Author Topic: Increase work hours for debt emergency?  (Read 3466 times)

Sparks11

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Increase work hours for debt emergency?
« on: June 01, 2017, 12:33:36 PM »
Hello! New to the forum here, but pretty deep into the blog and my own Mustachian transformation. We've been slashing expenses, selling our car, relocating for a shorter commute, cutting our total grocery/eating-out budget in half, and more. But I have one question specific to my situation I haven't seen anyone cover yet.

I'm self-employed, and my income is directly proportional to the amount of hours I put in. I'm currently working about 40 hours a week, but I feel a bit guilty putting in such a small figure when I have a debt emergency.

If I work about 60 hours a week, I could pay off my debt emergency in about 6 months instead of 1.5 years. What would you do? Work more, even if it means less time with the family and possibly a bit less sleep? Or would you maximize time with the family and just extend your FI a bit?

Some more background: I am the sole breadwinner for the family. I have 3 daughters, all in elementary school.

Thanks!

Daniel

Nick_Miller

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Re: Increase work hours for debt emergency?
« Reply #1 on: June 01, 2017, 12:40:57 PM »
Hello! New to the forum here, but pretty deep into the blog and my own Mustachian transformation. We've been slashing expenses, selling our car, relocating for a shorter commute, cutting our total grocery/eating-out budget in half, and more. But I have one question specific to my situation I haven't seen anyone cover yet.

I'm self-employed, and my income is directly proportional to the amount of hours I put in. I'm currently working about 40 hours a week, but I feel a bit guilty putting in such a small figure when I have a debt emergency.

If I work about 60 hours a week, I could pay off my debt emergency in about 6 months instead of 1.5 years. What would you do? Work more, even if it means less time with the family and possibly a bit less sleep? Or would you maximize time with the family and just extend your FI a bit?

Some more background: I am the sole breadwinner for the family. I have 3 daughters, all in elementary school.

Thanks!

Daniel

Hey @Sparks11, welcome to the forums!

And honestly the answer to your question will be dependent on a number of factors re: your financial situation. We know nothing other than a 6-month versus 18-month timeline.

You could provide some more info re: your kiddos. Do they go to school yet? If so, and you start working at 7AM, could you work until 6PM each day and then race home for a few hours in the evening, are you really missing that much time with them? Maybe you could work a half-day on Saturday mornings? That would get you close to 60 hours.

How long is your commute? Do you have others working for you? Can you just pop in for a few hours, work a bit, and then pop back home?

How bad is the debt "emergency" as you call it? Does it keep you up at night? Are you otherwise in good financial shape?

Miss Piggy

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Re: Increase work hours for debt emergency?
« Reply #2 on: June 01, 2017, 12:42:50 PM »
How about working 50 hours as a compromise?

Sparks11

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Re: Increase work hours for debt emergency?
« Reply #3 on: June 01, 2017, 01:06:34 PM »
Thanks for the inquiry for more info Nick, as well as some suggestions with the info you had.

Some more info: I'm a financial/stock analyst, and I always have plenty of work available to me if I want to increase my hours (not complaining!). I work from home, and the kids go to public school. I could steal time from the early mornings. I usually get to work around 9am in the morning, but play a pretty key role in the kids breakfast and such. I currently don't do much work on the weekend, so I could step it up there.

I also can step out of the house and work at a coffee shop to get out of the house in the evenings if I have to (usually buy a small decaf Americano to pay my rent to the coffee shop).

Debt is about 20k on a credit card at 10.95%. I have no other debts. I'm renting. After tax savings rate at 40 hours/week of work is 43%. Savings rate at 50-60 hours/week is about 48% to 53% or so.

I have basically no assets. Cash in my business and personal accounts is just enough for a buffer to keep me comfortable with regular expenses.

I'm 29 years old.

This is as much as a behavioral question as it is a mathematical one. It would be nice to hear how other people would approach this psychologically. Would this situation scare the hell out of you and spur you to work harder and get rid of your debt emergency? Or would you be okay with consistent, deliberate progress without going above and beyond for a shorter period?

Last bit of background: While 60 hours may not sound crazy to some, it's not really sustainable much more than 6 months at a time in my current role. 50, as Miss Piggy pointed out, is a more reasonable compromise. But I'm curious about how you guys would feel about the situation and how you would approach it?

Thanks!

Daniel

Laura33

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Re: Increase work hours for debt emergency?
« Reply #4 on: June 01, 2017, 01:15:27 PM »
Personally, I would bust it for 6 months (or some shorter time if I just couldn't take it any more).  I'd rather rip off the band-aid and get back to normal quickly than suffer the slow bleed/ongoing pain for a longer period.

