How Calculations Work
Understanding the math behind your relative costs
The Core Formula
We start with your annual income and calculate your hourly rate:
Hourly Rate = Annual Income ÷ (Hours per Week × Weeks per Year)From there, we calculate everything else to give you a complete picture of what any purchase truly costs you.
What We Calculate
Percentage of Annual Income
Shows what portion of your entire year's earnings goes to this purchase
Formula:
(Item Cost ÷ Annual Income) × 100Real Example:
A $5,000 purchase with $50,000 income = 10% of your year
Percentage of Monthly Income
Helps you understand monthly budget impact
Formula:
(Item Cost ÷ Monthly Income) × 100Real Example:
A $500 purchase with $4,166 monthly income = 12% of your month
Hours of Work Required
The actual time you'll spend working to afford this
Formula:
Item Cost ÷ Hourly RateReal Example:
A $200 purchase at $25/hour = 8 hours of work
Days of Work Required
Puts it in terms of calendar time
Formula:
Hours Required ÷ 8 (standard workday)Real Example:
A $1,000 purchase requiring 40 hours = 5 days of work
Handling Recurring Expenses
For subscriptions and recurring costs, we annualize the expense first:
Daily → Annual:
Daily Cost × 365Example: $5 coffee daily = $1,825/year
Weekly → Annual:
Weekly Cost × 52Example: $50 dining out weekly = $2,600/year
Monthly → Annual:
Monthly Cost × 12Example: $100 gym monthly = $1,200/year
This shows you the true long-term impact of "small" recurring expenses.
Complete Real-Life Example
Your Profile:
- • Annual Income: $60,000
- • Working Hours: 40 hours/week, 50 weeks/year
- • Hourly Rate: $60,000 ÷ (40 × 50) = $30/hour
Purchase: New Laptop - $1,500
Annual Income %:
($1,500 ÷ $60,000) × 100 = 2.5% of your yearly income
Monthly Income %:
($1,500 ÷ $5,000) × 100 = 30% of one month's income
Work Hours:
$1,500 ÷ $30/hour = 50 hours of work
Work Days:
50 hours ÷ 8 = 6.25 days of work
💡 Bottom Line: You'll work more than a full week to afford this laptop. Is it worth it for your needs?