Alright, so we’ve talked about saving and investing and all that fun stuff, but we haven’t discussed how we’re getting the money in the first place. I figured this post comes at a good time to break down and examine the difference types of wages and pay. No matter what your job or career is, the important part is aligning your personal finance goals with it. I know people say it’s not all about the money, but in this case it’s pretty dang close. Managing your money better could be far more useful to you than earning a raise or working longer hours. Let’s discuss a few different wage types.
The first type of wage, which is hourly, is the most common of the three. Hourly wage is when an employee gets paid for each hour worked, and is usually paid every week or every other week. This is how millions of people earn their money every day, but the amount earned depends upon your hourly rate as opposed to your actually input/output. Hourly wage can be beneficial when it comes to working overtime as wages increase past a set amount, but at a certain point it becomes difficult to legitimize trading large amounts of time for money, especially if hourly rate is low.
The second type of wage is salary, and it is sometimes looked at with higher regard than hourly, although that shouldn’t be the case. Salary wage is when an employee (usually management) is paid a predetermined amount over a certain period of time (usually a year). Salaried employees are often paid once per month, and each paycheck should be for the exact same amount, because the employer is simply paying them 1/12th of their yearly salary every month. Salary wage can be beneficial due to the consistency but can also be detrimental if you end up working more hours than expected. Due to salary wage being a preset number, the hours you work do not matter how much you earn, which defeats the purpose for a lot of people.
The last type of wage allows for the highest “ceiling” for skilled employees, because it is commission. Commission is when an employee gets paid for something every time they do it. This can be seen in a plethora of careers, all the way from cutting hair to selling houses. Commission is a great way for skilled workers to earn as much money as they think they’re worth, and for employers to pay a fair amount to employees as it corresponds to their work ethic. Commission can be very beneficial due to the high ceiling, but it can be difficult to manage due to inconsistencies in pay.
So now that you’re caught up on a few fundamental wage types, I think it is important to note that no wage is better than the other. These wages all fit well into careers and professions that have made them normalized over decades. The point of this post, was to analyze how people are making money with an emphasis on how it may be more beneficial to practice money management for some. After all, it’s more about how you manage your money than how you earn it. On a lighter note, which wage type do you think suits your lifestyle best? Which wage is your employer using right now and do you think it makes sense for the employees, yourself included?