top of page

Her $6k salary is better than your $10k - Here's why

Updated: Feb 9, 2023

A critical viewpoint that helps you increase your financial and personal value.

As a struggling student just a few short years ago, it was painful to hear how people with coveted jobs (doctor, lawyer or auditor etc) were making thousands, maybe even tens of thousands. All this despite the fact that they were only a few years older than I. (The median salaries for these people are still moving up nowadays.)

It was terrifying and yet today, I somehow managed to join the ranks of the salary elites. Peers covet my salary and flexible working hours. They see the gains I get... But they forget to consider the pains I put in.

It is hard to explain that not only is my position un-enviable (I have 60 to 80-hour work weeks, possibly longer), I actually envy some of their careers despite their lower pay cheques. How is that possible?

It's all about distinguishing absolute and relative income.

What is absolute income?

Absolute income is the most common identifier of someone’s income/success.

Rarely in conservative culture do people talk or even ask about each other’s incomes, but some things never change. People will brag or offhandedly mention it (in an affected embarrassed tone) or even upload it online for people to go nuts over it on a personal finance forum (just saying).

If you make $20,000 monthly, your annual absolute income is $240,000. It has nothing to do with spending or nett or whatever – it's just a way to gauge someone's earning power (and success).

How about relative income?

Relative income is a slightly more accurate way to gauge your financial success. It’s hard to define, so let’s use my real-life example.

  1. Friend A is an auditor. He makes $10,000 / mth. Friend A works 8am to 8pm, Mondays to Fridays and 8am - 1pm on Saturday.

  2. Friend B is a freelance graphic designer. She makes $6,000/mth. Friend B works 1pm to 7pm, weekdays only.

Like any other job, the hours can vary from time to time, but the hours are still pretty regular.

The (annoying) couple goes out with me from time to time to talk about fun stuff I like, such as investing. One day, we happened to do a very fun analysis in response to her pestering her husband about buying her more stuff out of his larger pay cheque.

Now, let’s do a quick breakdown.

Friend A works a total of 65 hours a week and 260 hours a month.

Friend B works a total of 30 hours a week and 120 hours a month.

I think you can kind of see what I’m getting at.

Friend A's relative income is $10,000 / 260 hours = $38.50/hour.

Friend B's relative income is $6,000 / 120 hours = $50/hour.

This means that for every hour worked, Friend B makes nearly 30% more than Friend A. B is arguably doing much better than A in terms of earning power. The revelation led to better understanding and appreciation of each other as a couple.

What does this mean for you?

a. Value your time.

I’ve had clients who have switched from a $2,500 pay to a $3,200 one, only for me to point out that their relative income is now lower since they’re working more hours.

It is not easy to accept that the value of your time has essentially decreased – that is what happens when you work for more money without careful planning.

Judge your value by your relative income, not your gross income. This way, you learn how to keep track of your own personal development, such as how you have improved (hence resulting in your time becoming more valuable).

b. Balance the amount of hours and the money.

You must strike a balance between relative and absolute income. A relative income of $150/hour wouldn’t help much in Singapore if you only work 6 hours a month.

If you’re like Friend B and you want to raise your absolute income, you can consider part-time work or taking on more assignments. If you’re like Friend A, consider your relative income before accepting a promotion or switching jobs.

Learning to balance the hours and money can also benefit your future. For example, taking a job that pays the same but for fewer hours will let you spend more time with family.

c. Consider miscellaneous factors as well.

A private tuition teacher who I used to work with was telling me about two Secondary 1 students whom she taught for two hours a week each. One lived an hour away and she was paid $55 an hour. One lived over at the next block and she was offered $40.

She mentioned her intention to drop her neighbor's kid as she felt she was being paid below her current value.

I pointed out to her that her relative income was actually much lower with the other kid as travel time (and general expenses) led to opportunity cost. So her with a relative income was actually $110/4h ($27.5/h) instead of $55, compared to the kid she was teaching for $40.

These are things you may want to consider for your own unique situation.


Understanding Absolute and Relative income helps me with your financial planning in several ways:

  1. It enables me to create a more holistic financial plan for people who are more flexible. I will also be able to give more centered advice, encompassing both insurance and investment needs. Time is money. A good financial planner will always take that into account.

  2. You will have a better understanding and appreciation of where you, and your peers, rank in terms of financial success, regardless of occupation.

Relative income is a better indication of the value of your time compared to absolute income. It is also a more accurate way to compare yourself against your peers.

As a professional, I pride myself on responsibility to all my clients. I always do my utmost to factor these points during any financial planning. The goal is to give my clients the most comprehensive review I can, so that they can get the best value out of life.

Money Maverick

4,251 views0 comments


bottom of page