee earns.

Next, let us see how this converts to buying power. Suppose someone with median income wants to buy shoes with a sticker price $100. The sales tax in California is 8%. What this means is that he/she end up spending $108 on the shoes. To earn $108 , this person needs to work for 3.6 hours.

I have made a spreadsheet to make this calculation easier. . If you want to figure out your spending power, create a copy of the spreadsheet and fill in the cells with numbers that apply to you.

Some ballpark numbers (for California):

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Comments

    • Posted byAnonymous
    • on
    Dude when did you became a finance geek analyzing income and spend patterns...huge shift from the lunatech in my early days @ Yahoo :-)
    Reply

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