Knowing What You Could Earn May Bring You Home

For several months I’ve nagged asked my friend Steve to write about how he decided to go from a corporate job to working from home. The wait for his article was worth it.

Guest post by Steve Anderson

Working from home was a dream long before it became a reality, and that’s because I needed plenty of time to convince myself that leaving the corporate office was not some crazy dream.

In hindsight, I’m sure I wasted too much time agonizing over the potential drawbacks. “I’m with a successful business, making great connections, challenging myself professionally. How do I leave this?”

It was good to ask those questions, but I needed to also ask myself another obvious question: “How much would I have to be offered to leave it all?” Could I leave for the same salary? Could I work from home for 10 percent less? or 20? or 30 percent?

Ask yourself that question, but before you answer it, answer this question: “How much money am I actually earning?”

“Easy,” you answer. “It’s right there on the paycheck, right?”

Is it? Have you ever calculated how much “real income” you pocket after all the payroll taxes, benefit deductions, and work-related expenses? I made the calculation (which shows that you don’t have to be a CPA) and it made my decision to move home infinitely easier.

In a nutshell, here’s how I did it:

I took my salary per week, then pulled the weekly deductions (dental, health, retirement, federal and state taxes). Then, I made columns for my expenses each week: fuel for my commute, eating out for lunch, dry cleaning … and anything else I wouldn’t have spent if I worked from home (like $400 on each of three new suits … shirts, ties, shoes, not included).

That gave me my “net.” Ouch. It was a huge eye opener to see how much I really pocketed at the end of a week. But I wasn’t done.

I then took that “net” and divided it by the real hours I was working each week in the office. I say “real hours,” because if you’re working 40 or 50 or 60 hours every week, you should know how much you’re earning for each of those hours – even if you arrive at a number that’s surprising and perhaps disappointing.

What you can do:

I’d suggest you go even further and calculate the total time you’re out of your home each day. (If you leave at 8:00 and get home at 6:00, that’s 10 hours a day or 50 hours per week.) Now, divide your “net” by that number … and feel free to wince.

Only when you’ve made your calculation should you compare your current salary to the income you’d make working from home. By looking deeply at the math, you may very well find that you could take a $5,000 or $10,000 cut at home, and still earn more per hour and end up with the same net yearly income you’d make in a corporate office.

Naturally, results are certainly going to vary. Be sure to include self-employment tax and expenses such as individual health insurance and a retirement fund. (Insurance through your spouse is a huge cost saver.)

But when it’s all said and done, you might find that’s easier to go home than you ever imagined.

Steve Anderson is the Word Guy at pounce.com, a full-service boutique specializing in creative and strategic planning for print and Web marketing.

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