Most advice offered to anyone struggling to make ends meet typically boils down to some variation of “spend less and/or earn more”—which often means getting a second job. And a lot of us have taken that advice—close to 8.5 million people in the U.S. have more than one job these days. On the surface, that makes sense: If you earn more money, your situation will invariably improve. But it’s not necessarily that simple. A second job doesn’t always help as much as you expect, and can even do some harm to your financial situation and other aspects of your life. Here’s what you need to consider before assuming a second job will solve your problems.
Mo’ money, mo’ bills
The first thing you need to do is calculate how much money you’ll bring in from that second job and compare it to any extra expenses you’ll incur:
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Commuting costs. Whether it’s more gas in your tank, more wear and tear on your car, or parking fees, commuting costs you money—about $2,600 a year, on average (for commuting to one job). And that doesn’t include the cost of replacing your car because you doubled the mileage. If you’ll be using more public transportation and carshares instead of driving, add those costs up instead.
And remember, these costs can sometimes quadruple if you have to commute to work, back home, then commute to a second job and back home again. Doubling up your commute increases those expenses, so calculate how much more you’re spending and deduct that from your take-home pay at your second gig.
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Food and meals. The time and energy for a second job has to come from somewhere. If you will be eating more fast food or takeout meals because of the second job, you need to estimate those additional costs and deduct them from your take-home as well. Fast food meals cost anywhere from $2 to $10 more than meals prepared at home, on average, so if you’re eating out three meals a day because you’re constantly working or commuting, that adds up.
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Childcare. If you need to pay for babysitting or other childcare services because you won’t be home as much with the second job, those costs need to be deducted as well. Childcare costs range between about $5,000 and $25,000 annually depending on your location, so this can be a significant hit to your extra income.
Every dollar you have to spend in support of a second job makes it less effective at improving your financial situation. Make sure you know how much you’re losing in the deal, and whether the second job is still worth it.
Tax implications
Second jobs can seriously complicate your tax situation:
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Marginal rates. If your second job increases your income enough to move you into a new tax bracket, you’ll pay a bit more in taxes. For example, if you earn $40,000 a year at your first job, your marginal tax rate is 12%. If you bring in an additional $20,000 from a second job, a little more than $15,000 of that money will be taxed at the higher 22% rate. You’re still paying 12% on the bulk of your income, but your overall liability will go up.
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Doubled withholdings. In many cases, your two employers won’t be able to adjust your withholding for Social Security, so you’ll wind up paying double, at least temporarily. Eventually, you might get a Social Security tax credit when you file your taxes so it will even out—but in the meantime you’ll be out that money, presumably just when you need it. And if your income shoots up over $200,000, you’ll also wind up paying a higher Medicare tax.
Taxes won’t erase your extra earnings, but you need to know how they’re going to impact them so you can judge whether the second job is going to bring in enough income to be worth it.
Burnout and health
Finally, there’s a “softer” impact that’s difficult to calculate: exhaustion. If you’re already working a full-time job and now you’re adding more working hours (and more commuting hours), you could be putting your mental, physical, and financial health in jeopardy. Studies have shown that longer work hours can increase your chances of depression, heart disease, and sleep problems. Those conditions come with increased healthcare costs that can erode the benefit of a second income.
Working more and sleeping less can also degrade your job performance at both jobs, which can potentially lead to negative financial consequences—like losing your first job, or missing out on performance bonuses. It’s impossible to predict the likelihood of something like that happening, and you can’t easily calculate the financial impact, but it’s something to consider if you’re hoping a second job will be the perfect solution.
