Is Over Time Worth It?

[ichangedmyname]

I get paid hourly but I honestly sometimes just hate going to work. But should I suck it up and just do overtime to increase my pay and thus increasing my savings? I don't know how to calculate how much overtime i need to do to make it worth it, tax wise.

A coworker does 60 hours a week but she is like a super robot or something. Is it wrong not to take advantage? I get paid 12/hr and 18/hr for ot.

Thoughts?

[ncornilsen]

You gotta make that decision for yourself...  I'd say if you have a specific goal you're working towards, that OT can be a great tool to shorten the timeline... I've seen it end up that people have to work OT just to make ends meet, which is NOT where I'd want to be.

[No Name Guy]

IMO, Yes....yes it is worth it.  Many years ago I worked 10-15 hours / week OT for months on end.....I saved up a nice chunk of change from that time.   Another time I pulled a double shift for a week.....ka-CHING when that paycheck showed up, even after getting assaulted by the tax man.

Your marginal tax rate is going to be pretty low at those hourly wages, no matter what.  OT may kick into a higher bracket - depends on your circumstances.  Even if you kick into a higher tax bracket, unless you jump multiple brackets, you'll likely still make more per hour than at your base rate.  Run the numbers using your last years tax return as a guide of what you might expect to happen.

Hypothetical Example where your OT is taxed at a higher rate (in the event your increase in income pushes you to a higher tax bracket - recall, however, that only your dollars above the threshold are taxed at the higher rate, NOT all your earnings, so your base wages will still be taxed at their normal rate):
$12 / hr x 15% tax rate = $1.80 hr / tax.  Hourly wage after tax = 12 - 1.80 = 10.20 / hr.
$18 / hr x 25% tax rate = $4.50 hr / tax.  Hourly wage after tax = 18 - 4.50 = 13.50 / hr

Google "IRS tax witholding table" and you'll find the info needed to figure out where the break points for higher brackets will be in your circumstances.

Just don't fall into the trap of spending extra because you're working OT.  Pre-make your dinner and lunch so you don't have the excuse of "I'm too tired, so I'll get take out / go out for dinner just this one time....."  It's easy to blow a significant fraction of the extra you're earning if you fall into these kinds of traps.

[vern]

Yes it's worth it. 

It is very easy to work a lot of overtime when you are young.  When you get older, not so much.

[happy]

Hmmm, I don't get paid extra for overtime, so no its not.

[ace1224]

i think it depends.  i get paid hourly and i only do overtime when i feel like it.  i will say i am not in any debt emergencies though so there's that.  sometimes i'm really tired and my kid has a lot of homework and i have to walk the dogs for the lady that pays me and one hour is not worth XX amount of dollars to me.
i usually only do overtime when a full day of work is offered to me, like tomorrow.  we are slammed at work so they asked if me and the counterpart can work a full saturday. 

[Left]

I work "overtime" but work 40 hours at main job and PRN somewhere else. A lot of people in field does this, something about taxes not being as high because you work 2 jobs instead of overtime at 1 job. And PRN rates are same as overtime rate (time and a half).

[Rural]

If I had any real choice other than leaving a job I still like (and need for 6.5 more years), I wouldn't. I'm at a point in my life where my time is worth more to me than (more) money. I think you just have to decide for yourself what's most valuable to you now. You're allowed to change your mind later, as circumstances change, too. If you're not sure, give it a try and see what you think.

[jrhampt]

If you have debt that you're trying to knock out, then I would say yes.  If it's just for extra savings, depends on your responsibilities and energy for things outside of work, which probably also depends on your age. 

[meadow lark]

No.  At least that is the decision I have made for me.  I don't really like my job that much, although I love some things about it.   I would think about ways to increase your hourly wage, though.  I'm not saying that to be obnoxious, but I worked for several years at around $10 an hour, and realized I wanted more, and the best way was to go back to a community college and get a degree in nursing.  So no, don't work overtime.  But maybe spend that extra time deciding what you can do to make a higher wage.

[ichangedmyname]

I'm definitely not going to do over time unless I need it. I'll use my 3 days off to do something productive, something I love to do that would make me happy.

I don't mean to be over the top but sometimes work is soul crushing LOL

Even though I earn 12/hr my monthly commission makes it so that I've earned over $30k this year so far. So I don't mind.
Thanks for everyone's thoughts on this :)

[matchewed]

I'm a huge fan of leisure time so I personally don't think it's worth it. But if the company offers and it is needed for the work I'll do it. I won't do OT if it involves me sitting on my ass doing nothing though. I'd rather be home doing that or something else entirely (could be either really).

[Eric]

In your case, I'd not spend any extra time at work, but instead use those would be overtime hours to look for a new job.

[MrsPete]

Too many variables to give a definite answer:

- Someone else did the money-after-taxes for you.  That's valuable information.

- Do you need the extra money right now?  I know that I once taught summer school because I had a specific need, and I really needed the money at that point.  Right now I'm doing a little side job for a couple months because I have some expenses coming up next summer, and I'd like to avoid dipping into savings for them.  I usually don't do extra work unless I have a specific need.

- If you work extra hours, would you then use the money to buy dinner out or someone to clean your house?  If you'd be so tired after the extra hours that you'd pay for things you normally would do yourself, it's not a profitable venture in the long run.

- How will this affect your overall energy level and attitude towards life?  If it's just too taxing, then you should not do it.

