Getting an additional job to pay off debt is actually worth more than the salary…

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?

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19 Responses to “Getting an additional job to pay off debt is actually worth more than the salary…”

  1. Kellen @ Accountant by Day Says:

    My student loan debt is closer to 6%, so it’s hard to really see it as “high” or “low.” I don’t think that I *could* take on a second job on top of my current job, because I don’t have set work hours, and I never know when I’ll be expected to come in on a Saturday. Mostly, I think that my full-time job performance would suffer if I had a second job, and that would be worse in the long run than paying less interest.

    On the other hand, my roommate works for a non profit, has very set-in-stone 37.5 hour work weeks, and doesn’t do much with her free time besides watch TV. She could probably fit another 10 hours a week of part time work in, and needs the money. If I were in her situation, I’d consider it.

  2. Leigh Says:

    What is also helpful about having a second part-time job (if you have spending issues) is that you’re spending time you could be out spending money working, so you’re actually saving money by working, in addition to the extra salary you are earning.

    I’ve only held an extra part-time job out of boredom, but it was certainly helpful to my savings account.

    • nicoleandmaggie Says:

      That’s definitely true. Though it it leads to more meals out it could be costly. I never understood why people at a min wage job I had in high school ate lunch out so much… I always thought, that’s TWO HOURS of asking people personal questions over the phone you’re eating.

      • First Gen American Says:

        I was going to say the same thing. When I worked Friday and Saturday nights, that meant I wasn’t out having a good time and spending money at bars and dinners, etc. As a bonus I worked in a restaurant and often my meals were free or close to free. Plus it was social in it’s own way because I had my regular customers. There is something to be said about not having time to spend money. I think that’s an even bigger effect than the marginal tax rate gain.

  3. Dr. O Says:

    The same could be said for saving a few dollars here, a few dollars there, if you’re putting that savings into paying down debt, or using it to keep yourself from going further into debt. I didn’t have anything other than basic cable during grad school, and I know that savings over 5 years compared to even the most basic cable package has vastly improved my current financial situation.

  4. Well Heeled Blog Says:

    I do some freelance work, so it’s not technically a ‘second job’. I use the extra money I make to get ahead on saving goals – and, if I am being really honest – splurge a little without feeling *too* guilty.

  5. Debbie M Says:

    I pretty much only take a second job if my first job doesn’t cover my expenses. In fact, I only take a first job if I need it to cover expenses (I never started working until the college that accepted me said I had to get a summer job to help pay for the next year’s expenses.) In fact, I wish I’d realized I could retire super early a lot sooner; now I’ll have to “settle” for retiring merely early. Currently wondering if I can switch to half time for a few years before my pension becomes available, and fantasizing about quitting completely somehow before my pension becomes available.

    Faculty members, especially nontenured ones, already have a second job and a third job (their jobs are research, teaching, and service).

    I have kept a second job when it was a part-time job once I found a full-time job, but not indefinitely. And I have taken on extra part-time work for friends and colleagues, mostly because they were asking me to do stuff I could do fairly easily (typing, transcription) and because I enjoyed helping them out.

    I’d say that when I don’t have kids (and especially if I’m living someplace where I don’t know anyone, like my third year in college when I had to move home, but my parents had moved since high school) it’s much more worth it than if I have kids (or lots of friends). (Unless maybe my kids are driving me nutso at that age but not driving my spouse nutso.) Also, it’s more worth it if you have friends working with you at the second job or otherwise love it.

    Instead, I go for the frugality strategy to pay off debt. And I did pay off my cheap student loan debt early and then even my pretty cheap mortgage. Actually, I’ve paid off all my loans early, though I have made minimum payments on my credit card while I was job hunting and on my house for many years after I refinanced to a lower interest rate.

  6. rented life Says:

    A few years ago I took on 7 classes. I was FT at one school and adjuncted at another. It was stupid at the time, but worked out b/c 1) I was able to save a lot of money that really helped when I got laid off. We’re in debt from my layoff, but it would have been far worse without that cushion. and 2) that adjuncting gig went really well and I was able to get classes here and there while on the job hunt and an awesome reference as well. This year I’ve also taken on extra work–extra classes and summer classes–all with the goal of paying off our debts. We’re also looking to move to a cheaper area which will make a huge difference. Less money on living expenses means more money to debt.

  7. frugalscholar Says:

    This is so simple, so obvious…yet I had never thought of it. Thanks!

  8. Link love (Powered by meatballs and musketeering) | Musings of an Abstract Aucklander Says:

    [...] a second job to pay down debt is worth more than just the wage, reckon [...]

  9. Sandy @ Journey To Our Home Says:

    I LOVE this post! I totally agree that a second job is worth more than the salary alone. You really have to think about all those interest rates, and the interest you are saving by being able to pay things off earlier!

  10. Leah Says:

    I did take a second job one summer to pay my car loan off two years early. I was leaving an R1 grad school to work at a non-profit and knew my income would go down (I know, crazy). I got a job to pay my expenses, and I also taught a class during the summer session at the school to pay off the rest of my car loan.

    I also got a second job once to alleviate boredom and save up money for a vacation. I worked a set 40 hours a week checking fish catches at the docks, and I picked up a motel job for minimum wage. It wasn’t a lot, but I worked 30 hours a week at the motel and managed to save half the amount I needed for a frugal month long vacation to New Zealand.

    Right now, I work a lot of extra little jobs to supplement my really crummy TA salary until I’m done with my second grad school degree (almost there). I substitute teach, babysit, proctor tests, etc. It’s worth it to have some extra cash and put some into savings — my TA paycheck is enough to live off of, but that’s about it.

  11. Carnival of Personal Finance #331: Global Stock Markets Edition Says:

    [...] from Nicole and Maggie: Grumpy Rumblings of the Untenured posted Getting an additional job to pay off debt is actually worth more than the salary…, a simple yet insightful post on how the interest from the debt you are paying off with your [...]

  12. The Simple Dollar » The Simple Dollar Weekly Roundup: Future Plans Edition Says:

    [...] Getting an additional job to pay off debt is actually worth more than the salary… A part-time job that has the entire paycheck go toward debt earns a lot more than the $8 per hour it seems to earn. It’s also earning the interest rate on your debt by paying it off early. If you’re earning $8 an hour in your spare time and that money enables you to get rid of a 20% debt three years early, each hour you work is actually earning you $13.82. (@ grumpy rumblings of the untenured) [...]

  13. lora | kathleen Says:

    I have a second job (20-30 hrs/week) and like Leigh said, one of the biggest benefits is I’m not spending money elsewhere! Now if I’m not working, I’m sleeping instead of buying things out of boredom.

    I found I spend little money on groceries now but about the same amount on eating out since I work in a coffee shop that serves food and I get a lot to take home at the end of the night.

    I’ve paid off close to $5,000 in high interest credit card debt in three months, so it’s been awesome for tackling my debt!

  14. Angel Says:

    Thanks for this post. I never factored in the interest rate before when considering a part-time gig.

  15. B Talbot Says:

    Hi Nicole and Maggie

    I found this post and thread interesting and still relevant despite living in the UK. I run a debt related website but 6 months before leaving college (and during the weekends while at college) I ran a landscape gardening business and managed to earn a pretty good extra chunk of money. This helped a great deal when I came to pay off my student loan as I had managed to save quite a bit of money during this period. After leaving college I worked in a shop and also kept the gardening business going as second source of income. I can whole heartedly say that having two income streams is sensible and can help get you out of debt at a much faster pace.

    Brian


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