Vindicated

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Re: Increase work hours for debt emergency?
« Reply #5 on: June 01, 2017, 01:18:44 PM »
Welcome, Sparks11!

I think you are going to have to experiment a little.  Try working an extra hour in the early mornings for a week, and see how it feels.  If that feels good, keep doing it.  If you have a Saturday that the Wife wants to take the girls to visit the in-laws, use that as an opportunity to pick up a few more hours.  Just be flexible, but don't increase your stress level for it.

For me, it's a balance of stress.  The debt causes some stress, and extra work causes some stress.  Work a little extra to lower the debt stress, and see if the work stress feels worse or better as a comparison.

Good luck!

PS - I do like Laura's band-aid analogy.  If that's the least painful way for you, go for it!

BigHaus89

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Re: Increase work hours for debt emergency?
« Reply #6 on: June 01, 2017, 01:20:40 PM »
Do you have a spouse?

You could try gradually increasing your hours to give yourself time to adjust. Also, sleep, diet and exercise are vital if you're planning on kicking it into overdrive

ketchup

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Re: Increase work hours for debt emergency?
« Reply #7 on: June 01, 2017, 01:28:00 PM »
If you've got everything else dialed in already (expenses reduced), I'd probably work a bit extra to accelerate the payoff.  In the meantime you could also look into a balance transfer credit card if you've got good credit.

Also, you didn't mention the history, but make sure you realize what led to that debt, and make sure it never resurfaces (obviously doesn't apply if it was an unavoidable medical thing or something like that).

I wouldn't cut your sleep, that never goes well.  If it's 50 hours with normal sleep or 60 with an hour less a night, go with the 50.  It's not worth it.

Lady SA

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Re: Increase work hours for debt emergency?
« Reply #8 on: June 01, 2017, 01:32:47 PM »
Can your spouse also pick up some part time work? If the kids are in elementary school, they might have a few hours during the week to bring in some extra money to help accelerate your payoff.

I'd also slowly increase your hours. I like Vindicated's thoughts around balancing work stress vs debt keeping you up at night stress. I'd try bumping up to 45-50 hours naturally by adding an hour in the mornings or something and see if that was tolerable. There is a lot of grey area between 1.5 year payoff and 6 month payoff. You might find an 8 or 9 month payoff to be the sweet spot.

Also +1 on trying to transfer the balance to a 0% introductory rate card if possible. Just make sure the behavior issues that lead to that much debt in the first place are resolved.

Linea_Norway

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Re: Increase work hours for debt emergency?
« Reply #9 on: June 01, 2017, 01:34:13 PM »
I would put in at least a few extra hours a week. Just to give it a boost. But not above a reasonable level. But as others say, try to put in an hour a day and some hours in the weekend in stolen moments.

Sparks11

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Re: Increase work hours for debt emergency?
« Reply #10 on: June 01, 2017, 01:38:29 PM »
Wow, first of all, I'm extremely grateful for the warm welcome to the forum, as well as your thoughtful and helpful responses.

All of these recommendations are useful. Laura33, I like the band-aid analogy. Combining that with Vindicated's recommendation to add some time in the mornings while minding the stress seems wise.

And thanks for the reminder about sleep, diet, and exercise, BigHaus89. Diet and exercise are pretty natural for me, but I'll have to ensure sleep doesn't suffer.

Re: ketchup: I actually forgot to mention that half of that balance is on a zero percent card now. But I treat it as if it's the higher rate, since it will increase after the promotional period (15 more months). Though you bring up a good point about looking into more promotional cards. I'll have to get the rest of the credit card on a promotional zero percent rate. Also thanks for the strong recommendation not to cut sleep.

As far as how I got into this mess in the first place. It was before I discovered Mustachianism and it was embarrassingly a result of poor math and "upgrading". Pay was looking better than ever, so I upgraded my life and didn't fully account for self-employment taxes. Mustachianism has helped me crawl my way back. I've already destroyed $20,000 in the past 4 months (selling a fancy car with equity and applying extra earnings toward debt). Now that my expenses are lower, this feels like the final stretch to killing this debt -- especially now that I've done a lot of the amazingly rewarding work of reducing expenses.

Proud Foot

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Re: Increase work hours for debt emergency?
« Reply #11 on: June 02, 2017, 10:13:08 AM »

Debt is about 20k on a credit card at 10.95%. I have no other debts. I'm renting. After tax savings rate at 40 hours/week of work is 43%. Savings rate at 50-60 hours/week is about 48% to 53% or so.