[devan 11]

Very much worth it.  If you work 40 hrs and fixed expenses are 28, you have 12 bankable hours for future FI.  Add in two overtimes and you have doubled your bankable FI savings by only working two extra half says.  This is simplistic, taxes increase etc.. But discretionary income is still greater.

Also, you are becoming more valuable an employee.  In hard times, who is kept on, the person who does extra?  When promotions and raises are due, which person shows the traits to move up?

[deyoswed]

Very much worth it.  If you work 40 hrs and fixed expenses are 28, you have 12 bankable hours for future FI.  Add in two overtimes and you have doubled your bankable FI savings by only working two extra half says.  This is simplistic, taxes increase etc.. But discretionary income is still greater.

Also, you are becoming more valuable an employee.  In hard times, who is kept on, the person who does extra?  When promotions and raises are due, which person shows the traits to move up?

Very well put, devan 11 is right overtime is always worth it!
Consider that your overtime will most of the time not increase monthly expenses but wil most likey dramatically increase the amount you save that month.
You will end up shaving alot of time off to become financial independent :)

[odput]

It's also important to consider how this overtime is being taken...I saw in an earlier post that you have 3 days off.  OT on the days you are already working does not impact your free time as much as OT on one of your off days.  For example:

40 hours for 4 days work = 10 hrs/day
50 hours per week for 4 days = 12.5 hrs/day
50 hours per week for 5 days still is 10 hrs/day, but you have given up an extra day off, so this may feel more painful.

IMO, working longer on days you are already going to work is worth it.  Going in an additional day for the same amount of OT, not so much...

[Guses]

It is a common misconception that you get taxed more for overtime.

But the fact is, it is always more money in your pocket.

Like a previous poster mentionned, you get taxed the marginal amount on additional dollars earned. Some places project your current payroll over an entire year to figure out how much is witheld at source for that particulat pay. This can result in more taxes being kept at source (if the overtime is not everypay) but you get those dollars back with your tax return in the end.

At our workplace, we can get paid overtime in vacation instead of pay. In my opinion IT IS ALWAYS WORTHWHILE TO WORK OVERTIME in that case!

Do I want to work 4 extra hours and get 8 paid hours off?! HECK YES!!!

[GuitarStv]

It depends.

My favorite job ever consisted of a couple weeks of 80 - 100 hrs followed by a couple of weeks off.  The overtime was awesome knowing that you were raking in money and had a chance to recover afterwards.

My current job I don't like doing it as much . . . but it depends on the mood I'm in, and the urgency at work.  If it's going to make my life a living hell at work for a several weeks not to do overtime, it's probably worth it to suck it up and head in on the weekend.

[ichangedmyname]

It's also important to consider how this overtime is being taken...I saw in an earlier post that you have 3 days off.  OT on the days you are already working does not impact your free time as much as OT on one of your off days.  For example:

40 hours for 4 days work = 10 hrs/day
50 hours per week for 4 days = 12.5 hrs/day
50 hours per week for 5 days still is 10 hrs/day, but you have given up an extra day off, so this may feel more painful.

IMO, working longer on days you are already going to work is worth it.  Going in an additional day for the same amount of OT, not so much...

\
I totally agree. I tried going to work on my days off 3 hours each and I felt like crap. I do love my days off and I like schedule. Maybe I can suck it up and do 12 hour days. Transitioning from 8-hour days to 10-hour days was kinda okay due to the fact that I work Tuesday and Wednesday, Thursday off, Friday Saturday work and Sunday Monday off. I'll think about it. Thanks for putting it that way. Giving up a day off is not worth it but working extra long (in my case extra early since I'm a closer) might just be the ticket.

*snip*
At our workplace, we can get paid overtime in vacation instead of pay. In my opinion IT IS ALWAYS WORTHWHILE TO WORK OVERTIME in that case!

Do I want to work 4 extra hours and get 8 paid hours off?! HECK YES!!!

That is a good deal! I might do OT on my days off if I can get vacation PTO :D

[Matte]

I like the overtime, especialy because I am young.  It really helps brig the mortgage principle down and the investment contributions up.  I look at it as all the overtime I work now will come back to me by reaching fi a lot faster.  My job being on 12hr shifts lets you accumulate lots of ot with less commuting. 

[clutchy]

a simple rule of thumb is this.   You always make more money making more money.  Taxes are progressive and you don't just jump brackets.  certain amount is taxed @ 15% then above a certain amount 25%.

alot of people think they'll be pushed into a 25% only bracket where all income is taxed at the 25% level... this is incorrect.

[projekt]

$12 / hr x 15% tax rate = $1.80 hr / tax.  Hourly wage after tax = 12 - 1.80 = 10.20 / hr.
$18 / hr x 25% tax rate = $4.50 hr / tax.  Hourly wage after tax = 18 - 4.50 = 13.50 / hr

This year, a single person at this pay scale would have to work more than 64 hours each week for 50 weeks to hit the 25% tax bracket, assuming there were no other deductions or additions to their taxable income (health care, interest, 401k, IRA, etc.)

Standard Deduction: 6100
Exemption: +3900
25% tax bracket threshold: +36250
2000 hours at $12/hr: -24000
Overtime pay: $22,250
Divided by overtime rate: / $18/hr
Overtime hours: =1236.11 hours
Add in regular time: +2000 hours
Divide by 50 weeks: / 50
= 64.72 hours/week

As was said elsewhere, the extra tax is applied only to the amount above the threshold, so only hours above 64.72/week would be taxed extra. In other words, I wouldn't let tax bother me on this one.