Author Topic: Am I Missing Something?  (Read 2636 times)

nexus

  • Bristles
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Am I Missing Something?
« on: August 30, 2016, 11:41:01 AM »
I need some help/assistance/reassurance that I'm making the right choice here. I'm in a unique situation and I'm surprised that the math is working out this way.

The question: Do I take a full-time position, or stay with an 18 month on/6 month off (unemployment) rotation? My math is telling me the 18 on/6 off is a much better deal in terms of stashing cash for FI.

The facts:
<A>
Monthly expenses regardless of job: $2,500 (actually close to $2,200 but we will use $2,500 to provide cushion). Annual expenses: $30,000

Monthly income after taxes when working on contract: $6,500 monthly or $78,000 annually
Estimated income while on unemployment: $3,000 monthly or $36,000 annually
Estimated take-home income over a 24 month period (78k * 1.5) + (36k * 0.5) = $135,000

Total 2 year expenses = $60,000
Estimated stash increase over 2 years: $135,000 - $60,000 = $75,000

<B>
Estimated income with full-time job: $80,000 (maybe $85,000, but unlikely).
My current take home pay is 67%, so 67%  of $80k is $53,600. We can round up to $55k.
So, estimated take-home income over a 24 month period (55k * 2) = $110,000
Estimated stash increase over 2 years 110,000 - 60,000 = $50,000

Other notables:
<A> is much, much closer to my current home.
<B> offers dollar per dollar match up to 6% on 401k after 1 year of work
<B> could have an annual bonus up to $10k (probably get 5k after tax)
<A> offers 50 cent match up to 6% after 1 year of work
<B> 'better'/more comprehensive benefits package
<A> Bare bones health insurance, but I'm 26 and in good shape/healthy
<B> Would mean taking a train to work for the nice sum of $12 per day, not counting paying for parking at the train station or the 1 hour ride there and back each day.
<A> means I can't get preapproved for a mortgage and I'll have to keep renting. I tried to get preapproved, but was told that I need to have a full-time job or at least a 3 year contract. I'm not really worried about getting a home right now, but felt it was worth mentioning.

Would anyone in their right mind take option <B>?? The only risk I can see is the chance that I won't get to come back after 18 months, but my boss seems on board with it. During the (paid) 6 months off I'd be working on writing a novel and possibly making side income under the table via odd jobs.

Please chime in with your own calculations, insights, etc. I'd love to get some more insight.

How long would these two methods each take to reach FI of $650k assuming 7% annual growth?
Thanks everyone!

erutio

  • Bristles
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Re: Am I Missing Something?
« Reply #1 on: August 30, 2016, 02:12:52 PM »
so is position A 18on/6off/18on/6off repeatedly?  And you'd be only covered for insurance, etc during those 18 months on?

nexus

  • Bristles
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Re: Am I Missing Something?
« Reply #2 on: August 30, 2016, 04:32:55 PM »
so is position A 18on/6off/18on/6off repeatedly?  And you'd be only covered for insurance, etc during those 18 months on?
Yes, I would only have the bare bones Obama care minimum during the time I was working under contract.
Yes to the repeatedly part too. I have a colleague that's back for his 3rd contract, meaning he's working towards year 5. I could probably pay for COBRA in the down months or buy health insurance (and just keep it). The $2,500 monthly expense factors this in, as I only really spend about $2,200. I'd -hope- an extra $300 per month would cover me.

erutio

  • Bristles
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Re: Am I Missing Something?
« Reply #3 on: August 30, 2016, 05:08:58 PM »
Regarding cobra, payments you make can be applied retroactively, so what you could do during your 6 months off is to not pay for insurance but if something comes up, then retroactively pay for cobra.  Could save you a few hundred if you stay healthy, but it could also cost a lot if you need healthcare.

abhe8

  • Bristles
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Re: Am I Missing Something?
« Reply #4 on: August 30, 2016, 06:33:29 PM »
What do you mean you are"paid" on you six months off? Are you planning on taking unemployment benefits for those six months?

nexus

  • Bristles
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Re: Am I Missing Something?
« Reply #5 on: August 31, 2016, 12:03:19 PM »
Monthly income after taxes when working on contract: $6,500 monthly or $78,000 annually
Estimated income while on unemployment: $3,000 monthly or $36,000 annually
Estimated take-home income over a 24 month period (78k * 1.5) + (36k * 0.5) = $135,000

Total 2 year expenses = $60,000
Estimated stash increase over 2 years: $135,000 - $60,000 = $75,000

Yes, 6 months unemployment. Is that unrealistic?

Davids

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Re: Am I Missing Something?
« Reply #6 on: August 31, 2016, 01:55:11 PM »
Would you qualify for unemployment? I don't know the rules fully but i am not sure you would.

nexus

  • Bristles
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Re: Am I Missing Something?
« Reply #7 on: August 31, 2016, 03:10:26 PM »
Yes. Here's why.

You qualify if you meet both of the following.
1.You are unemployed through no fault of your own: That means you are out of a job due to reasons beyond your control, like a layoff.
> I am being laid off at the end of my contract. The options are to extend my contract, hire me permanent, or lay me off.


2.You meet your state’s requirements for time worked or wages earned: Every state has different rules. For example, New York State requires you to have worked in at least two calendar quarters of your “base period” (generally that just means the year before), be paid at least $1,600 in wages in one of those quarters and during that period made a total of at least 1.5 times the amount you made in your highest-paid quarter that year. Complicated, right? Fear not: If you had a solid, long-term job that you lost, you probably meet your state’s minimum time and wage requirements.
For my state, I look here: http://www.edd.ca.gov/Unemployment/FAQ_-_Eligibility.htm

I noticed that it says the maximum weekly payout is $450, meaning I would only get $1800 per month at most. If that is the case, then I'd be out of luck and better off with a permanent position.

« Last Edit: August 31, 2016, 03:12:17 PM by nexus »

Lanthiriel

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Re: Am I Missing Something?
« Reply #8 on: August 31, 2016, 03:32:00 PM »
Monthly income after taxes when working on contract: $6,500 monthly or $78,000 annually
Estimated income while on unemployment: $3,000 monthly or $36,000 annually
Estimated take-home income over a 24 month period (78k * 1.5) + (36k * 0.5) = $135,000

Total 2 year expenses = $60,000
Estimated stash increase over 2 years: $135,000 - $60,000 = $75,000

Yes, 6 months unemployment. Is that unrealistic?

Depends on your state. In Alaska, the maximum unemployment is $370/week.