I have basically no assets. Cash in my business and personal accounts is just enough for a buffer to keep me comfortable with regular expenses.

What do you mean you have basically no assets?  And where is your 43% savings rate going? If it is only money going towards a 401k or IRA how long would it take to pay off the debt  by redirecting it towards your debt? Or what would happen if you could transfer to a new 0% card with the plan to do another transfer at the end of the promotional period?

Sparks11

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Re: Increase work hours for debt emergency?
« Reply #12 on: June 02, 2017, 11:33:48 AM »
Hi Proud Foot! I only a few thousand dollars in my brokerage. So, I have no assets. My savings rate (calculated with an excel spreadsheet including my income, taxes, and expenses), which was only recently achieved with cost-cutting, is all going toward debt. Before my Mustachian cost-cutting, I was unfortunately spending all of my money.

Good point on rolling over 0% cards to new cards. That would certainly help. Though, hopefully the debt is gone before my 0% introductory rate (which I have on half of the remaining $20,000 of debt) expires.

In the meantime, I can at least get a 0% rate on the second half.

Lady SA

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Re: Increase work hours for debt emergency?
« Reply #13 on: June 02, 2017, 12:03:29 PM »
How old are you? You can never get time in the market back and you are missing out on compound interest on your savings. I would consider a balanced approach.

Do you have access to a 401k? You should be contributing to it, even before paying off debt. Taking advantage of tax-advantaged accounts is in your best interest and I'd hate for you to be totally neglecting this for the next year or so of focusing solely on debt.

Especially if you can keep rolling your debt onto a 0% card, you can absolutely slightly scale down the payments and also make room for saving for your future, too.

Investment order:
WHAT           
0. Establish an emergency fund to your satisfaction           
1. Contribute to your 401k up to any company match           
2. Pay off any debts with interest rates ~5% or more above the 10-year Treasury note yield.           
3. Max HSA             
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level           
5. Max 401k (if 401k fees are lower than available in an IRA, or if you need the 401k deduction to be eligible for a tIRA, swap #4 and #5)           
6. Fund mega backdoor Roth if applicable           
7. Pay off any debts with interest rates ~3% or more above the 10-year Treasury note yield.           
8. Invest in a taxable account with any extra.           
           
WHY           
0. Give yourself at least enough buffer to avoid worries about bouncing checks           
1. Company match rates are likely the highest percent return you can get on your money           
2. When the guaranteed return is this high, take it.
3. HSA funds are totally tax free when used for medical expenses, making the HSA better than either traditional or Roth IRAs for that purpose.
    At worst, the HSA behaves much the same as a tIRA after age 65.
4. Rule of thumb: traditional if current federal marginal rate is 25%; Roth if 10% or lower, or if MAGI is too high to deduct a traditional IRA; flip a coin otherwise. 
   See Credits can make Traditional better than Roth for lower incomes and other posts in that thread about some exceptions to the rule.
   See Traditional versus Roth - Bogleheads for even more details and exceptions.  State tax (or lack thereof) should also be considered.
   The 'Calculations' tab in the Case Study Spreadsheet can show marginal rates for savings or withdrawals*.
5. See #4 for choice of traditional or Roth for 401k.  In a 401k there are no income-based limits for deductions or contributions.     
6. Applicability depends on the rules for the specific 401k           
7. Again, take the risk-free return if high enough           
8. Because earnings, even if taxed, are beneficial


Notice how there are various savings that come before paying off debts, even hair on fire debts.

Lady SA

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Re: Increase work hours for debt emergency?
« Reply #14 on: June 02, 2017, 12:13:31 PM »
As an example of the above, My DH and I currently have 70k in student loans. With our incomes, we could have this completely gone within a year, but we get better return on our money if we take a more balanced approach.
But after running the numbers, we max all our tax advantaged accounts (401k, IRA, HSA) BEFORE paying our loans. This means a longer timeframe of having debt, but in the long run we are further ahead. If we instead focused solely on debt, we would double our payments but have neglected our assets over the term of the loan.

Now, SLs are a bit of a different beast than CC debt. But it sounds like you've handled the behavior that got you into the problem in the first place, AND you are confident you can roll the sum onto 0% balance transfer cards--effectively making it a 0% interest debt. If you are confident you can continue that for a few extra months, with that return, you are better off getting time in the market.

It is a crude comparison, but you are using your dollars toward a 0% return and neglecting the potential 5-7% return.

