4. Wage vs. Salary Before we jump into the topic of setting financial goals, it’

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4. Wage vs. Salary Before we jump into the topic of setting financial goals, it’s important that we provide you with a brief explanation of the basic differences between “wages” and a “salary.” As was the case when explaining the difference between a career and a job, there are varying opinions on what wages and salaries are. Here is a basic explanation of the two. Wages are often paid per hour or weekly while a salary refers to how much a person is paid monthly or yearly. In the case of an employee who is paid a salary, they are normally paid that monthly or yearly amount to perform a specific set of responsibilities, regardless of the number of hours it takes to complete or fulfill the responsibilities. An employee who is paid an hourly wage normally only gets paid if they are at work. One very key point related to setting long-term and short-term financial goals is knowing the formula or math used to calculate or convert annual income to hourly wages – and vice versa. One figure or value that most people know is that an average work week for a full-time employee is 40 hours per week. A number that many people don't know is that there are approximately 2080 working hours per year. When calculating your annual income let's assume that people have two weeks of vacation -- that's 2×40 hours or 80 hours of vacation per year. By subtracting the 80 hours of vacation time from the 2080 hours in a year, we are left with approximately 2000 working hours in a year. We use that value of 2000 hours when calculating a person’s annual income. Now let's look at the situation in the reverse manner, how to convert an annual salary to an hourly wage. For the sake of personal comfort, if you are used to getting paid on an hourly basis and your first job offers you a salary of $20,000 per year you may want to calculate the hourly rate. Again, you may do this in your mind or on paper just to have a level of personal comfort and understanding of how much money you are making. The math formula for this scenario would be $20,000 per year divided by 2000 working hours per year equals $10 per hour. Keep these simple math formulas in mind and they will help you set realistic short-term and long-term financial goals. Discussed how to estimate and convert hourly wages and annual salaries. And discuss why to know how to convert these values is valuable for an individual who, up to this point in their life, has only been paid an hourly wage. Give specific examples to support your response!

Explanation / Answer

There are a lot of variables when we compare these two different types of renumerations.

Despite the fact that you have put across some really good pointers as per your understanding of the difference, Let us put some light as to why an individual should know how to convert these values for a comparison. Basically, knowing this would lead to an educated decision for a person to know what is the goal and how to accomplish it.

How to convert the annual salary to Hourly rate :-

Assuming that a person is earning $41,600 per Annum.

That means He is earning : 41,600/12 = $3466.67 per month

$10,400 / 30 = 115.55 per day ( Including paid weekly offs )

1. work hours : when we speak about wages it means when the person is being paid per hours there has to be a consistent flow of work availability to support the completion of 2000 work hours an year which is not certain in a general case. However if you take a look at the salary, this mean that regardless of the consistent availablity of work the pay still remains the same.

2. Ability to scale : When it comes to one's own ability to work as per requirement, it is crucial to understand if we would want a secured but a limited income or the person is up for a chance and scale by working per hour. This is directly proportional to the financial and career goal that one may have.

Also consider that a person working for wage is entitled for an overtime pay of 1.5 x which is ideally not a scenario for a general salaried employee.

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