One of the recommendations for people in over their heads in debt is to get a second part-time job, even a minimum wage or near-minimum wage job. A popular suggestion is delivering pizza.
And, if you have a lot of debt, an $8/hr job may not seem so great especially after taxes etc. are taken out.
But, if you have high interest debt that you’re paying with your second salary, your take-home pay isn’t really the only benefit you’re getting from this additional money. You’re also getting the 23% or 17% or 8% or whatever % interest rate from the debt that you would not have been able to pay off without that salary. It may not feel like it because you’re not yet getting the immediate benefit from paying down that debt other than possibly lowering your required minimum payments, but you will feel the benefit much much sooner than you would without that second job.
Another way of saying the same thing, but using bigger words is, the interest from the debt you are paying off with your second job is an increase in the marginal wage.
When you have high interest debt, every penny that goes towards it makes a big impact in terms of your future stability and your future spending power. Even a low wage job, even small spending cuts.
Is it worth it to get a secondary job to pay off low interest debt, such as a mortgage? Well, that depends on how much you hate debt and how much you value your time (and how much you value time vs. spending cuts). For us, definitely not. But we’d be singing a different tune and spending a LOT less if we carried debt that wasn’t at 4.75% (and less with the tax cut). In fact, back in the day we scrambled for money to pay off 8% student loans and to keep from getting credit card debt.
Have you ever taken a second job to pay off debt or to stay out of debt? Was it worth it? What kind of interest rate or other trade-off would there have to be for you to take a second job in order to combat debt?