You've probably heard before that it doesn't always make sense for both adults in a household to work because the second spouse's income is all taxed at the marginal rate. When childcare costs are factored in, there can be little-to-no financial motivation for both parents to work. But did you know that taking a full-time job instead of a part-time job, or taking a higher paying full-time job instead of a lower paying one, can often be more expensive than you realize, even if you're single and childless? Here are some ways that working more can actually wind up costing you more.
Overtime. Most full-time employees are not paid for overtime because they are salaried, and higher salaries often come with the expectation of frequent overtime work. Recent college graduates working at large consulting firms might work so many hours that what looked like a good salary when they signed up ends up being comparable to minimum wage when you divide that salary by the insane number of hours worked. By contrast, when you work part-time or get paid hourly for your full-time work, your employer will be very reluctant to keep you around for more than eight hours in a day lest they have to pay you time and a half. Being paid hourly means that your free time truly belongs to you, and that when it doesn't, you're compensated for the inconvenience.
Taxes. A common myth is that your take home pay can actually go down when you get a raise that bumps you into a higher tax bracket; however, this is not true. Because we have a marginal tax system, your first several thousand dollars of income is not taxed at all, your next several thousand dollars are taxed at 10%, your next several thousand dollars are taxed at 15%, and so on. That means that if you get a pay raise that bumps you into the next tax bracket, only a small amount of your income, not all of your income, will be taxed at the highest rate. So while moving into a higher marginal tax bracket does not put you at risk for a lower overall income, it does mean that you get to keep less of each additional dollar you make. At some point, the extra money may not be worth it to you. When considering getting a second job or changing jobs to increase your income, don't look at the gross pay you are offered, but rather at what you will actually be taking home For most people reading this article, that will be 75% of the gross pay if you live in a state with no state income tax, and 75% plus your marginal state tax rate if your state does have an income tax. Suddenly, that extra $5,000 a year is only an extra $3,750 at most. It depends on your individual circumstances, of course, but the amount of work you'll have to do for that extra, more heavily taxed money will not always be worth it. The more money you make, the higher your marginal tax, and the greater the disincentive to do more work.
Plane tickets. When you have a traditional Monday through Friday 9-5 schedule, it's often impossible to get the best deals on plane fare. The demand for plane tickets created by all the people who want to get out of town on any given Friday night and return on Sunday night often means you'll automatically pay more for tickets. To add insult to injury, if your job expects you to work frequent overtime (for free, because you are salaried), you may find it difficult to ever plan a trip far enough in advance to get a good deal. Some may argue that weekday plane tickets are priced higher for the business traveler, and this is sometimes true, but business travelers often buy their tickets at the last minute to accommodate their ever-changing schedules, while vacationers plan ahead and secure the lower fares that are specifically targeted towards them. Your lack of flexibility and inability to travel on weekdays really is costing you a significant amount of money if you fly a lot. You'll also find that it is almost impossible to use your frequent flyer miles when you want to use them for as long as you're on the 9-5 schedule.
Other travel costs. Hotels and all the other costs associated with traveling are more expensive when demand is high, and everyone who works a typical schedule tends to get the same holidays off, which means that traveling during Thanksgiving, Memorial Day, and other holidays will always be overpriced. Not only do you pay more, but you'll often have a less relaxing trip due to the crowds.
Happy Hours. I've never understood the purpose of happy hours. Who are they designed for? Aren't they supposed to be for those of us who are stressed out from wearing uncomfortable clothes, conforming to corporate etiquette, and bending over backwards for our bosses all day? But it seems that happy hours are always at times that you just can't make unless the bar is located on the same street as your office (and it's not). Even then, you might only mange to order one drink before the clock strikes 6:00 or 7:00. Earning a salary means you'll tend to pay full price for drinks and food when you go out.
Matinee shows. Those who work from 9-5 won't ever catch a matinee movie on a weekday without playing hooky. (Of course, movies are so expensive these days that you're better off buying a subscription to Netflix and watching movies at home on your own schedule.)
Lunch with co-workers. Sometimes it seems like it's impossible to be a real part of the office crew if you bring your own lunch. In order to get to know people outside of the office, it often becomes necessary to go out for lunch (which easily costs $10 these days) or go out for drinks after work.
Office gift funds. I suppose it technically isn't mandatory to contribute to the office gift fund for an upcoming co-worker's birthday or to participate in Secret Santa exchanges during the holidays, but we all know that in order to be a "team player" you'll have to fork over money for these sorts of things. Whatever happened to the good old days of elementary school where you brought your own cupcakes for your birthday?
Work attire. Work clothes don't have to be expensive, but no matter how good of a bargain you get, you're still spending money that you would undoubtedly be keeping in your pockets if your job didn't require you to leave the house.
Commuting. For most people, owning and operating a car daily is a lot more expensive than they realize in both the long and short term. Driving to and from work can also be a major time leech, especially if you regularly have to sit in traffic. While you may be able to decrease your commute costs drastically by using public transportation or carpooling (does anyone carpool anymore?), commuting is probably not your idea of an enjoyable or relaxing time no matter what. Even if you're listening to an audiobook, wouldn't you rather be lying in your bed or going for a walk while you listen to it instead of crammed into a smelly subway car?
There are many factors to consider when choosing one job over another, but particularly if you're the type of person who just wants to make enough money to live comfortably and have plenty of time left for the other important things in your life, you won't always come out ahead by taking the highest paying job you can find (especially if you let your expenses increase each time your income increases). When I first graduated from college, I used this reasoning to take a lower paying restaurant job that was half a mile from my apartment instead of taking a higher paying office job that I would have had to commute to. Because I did not have to buy a car, pay for insurance, buy gas, get oil changes, repair my car, buy nice work clothes, or spend much money on groceries (at least half of my meals were either subsidized by or free from the restaurant), I was able to have a job I loved, take days off when I needed them, not waste any time commuting, and get by on a little over minimum wage while still putting $275 a month into my savings account (and no, I was not on any kind of public assistance).
Holding down a full-time salaried job from 9-5 (which, of course, is really 8-5, 8:30-5:30, 9-6, or some other variation thereof) costs more money and time than the average person realizes. Whether you're an aspiring stay-at-home parent or you're just perpetually exhausted by the daily grind, know that you may be able to scale back your job while reaping even more benefits than you had already considered.
Photo by Sies van Gijtenbeek