$50,000 a year is how much an hour? (Plus ways to increase it)

$50,000 a year is how much an hour?

You can find your hourly wage by dividing $50,000 by the total hours you’ve worked.

If you aren’t sure how many hours you’ve worked in a year, you can use estimates to get a good idea of your hourly wage. A good place to start for full-time employees is to use the Office of Personnel Management estimate of 2,087 hours worked per year.

Based on this estimate, how much per hour is $50,000 per year? Using the rationale above, we can do the following calculation:

$50,000 per year / 2,087 hours worked per year = $23.95 per hour

Your hourly wage depends heavily on hours worked

While the calculation above is helpful, it’s only useful for Americans who work the average 40-hour work week. You'll need to adjust your calculation if you work more or fewer hours.

For example, say you have a freelance business that you work at on the side of your full-time job. You spend about 20 hours per week working on your business and earn $50,000 in one year. That means that your hourly wage calculation would be:

20 hours per week x 52 weeks per year = 1,040 hours worked per year

$50,000 per year / 1,040 hours worked per year = $48.07 per hour

That’s a great hourly wage!

Conversely, if you spend many hours working unpaid overtime at your job, you’re lowering your hourly wage.

For example, if you work an average of one extra hour per day at your job, that’s five hours per week. At that rate, you’re adding about 260 hours to your total hours worked in a year (5 hours per week x 52 weeks).

That means your hourly wage calculation would look like this:

2,087 + 260 = 2,347 hours worked per year

$50,000 / 2,347 hours worked per year = $21.30 per hour

Paid holidays impact your hourly wage

There’s another factor that you need to consider when calculating your hourly wage, and that’s all of the time that you're paid, but you aren’t working. Here are some common paid time off (PTO) days according to a survey by QuickBooks Time:

On top of PTO that your employer provides as part of your compensation package, you’ll also receive time off for statutory holidays. These are 11 federally mandated holidays that most U.S. office workers have off.

Considering these paid days off in your yearly wage of $50,000 raises your wages slightly. Someone working eight-hour work days without the 11 paid statutory holidays earning $50,000 a year makes $25 per hour.

But if you include the paid holidays, they’ll make $27 per hour.

Here’s the calculation:

11 federally mandated days x 8-hour workdays =

88 hours

2,087 hours worked per year without holidays – 88 hours = 1,999 hours

$50,000 per year / 1,999 hours = $25 per hour

Finally, if we add the 11 federally mandated days off to the average 23.2 days of PTO provided by employers, you can calculate an accurate hourly wage for an annual salary of $50,000:

34.2 paid days off x 8 hours =

273.6 hours

2,087 hours worked per year without holidays or PTO – 273.6 hours = 1,813 hours

$50,000 per year / 1,813 hours = $27.57 per hour

As you can see, the difference when accounting for paid time off is fairly significant. But not every employer offers the same amount of time off. Some employers don’t offer as much PTO as others. And that difference can change your hourly wage significantly.

The more PTO days that you receive for the same annual salary, the more money you're earning per hour. Keeping this in mind can be handy when comparing two job offers that have similar salaries but very different PTO policies.

Passive income can help grow your hourly wage

There are several ways to grow your hourly wage. First, you can work overtime, generally compensated at a higher rate than your regular schedule. Second, you could switch jobs or upgrade your skill set to command more income.

While these approaches are practical, they all have one thing in common: More work for you. Fortunately, there is a way to increase your earnings without working more hours, and that’s to earn passive income.

Passive income is money earned from an investment or business in which you're not actively involved. Sometimes it can take a bit of effort to build up a passive income stream. But once you’ve done the initial legwork, it can be a great way to earn more money without working many more hours.

Ways to earn passive income

• Dividend stocks

If you have extra money in your budget for investing, consider focusing on investing in dividend stocks. Dividend stocks are stocks that distribute their profits to shareholders, usually quarterly. It’s like a bonus for investing in their stocks.

The dividends are traditionally a single-digit percentage of the value of the stock. So the more you invest, the more dollars your dividend stocks will pay out. A popular strategy is to automatically reinvest your dividend payouts into the stock so that your payouts snowball.

• Rental property income

Investing in a rental property can help you generate passive income as you collect monthly rental amounts that exceed your monthly expenses.

Remember that this strategy generally requires more effort than dividend stock investing. You’ll typically need to find and screen tenants, collect monthly rent, and be available to address repairs to your rental property as required.

That said, depending on your local real estate costs, rental properties can generate significant income. And at the end of your mortgage period, you’ll also have the asset.

Traditionally, one of the downsides to investing in rental properties is that it would require a big initial outlay of cash for the down payment. However, fractional real estate investing companies are changing that. For example, with Arrived Homes you can invest as little as $100 in an individual property.

• Capital appreciation of assets (stocks and properties)

Finally, holding assets that appreciate, like properties, stocks, art or other collector items, can also generate passive income. Of course, these investments won’t immediately result in more money in your bank account until you sell. But once you do, the profits could significantly increase your passive income for a given year and, correspondingly, your hourly wage.

More: Passive investing ideas

Bottom line

Calculating the hourly wage of a $50,000 annual income depends on how many hours you work, paid time-off and federal holidays. You earn less per hour when factoring in unpaid overtime.

If you want to grow your income, you have active and passive options, but we recommend a blend of both.

Growing your full-time income through changing jobs and expanding your skill-set is smart. But you can also send some of those dollars toward income-generating assets.  Using this strategy, you can eventually stop trading your hours for money and start living on your passive income streams instead.

More: $60,000 a year is how much per hour?