What Is My Approximate Annual Salary?

Without performing the messy calculations, is there a quick way to know approximately how much you will earn in a year if you work the entire year and average 40 hours per week?  Many years ago, I learned a trick, and the process remains a valid one today.

Let's take a look at a possible real-world scenario, and understand the benefit of knowing this helpful information.

Mr. Miller works 40 hours each week throughout the year and currently makes an annual salary of $40,000 and would like to find a job that pays more money without working more hours.  He has recently interviewed for a job at the local factory that pays $25 per hour and he is trying to determine which job will earn more money?

Here is the solution:
Traditional Method of calculation:
1.) Multiply $25/hr x 40 hrs/wk x 52 wks/yr.
2.) He will earn $52,000.

Alternate Method of Approximation:
1.) Multiply the hourly wage $25 and double it, which is $50.
2.) Multiply by $1,000 or if you prefer you may add 3 zeros, which is $50,000.

Let's take a closer look at the math operations and gain a better understanding of how this actually works.  If he works 40 hrs per week every week and there are approximately 50 weeks in a year, we can quickly multiply 40 x 50 and know the product is 2,000.  We also know that 2 factors of 2,000 are 2 x 1,000 which enables us to double the hourly wage (utilizing the 2 of both factors) and apply the 3 zeros in 1,000 to the product, which gives us the estimated wage of $50,000.

Some of you may be concerned that the wage varies by $2,000 from the actual calculated amount, and my reasoning for accepting this method of approximation, is that you know you'll make at least $50,000 and it would be wise for Mr. Miller to accept the new job offer if he is ready to make a change in his employment.

One quick note about the variance in the calculations is knowing that the higher the hourly wage, the greater the variance will be between both annual salaries.  Another note about the difference in wages, by underestimating the actual wage, we are offering a layer of financial protection by accounting for 50 of the 52 weeks in the year.

Try a few examples on your own, and you will soon be the expert!  😉😉