One of the best ways to free up time and energy to achieve your personal goals is simply to work less.
I know, I know, Captain Obvious and all that, but hear me out.
If you work full time now, have you considered working four days a week instead of five? If you work four days, you’ll earn less—but the difference may be smaller than you think.
That’s because in most places, income taxes are progressive: the more you earn, the higher your tax rate. You get to keep less of dollar number thirty thousand you earn than of dollar number one thousand.
In other words, you get paid less per day for each additional day you work.
How much less? Let’s calculate it!
Ask the right question
Let’s start by understanding your situation now, when you work five days a week.
Q. How much do you earn each month for every weekday that you work?
Take your monthly take-home (after-tax) pay and divide it by five. What’s that number?
Let’s say it’s $600. Then you can tell yourself “every day of the week I work is contributing $600 my monthly income”. The Mondays you work give you $600 in monthly income. So do the Tuesdays, the Wednesdays, and so on.
What would happen if you worked four days a week instead of five? You’d work 20% less, but (if you live in a country with progressive taxes) your net income would go down less than 20%. It might go down 15%, or even only 10%.
Another way to look at this is that you earn less working Fridays than you do working Thursdays. (You probably also earn less working Thursdays than you do working Wednesdays, etc.)
But how much less do you earn working Fridays? To answer this question, we need to determine what your monthly take-home pay would be if you worked four days a week.
We can use that information to answer:
- By what percentage would your take-home pay decrease if you went from working five days a week to four? In other words, work 20% less, earn x% less. What’s x?
- How much does working Fridays contribute to your monthly income? (And thus, for what discount are you working on Friday compared to the first four days of the week?)
Find a tax estimation tool
The easiest way to roughly answer these questions is to use an online tool that will estimate your taxes due on a certain income.
You could look up your location’s tax rate schedule yourself, but then you’d have to keep track of deductions and exemptions too. They can substantially change your take-home pay, so you won’t want to ignore them. It’s easier and quicker to use a tool that accounts for them for you.
I’ll use the tax rates where I live (The Netherlands) as an example. In your case, the currency may be dollars or rupees or what have you, and the percentages might be different. But the calculation method will be the same.
Here’s the basic Dutch tax schedule:
|Up to €19,981||36.55%|
|€19,982 – €67,071||40,80%|
|€67,072 and up||52%|
There are also some deductions; the tax estimation tool I use will account for them.
Calculate your take-home pay for a four-day workweek
Let’s say you live in The Netherlands and you earn €3,000 per month working full time. This handy calculator estimates your take-home pay would be €2,230 per month.
(If you live in the U.S., try using the SmartAsset tax estimator to run your own numbers.)
If you work four days a week instead (at the same full-time wage), your gross income would be 80% of €3,000, or €2,400. And the tool estimates that your take-home pay would be €1,914.
Now we can answer the first question: if you work 20% less, you’ll only earn (1 – €1,914 / €2,230) * 100% = 14% less. Worth considering, isn’t it?
And what about the other way of looking at it? What does working Fridays earn you?
We know that working four days a week earns you €1,914, which is €1,914 / 4 = €479 per weekday that you work. And if you work that fifth day, your take-home pay would increase by €2,230 – €1,914 = €316.
Now, €316 / €479 * 100% = 66%. So in this example, you’d work for 34% less pay on Fridays than you would on Mondays through Thursdays if you worked four days a week. Would you accept that?
Obviously, these calculations are only an example. The numbers might work out differently for you. It’s possible that at your income level, the tax schedule isn’t progressive, so that working 20% less results in 20% less take-home pay, more or less.
But you won’t know until you do the math! So I’m curious: how much less do you earn on Fridays?