Math for working moms: How much do they really make?

September 22, 2015, 6:14 PM UTC
Photograph by Getty Images

Many working moms assume their gross pay determines their hourly rate. For example, if you make $50,000 a year at 40 hours a week over 52 weeks, then you earn $24 an hour. Right?

Not so fast. It depends on many factors, including whether you are a W-2 employee or a 1099 working mom. Using a little math for working mothers, you might be surprised to learn how much you actually make.

Let’s start with the W-2 crowd. Paula Pant, personal finance expert and founder of Afford Anything, says when you work outside the home, you have expenses you wouldn’t if you worked at home or didn’t work at all.

“So you make $50,000 a year, but that’s your top-line revenue, your gross revenue,” Pant explains. “A lot of people fail to calculate the operating expenses they incur to make that money. Once you subtract out all of your operating overhead, then you arrive at your net profit.” And that, she says, is a number most people don’t know.

Here are some estimated examples of these annual operating expenses with average costs, minus the two weeks you should be on vacation:

  • Full-time daycare costs. Average expense for families in the U.S., according to $18,000
  • Commuting, parking, and wear on vehicle. Estimating 15 miles daily multiplied by the IRS deduction rate of 57.5 ¢ per mile, as well as $50 a week for parking, which is the median range for off-street parking according to a study by Public Works Management & Policy: $4,656.25
  • Work-related clothing and dry cleaning: Estimating $25 per week for both: $1,250
  • Lunch and coffee: Estimating one of each, once a week, totaling $13 a week: $650


Total annual expenses: $24,556.25.
Your hourly rate after overhead expenses: $12.23
(This breakdown does not include income taxes, insurance, or retirement savings.)

Everyone’s own estimate will vary, of course, so Pant recommends writing out a list of your personal overhead to ascertain your actual pay per hour.

“When you do that, you’ll understand your true hourly rate,” she says. “Once you know your true hourly rate, that knowledge will influence your decision-making.”


What about 1099 working moms? Taking the same $50,000 and dividing it by 50 weeks (assuming two weeks vacation, which for 1099 employees is unpaid) and the 36-hour average a freelancer works a week according to Payoneer’s Freelancers Income Survey 2015, you gross just under $28 ($27.78) an hour.

But running your own business brings its own overhead. According to Kim Loewer, EA (Enrolled Agent) ATA (Accredited Tax Advisor), of Loewer and Associates, one of the biggest expenses unique to 1099 employees is the self-employment tax, otherwise known as the Social Security and Medicare tax.

“As a self-employed individual, take into consideration that amount would be twice as much as you would pay as an employee because you’re paying the employee as well as the employer share,” Loewer says.

Self-employment tax is approximately 15.3% and calculated on your net income after business expense deductions, says Loewer. Besides business expenses, there are other overhead costs for the self-employed, including city taxes, association costs, and even increased utility bills.

Let’s consider the same $50,000 per year earnings on a sole proprietor consulting business:

  • Business expense deductions: Expenses can include marketing and professional association memberships, travel and car expenses, Internet and phone, computer hardware and software, and IT support among others. Estimate before taxes: $10,000.
  • Your new net income: $40,000
  • Self-employment tax: 15.3% of $40,000= $6,120


Total expenses: $16,120
Hourly rate after overhead expenses: $18.82
(This breakdown also doesn’t include income taxes, insurance, or retirement savings.)

Another caveat for the 1099 employee: Unlike the W-2 worker, the $50,000 is not guaranteed, but instead depends on what the 1099 employee books—and charges. According to Payoneer, the average freelancer makes $21 per hour, putting that average gross salary at $37,800.

Childcare expenses may also be lower for 1099 working moms, but they do exist. “If your job takes you away from home when the children are coming home from school, are on vacation or they’re sick,” Loewer explains, “there’s a cost of daycare or getting a babysitter,”

In fact, childcare is the biggest expense for most working moms whatever their status. When comparing childcare expenses to their salaries, Pant says many working moms choose to take a break from their careers. But she cautions moms to consider the long-term financial implications that come with that decision.

“Taking that break from your career could result in a lifetime of decreased earnings. Now that being said, if you have personal reasons for wanting to take that break, that’s a different story. That’s not a financial decision anymore,” she says.

Whatever choice you make as a working mom—full-time employment, striking out on your own, or taking an extended break from the working world—figuring out your actual hourly rate is a great first step. Getting a clear number on what you net after all your overhead costs can make the difference for any career decision when you’re juggling home and life priorities.

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