Understanding hourly vs salary pay conversion

- [Instructor] Let's say that you just got two job offers, and these jobs are pretty identical to each other, except for how they gave you the offer. So the first job, they tell you that it is $30 an hour, and they're going to expect you to be there 40 hours per week. Then the second job, they're offering you $60,000, $60,000 per year, and they're also assuming that you're going to be there 40 hours a week. Which one is giving you better pay? Pause this video and see if you can figure this out. What's better? $30 an hour or $60,000 a year? Alright, now let's work through this together. Now, one way that many people will often do this, and you might have just tried to do it this way, but I'll tell you in a second, is a mistake, is to say, okay, I'm going to take my $30 per hour, multiply that times 40 hours per week, multiply that times four weeks in a month, and then multiply that times 12 months in a year. Before I tell you why this is incorrect, let's actually calculate what we get by doing that. If we take 30 times 40, that's going to be 1200, times four weeks is going to be 4,800. And then if we want to multiply 4,800 times 12, at the risk of me making a simple math error while y'all are watching, I will just do that here. 4,800 times 12 is equal to 57,600. Let me just confirm my math. So I took 30 times, lemme do it down here so you can see what I'm, times 40 hours in a week, times four weeks, times 12 months in a year. I got $57,600. $57,600. So if you just did that calculation, you might just say, oh wow, this job right over here is better. $60,000 a year versus 57,600. But I just told you there is a mistake. Can you spot the mistake? Well, if you think about what just happened, you didn't realize that most months actually have more than four weeks in them. There's actually 52 weeks in a year, and the way we just calculated, we assumed there's 48 weeks in a year. So the correct way to do this would actually be to take your $30 an hour, multiply it times 40 hours in a week, and then to get to the year, multiply that times 52 weeks in a year. And if we do that, we're going to get a different number. So now, lemme do it up here. $30 an hour times 40 hours in a week times 52 weeks in a year gets us to $62,400. $62,400, which gives us a very different number. This is almost $5,000 higher than our previous number. And now all of a sudden it looks like the $30 an hour job is better. So the big takeaway from this video is if you're trying to convert between hourly and annual, remember, don't just go for estimate how many weeks are in a month and then multiply you by 12 months in a year. Or if you're going the other way, divide by 12 months and then divide by four weeks. Think about multiplying by 52 weeks in a year. Or if you're going from annual to hourly, think about dividing by 52 weeks in a year. Now I know what some of y'all are saying. Well this might be roughly right. This $30 an hour looks better if I just take it all together like that. But maybe this job right over here that isn't hourly is more salaried, and maybe they're going to give me other vacations. I'm going to get national holidays. I can take sick leave. And that might indeed be the case. So what I just showed you is a very superficial quick calculation, which I wanna make sure that you're going to do correctly, but you also have to think about other differences that might exist in the job. This job, for example, because of the vacations, might not actually make you work as many weeks as the calculation implies.