What’s Your Net? | The Zebra Blog

What’s Your Net?

Last week I talked about how important it is to truly being able to calculate how much money an agent makes per hour by dividing their gross commission income by total number of hours worked in a given year.

For example, if you make $100,000 gross commission and you work 40 hours per week for 52 weeks (2080 hours per year) you would make $48.08 per hour.

If you have yourself 4 weeks of vacation you would actually be giving yourself a raise because now you would only be working 1840 hours which would bump your hourly rate to $54.35.

But if you worked 60 hours per week, that would make your total hours worked in a year to be 3120. This would be a huge pay decrease down from $48.08 per hour to $32.05 per hour.

You can see from this how important it is for you to know your numbers.

It is one thing to know your gross income per hour, but what about your net income per hour? The net income per hour is the truer picture of what you really make. When you know exactly what you earn per hour you are able to make better decisions in your business about who you will work with, what appointments you will and won’t take and what and who you need to say no to.

So let’s look at the same scenario but this time let’s examine NET numbers.

If you make $100,000 GROSS income you have to back out your total expenses and taxes. For this example let’s assume you have $2,000 per month of expenses or $24,000 per year.

Take your gross income of $100,000 and subtract your expenses of $24,000 for a remaining balance of $76,000. You then have to back out your taxes owed. For the purposes of this example we will assume your tax rate is 20%. Calculate your 20% taxes from your net ($15,200). This leaves you with a true net income of $76,000 minus $15,200 which equals $60,800 as your true net income.

If we use the net income to calculate the hourly rate, it declines dramatically from $48.08 per hour working a 40 hour work week (2080 hours per year) to $29.23 per hour. However, if you had worked 60 hours per week (3120 hours per year) you would further reduce your hourly rate to $19.48 per hour.

The moral of this story is to take a good hard look at what your time is worth. Stop working yourself to stress and start being vigilant about the hours you work, the time you waste at work, the expenses you take on, and the business you choose to do. Being efficient and effective with your time is critical to increasing your income. Don’t forget to book some vacation time away from your business. That will automatically give you a raise and it will energize you and remind you what really matters in your life.

Next week I am going to cover how knowing your net income per hour will help you make decisions about expenses and what business you decide to take on.

Finally, if you have done either the gross income per hour or the net income per hour exercise, I would love to hear from you!

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