When thinking about spending in early retirement, people think automatically they will spend more. There is more free time, which you will now spend doing things instead of working. That said, people often forget that they are also spending money to work. What are the costs of working?
You’re probably spending more money on work than you realize. When you’re thinking about it, you’re spending plenty of money to go to work. Imagine if you retired, you didn’t have to have that extra car, those fancy clothes, eat those lunches.
In this article, we’ll dive into some of the direct and indirect costs of having a job. When you know how much you spend on that, you have a better overview of what paycheck you’re actually taking home.
Know that there will be a focus on the financial costs of working, there are also other factors that come into play. Things like job satisfaction, colleagues, and time spend all count.
Let’s dive straight into the article: what are the costs of working?
Going To And From Work
You have to go to work and return home every day. That’s transportation costs right here. If you’re taking your car to work, you need to take into account the gas you’re using plus the depreciation on the car. If you wouldn’t have this car if you were not working, you can take the entire value of the car into account.
When you’re biking, you can take the costs of your bike on a monthly or yearly basis. When you’re going by public transport, it’s simply the amount that you spend on going to and from work.
Personally, I drive my car to work. I have a leased car, so the amount of kilometers I drive is irrelevant since my company pays gasoline for me. The fixed costs that I have every month are additional taxes that I have to pay on top of my income taxes. I wouldn’t drive a car if it weren’t for my work, meaning that I would take public transport instead to visit my friends.
I’m paying now around €180 every month on taxes, otherwise, I would pay €33 on a weekend train card – what I’m now doing with my car. Meaning that I pay €146 every month to go to work. That’s the money I pay for having the convenience of the car.
I can lower this. One way would be to work remotely, meaning that I don’t need my car to drive to clients. Another way would be to not drive my car for private purposes, meaning that I don’t have to pay the additional taxes. While I could do that I’m quite used to my car now. When I can drive a car for cheap, why not take the opportunity? Perhaps I will do it sometime in the future, but for now, it’s not necessary for me personally.
If you’re having your own private car that you use to drive to work, there are even more things you can do. You can buy a more fuel-efficient car, especially if you’re driving a significant distance to and from work this can give you some additional savings. You could even go for an electric car, which is becoming more and more efficient. When public transportation is a cheaper option for you, you can switch from a car to public transport.
Dress For Success
We all know the expression dress for success, right? Well, dressing for success also costs us a significant amount of money each month. Depending on your lifestyle and work, you can spend a lot of money on having a professional wardrobe for work. You can spend thousands of euros every year keeping your wardrobe up to date.
BUT there are lucky people who can wear the same clothes to work as they are wearing when they stay home. When you’re one of those people, it probably doesn’t cost a lot to dress for work. On the other hand, people who have an office job and are expected to look ‘professional’, might spend more.
I know that I would love to wear my sweatshirts to work every day, sadly that won’t be appreciated. When I started working, I bought a few new pants and that’s it. I already had some shirts, so that’s what I’m dressing with right now. I have started my clothing ban last year, meaning I won’t buy any new clothing for as long as possible.
This year, I haven’t spent any money on dressing for success. Last year I’ve bought 2 new pairs of shoes and 3 new pairs of pants for work, that’s about it.
Taxes are the most boring and the most direct cost of working. The more you earn, the more taxes you owe. In the Netherlands, the higher your salary, the higher you are scaled in the different tax brackets. Meaning that if you earn more, every extra euro is taxed more than your average tax rate.
What you can do about that, is invest in tax-deductible accounts that save money for when you retire. Another way to lower this is to optimize your tax declaration. Most of the time you can move around your money a bit, which can save you anywhere between €10-100 euro’s on a yearly basis.
When you stop working, most of the taxes will go away. You will pay fewer taxes in retirement for sure. To be honest, I enjoy paying taxes, as we have many benefits in return.
Food At Work
Food at work can be a big cost when you’re working. Many people spend more money on food when they are working. When you’re at home, you cook most of your meals. When you’re in the office, many people do not bring their lunch to work. Since meals in the office are significantly more expensive compared to making meals at home, you will spend extra money.
