Extra Work and FREE Money
Rory still works part time for a local hospital. It is supposed to be two 8 hour shifts a month, but in the last year he has had a hard time coming up with the motivation or time to work those shifts. It’s good to track things because it makes you look back on what you have done with a different perspective. Rory was in search of his W-2 from the hospital today (it IS tax season afterall all) and although he didn’t find it, found most of the data he was looking for. Below is a picture he took of what he found.
The most shocking thing to him? That he only worked 76.75 hours in 2016! That’s less than 10 shifts! He thought his average for the year would be closer to 20-24 shifts. Over 12 months his goal of working two shifts a month dwindled to less than 1 per month. We will compare this year’s extra work at this hospital to 2017 a year from now and see where we sit. Rory fully intends on hitting his goal of 24 shifts. By tomorrow night he will have his two shifts for the month under his belt, so we are on track for now.
The other thing to take notice of is that out of $2006.88 earned this past year here, he contributed $769.68 to his 403B. Most of this was at the very end of the year when we made a shift into our serious commitment of retiring early. His plan allows him to contribute 84% of his earnings to the plan, and the hospital contributes a 4% match. We plan to continue this this 84% contribution this year, mostly for the reason you see at the bottom of the picture. The employer match was $34.51. That might not seem like a large number, but NEVER TURN DOWN FREE MONEY! Let’s say this next year Rory gets close to his goal of twice the earnings at this job and can contribute $4,000 to the 403B. A 4% match would add an extra $160 to his plan. Without belaboring the point, lets see what that $160 REALLY Represents.
Assuming a 10% (Still less than the average in the history of the market) average return between now (he’s almost 34) and 60 (When we plan on beginning to withdraw our retirement funds) that $160 of FREE money REALLY becomes $1,907 of FREE money in 26 years of letting it grow.
So, although he can max out his 401K at his business, it doesn’t make sense financially to do so because of that seemingly small amount of free money available to him as a perk of one of his side jobs.
*Remember that the government caps your contributions to a 401K/403B plan to $18,000 per individual TOTAL. So even if you have multiple plans like Rory, you cannot exceed $18,000/year in this tax sheltered retirement plan.
Ask yourself, how many people do you know who would think through such a seemingly small decision? It’s ONLY $160 after-all… We don’t know that many. In fact, most people we know would consider someone “CHEAP” if they knew they would make such a big deal over $160 gained a few dollars at a time over an entire YEAR. That’s crazy, right? This just leads us back to our belief that the average person doesn’t have the right mindset to be wealthy. Put aside all their daily decisions around spending, their view of what small amounts of money actually represents is the real problem. Every time we think about buying a $5 beer or coffee we think about what its true cost is. $5 invested for 30 years with a 10% return is actually $81. Would you buy a $81 coffee or beer? It’s a different way of looking at things, but sure makes you more “cheap” when you think about the real cost of spending that $5 bill.
We like the idea of extra work. We feel like it’s the easiest way to come up with extra income. In fact, it’s one of the most difficult things about Kristen’s new management job for us. She effectively lost her ability to work overtime in taking this salary position, eliminating her easy ability to pick up extra shifts and make the extra income for us when its desired. When is it most desired to have extra income for us?… You guessed it, TRAVEL. Although we can afford to take vacations without working extra, it sure is nice for our savings and the psychology behind it to work some extra shifts to pay for it, thus allowing us to justify a little easier the expense of travel.
We plan on writing a blog soon about our “dreams of the future”. It’s probably overdue after all the financial talk. Especially since the ONLY reason we care about the financial stuff is because what it enables us to do in the future. We not only dream about what sort of relaxing things we will do, but truth be told, we spend more time talking about what WORK stuff we will do. We are speculating, but expect that we will ALWAYS work in some capacity. We have some ideas of what that extra work will be, but we will probably continue to earn our living expenses every year so we can allow our investments to grow.
So get out there and find that extra $10,000 for your retirement! It just might be $34.51 at a time!