How Much Is Your Money Earning Per Hour?

Have you ever wondered how much your investments are earning for you on an hourly basis? If you have a net worth that's growing steadily, it can be fascinating to break down that growth into smaller increments of time. This can provide a unique perspective on the power of your money working for you. Let’s explore how to calculate this, using an example of a net worth of $1.7 million growing at 7% annually.

Step-by-Step Calculation

1. Determine Your Annual Growth Amount:

   • Start with your total net worth. In this example, it’s $1,700,000.
   • Apply the annual growth rate. Here, we’re using a 7% growth rate, which is fairly typical for a diversified portfolio.
   • Calculate the annual growth amount:
   • Annual Growth Amount = Net Worth × Annual Growth Rate
   • Annual Growth Amount = $1,700,000 × 0.07 = $119,000

2. Calculate Total Hours in a Year:

   • Assume a standard 40-hour work week.
   • There are 52 weeks in a year.
   • Total hours per year:
   • Total Hours = 40 hours/week × 52 weeks/year = 2,080 hours/year

3. Determine Hourly Earnings:

   • Divide the annual growth amount by the total number of hours in a year:
   • Hourly Earnings = Annual Growth Amount / Total Hours Hourly Earnings = $119,000 / 2,080 ≈ $57.21

So, in this scenario, your investments earn approximately $57.21 per hour.

Why Should You Care?

Breaking down your investment returns into hourly earnings provides a tangible sense of the value your money is creating. Realizing that independent of your daily efforts, your investments are continuously working and generating income can be motivational.

How Much Would You Have to Invest to Make the Federal Minimum Wage?

With this in mind, let’s consider how much you would need to invest to make the equivalent of the federal minimum wage. The current federal minimum wage is $7.25 per hour. Here’s how you can calculate it:

Determine Annual Earnings from Minimum Wage:

• Minimum wage per hour: $7.25
• Hours per week: 40
• Weeks per year: 52
• Annual earnings from minimum wage:
• Annual Earnings = Minimum Wage per Hour × Hours per Week × Weeks per Year
• Annual Earnings = $7.25 × 40 × 52 = $15,080

Calculate the Required Investment for Equivalent Annual Earnings:

• Let's assume an annual growth rate of 7% (0.07).
• Required investment amount:
• Required Investment = Annual Earnings / Annual Growth Rate
• Required Investment = $15,080 / 0.07 ≈ $215,428.57

To make the equivalent of the federal minimum wage of $7.25 per hour through investment returns at an annual growth rate of 7%, you would need to invest approximately $215,429.

Final Thoughts

Breaking down your investment returns into hourly earnings can provide significant insights into the efficiency and power of your money working for you. With an investment of approximately $215,429 growing at an annual rate of 7%, you could generate enough annual income to match the federal minimum wage, working 40 hours per week for 52 weeks a year.

Understanding these details can make a substantial difference in financial planning and investment strategies. Your money is always at work, and knowing its hourly rate is a powerful reminder of the benefits of smart investing. Whether planning for retirement, saving for a major purchase, or simply looking to grow your wealth, this perspective can be incredibly useful for achieving financial independence.