The simplest way to reduce and avoid this cost is to bring food from home. When you’re avoiding eating out, it’s one of the easiest ways to reduce your food budget. You can make each meal at home. You can meal prep at the beginning of the week, having enough food to take to work every day. When you’re not the meal prepping type, you can cook every evening and make some extra to eat the next day for lunch.
I bring my lunch to work most days. Sometimes when I have a lunch meeting, lunch is provided. Meaning that I will not spend a significant amount of money on eating food at work.
Even though I bring my own lunch, I spend less than $70 per month on groceries. I enjoy eating my own meals much more than getting something from the canteen we have
One thing that is extremely expensive is daycare costs. Whether you have a pet or a child, they might need to go to the daycare. In most countries, daycare is extremely expensive.
In the Netherlands, daycare costs around €50 per day. Per child. Depending on your income you can get a subsidy from the government, that is covering up to 90% of daycare costs. If you’re both working and having a decent salary, costs might actually come down to the aforementioned €50 a day. That is €11,000 per year you’re spending on one child for childcare.
One main way to reduce these costs is to work less as a parent. You and your partner could both be working 3 or 4 days, depending on your preference, and have the kids at home for the majority of the week. You could also ask family members to watch the kids.
For the moment this is not a relevant cost to reduce, as I don’t have a child or a pet. I would love to become a dog mama, someday my time will come!
Premium Price On Some Outings
When you’re working, you will do most things on the weekend. When you want to take a short trip, you need to go at the weekend. That’s when flights and hotels are the most expensive, thus you will pay a premium price for it.
Besides that, in my company, I should take holidays in July or August. That’s when it’s quiet at work and they want us to take our holidays in these two months. That’s when the high season is there and the prices over the entire world go up. Hotels and flights will be more expensive during July/August than during any other month, as will basically anything else.
If you’re retired, you can go abroad whenever you want. You can randomly go on a Tuesday in May because the prices are cheap. You can travel in the discounted season and as one would naturally want to do.
This is an indirect cost of working, it’s a cost nonetheless. If you’re working, you have less time in general to do things. You might take the convenient option when they’re available, just because you can.
Things that can be convenience costs can be:
- Ordering food at home, or getting take-out
- Buying ready-to-cook foods that will be done in 5 minutes
- Buying from a store nearby, rather than the cheapest in your area
- Not comparing prices when shopping
If you come home from a long day at work, it can be very tempting to do one of the above things. I have to admit that I still do two of those things, even when I’m paying attention to where I spend my money.
I go to the nearest shop when I’m at home and realize I forgot something. It will mostly be for the small things and not for my weekly grocery trip, but it’s still convenience costs. Also when I do my weekly shopping, I don’t compare prices. Ever. I go to a low-cost grocery store and I simply assume that anything there is cheaper, compared to the premium supermarket close to my house. Within the store, I go for discounts. That’s all I do!
So, What Are The Costs Of Working?
As you can see, working also brings costs with it. Let’s call it an investment. You have to spend money to earn money.
This post is just to make you aware that your job is also costing you money, and making you realize how much money you spend per year to work.
For me personally, the direct costs of going to work are €1800 per year – which is mostly my car costs. I bring food from home, I don’t spend money on clothing, and I don’t have kids. Of course, I need to pay taxes. That will be around €7000 per year when I work the full year. The current year I will only work 8 months, take all my holidays, and have my mini-retirement.
When you compare two different jobs, it’s important to compare not only salaries but also the cost of working. If your cost of working is taking too much from your additional salary, you could decide not to take the other job. If you’re approaching work like this, you will do it differently than 95% of the population. Great job!
What are your costs of working?
Founder of Spark Nomad, Radical FIRE, Journalist
- Expertise: Personal finance and travel content
- Education: Bachelor of Economics at Radboud University, Master in Finance at Radboud University, Minor in Economics at Chapman University.
- Over 200 articles, essays, and short stories published across the web.
Experience: Marjolein Dilven is a journalist and founder of Spark Nomad, a travel platform, and Radical FIRE, a personal finance platform. Marjolein has a finance and economics background with a master’s in Finance. She has quit her job to travel the world, documenting her travels on Spark Nomad to help people plan their travels. Marjolein Dilven has written for publications like MSN, Associated Press, CNBC, Town News syndicate, and more.