Now, if you can't get your balance on a 0% card, this advice is no longer applicable, of course. 10% trumps 7%.

TartanTallulah

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Re: Increase work hours for debt emergency?
« Reply #15 on: June 03, 2017, 01:27:36 PM »
Thanks for the inquiry for more info Nick, as well as some suggestions with the info you had.

I'm 29 years old.

This is as much as a behavioral question as it is a mathematical one. It would be nice to hear how other people would approach this psychologically. Would this situation scare the hell out of you and spur you to work harder and get rid of your debt emergency? Or would you be okay with consistent, deliberate progress without going above and beyond for a shorter period?

Last bit of background: While 60 hours may not sound crazy to some, it's not really sustainable much more than 6 months at a time in my current role. 50, as Miss Piggy pointed out, is a more reasonable compromise. But I'm curious about how you guys would feel about the situation and how you would approach it?

Thanks!


I've never had debt other than a mortgage (I was brought up in a culture where consumer debt was stigmatised and feared), but there have been times when we've sailed close to the wind financially due to unexpected expenses or not keeping an eye on the bank account (the last time was when we relocated six years ago) my reaction has been to work my socks off to get back to safety. Looking back, I can't quite believe that I managed those long working weeks, including weekends, for such a long period of time, and am less surprised that I came down with a dose of burnout once the pressure was off.

At 29, there would have been no question, I'd have taken the 60-hour weeks - I know because I did. Now, in my 50s, I can't sustain the workload I could when I was younger, but if it was that or being in debt I'd have a damn good try.

Freedomin5

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Re: Increase work hours for debt emergency?
« Reply #16 on: June 04, 2017, 06:41:51 AM »
I'm in this situation where more hours = more pay. I've paid off all debt except mortgage on a rental at this point. If I had $10k in CC debt at 10% interest, I'd definitely bust my butt until that $10k is cleared, then slow back down to more reasonable hours to clear off the other $10k before the 0% promotional rate expires.

Spouse stays at home, which allows me to work more, but this is changing and we are becoming a dual-income family. This means that I plan to prioritize family responsibilities and to work around those. This means working after putting the kiddo to bed.

Villanelle

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Re: Increase work hours for debt emergency?
« Reply #17 on: June 04, 2017, 06:56:21 AM »
I would absolutely increase hours for a relatively short time.  If it becomes absolutely unendurable (not just a little sucky), you can always stop, or dial back to 55 or 45, or whatever point is sustainable until you get the debt paid off (and perhaps a bit longer, if you can stick it out, in order to get a fully funded e fund, at least.

I'd probably tell myself it was going to be 60 hours until I got the debt paid off, as incentive to mentally help me with cutting expenses.  Then assuming I really hate that, I'd allow myself to go to 50 hours until I had my e fund set up.   

BlueHouse

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Re: Increase work hours for debt emergency?
« Reply #18 on: June 04, 2017, 08:16:37 AM »
For me, it's a no-brainer.  I would work extra hours, but that's because I've always been known as a workaholic.  In truth, I've never been a workaholic.  I've used work for many years as an excuse to get away from responsibilities at home and with the family.   
I applaud you for considering your family responsibilities in this equation, as they are equally or more important than your debt emergency.  So discuss it with your spouse because if you decide to work more, spouse will be picking up your slack around the house.  So you're making a decision for both of you actually. 

I also have a very difficult time understanding why anyone would take a second job of a service nature for much less money rather than working extra hours at their own job.  I could only see this as having fun rather than contributing to the family.  I can't imagine that serving coffee could make a fraction of what you'd make as a self-employed financial analyst, so the point would seem to be to escape your family/house. 


Sparks11

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Re: Increase work hours for debt emergency?
« Reply #19 on: June 04, 2017, 09:49:55 AM »
Hi again everyone. Just checking in to let you know I really appreciate all the advice and encouragement.

I'll be working with my wife to manage a schedule that allows for as much more work as possible without sacrificing all of my quality time with the family. I think there's a lot of margin in my life where I could fit as much as 2 more hours of work a day, as well as more deliberate work during the hours I'm already working.

I'll be aiming to pay off all my debt in as little as six months, get the remaining debt on a zero percent card within the next 45 days or so, and start contributing to my IRA (marginal tax bracket is at the high end) for the first time ever.

Finally, I'll be posting some updates when I hit key milestones here for some accountability!

This blog -- and this forum -- have literally been life-changing for me since I started crawling every post earlier this year.

I'll continue to check this thread occasionally for any fresh ideas to help me get through this.

Thanks again everyone!