Why every dollar counts as more

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In my weekly review last week I said that my savings/money made of 225.72 equaled 336.74 of DH’s salary saved. Here’s how I get that number.

To have a dollar to spend you have to earn a dollar right?
To spend a dollar you have to earn the dollar, plus your income tax rate, social security and medicare, and for many tithe. For our family it looks like this:

13 % = our average income tax rate after deductions
7% = medicare and social security
10% = tithe
That’s 30% of our money gone off the top!

DH has to earn $1.43 in wages for every dollar that I spend at the store. It may not seem like much, but it adds up. If I spend an hour to put together my list and coupons in order to save $10.00 off my bill, it’s like saving $14.30. Now that may be a far cry from my hourly wage as a music teacher, but as a SAHM it sure is a decent side job. Anyone want to share any thoughts?

Updated March 2011:  After the birth of Little One last year, salary reduction by my staying home and now owning two homes, our tax rate has dropped yet again.  For 2010 we had no tax liability.  I don’t expect 2011 to be the same, but it should be low.  For the purposes of this figure I’m going to say it will be 5%.

5% tax rate + 7% social security and medicaid + 10% tithe = 22% of our money gone before we have the chance to spend it.

You can find your average income tax rate on your tax return summary from last year.  There is a line that reads “Your effective tax rate is xx%”  This is the percentage of your total income going to taxes after all of your deductions and credits have been considered”

For an average family it would look like this:

$1.75 x 7% Social Security and Medicaid* = $.12
*(this is 14% if you’re self employed)
$1.63 x 23% average tax rate = $.375
$1.75 x 10% tithe (it should come off the gross income, not take home pay) = $.175

$1.75 – $.12, $.375, $.175 = $1.08.  If you want to buy a soda at the dollar store it will cost you the $1 plu $.08 in tax.

The average American has to earn $1.75 if they want to buy something that costs $1!  Now those coupons look a little bit more appealing don’t they?  :-)


  1. Anonymous says:

    I like the way you think!
    – Sherrill

  2. I love love love this! I often joke with DH that I make more an hour being a SAHM than he does and my wage is tax free! Brilliant train of thought.

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