A second paycheck looks like pure gain, and for many households it is. For others, the money that actually stays home is a fraction of what it looks like. The only way to know which kind of household is yours is to run the numbers before saying yes.
Start with taxes. Extra income does not begin at the bottom of the tax brackets. It lands on top of what the household already earns, so it is taxed at the highest rate the household reaches, starting with the first dollar. A spouse returning to work, a second job and a raise all get the same treatment, and a side business also owes self-employment tax on its profit.
Next, subtract the costs that exist only because of the work: childcare, a second commute and the vehicle behind it, meals bought instead of packed, work clothing, and chores the household now pays someone else to do. None of that shows up on a pay stub, but all of it comes out of the same paycheck.
Finally, divide what is left by the hours the job really takes, drive time included. That is the real hourly wage, and it is the number worth deciding on.
So does a second income pay? Often, yes. Plenty clear the bar easily, and money is not the only thing a job brings. Health coverage, a retirement match and staying current in a career all have value of their own. The point is that running the numbers is better than a guess.
The same math works on income a household already has. Run a weekend side job or regular overtime through the same three steps, and the result may show that giving up those hours would cost far less than the paycheck suggests.
Rick Good spent ten years in the newspaper business, including with The News & Observer (Raleigh, NC) and The Greenville News (Greenville, SC). He co-wrote, with Melinda Coleman, Rutledge to Riley: Governors of South Carolina, 1776–Present (Published by The Greenville News), and is the author of Mind Games Trivia #1 (Amazon). He has recently spent 15 years creating original trivia content through Sounds Good Mobile Entertainment and continues that with his new company, SGME Software. He edits The Smart Reader’s money, real estate, and business coverage.
