Moonlighting: 4 Tips To Help Manage The Extra Income
Moonlighting. If you are in the healthcare field I'm sure you're familiar with the term. If you're entering the medical field, I'll enlighten you. Moonlighting is basically working a second job in addition to your first job of course. I've truly never met anyone that says "hey, I'd love to give up some free time to take on a second job" without there being some sort of financial necessity. I've had the pleasure of serving physicians and nurses that have taken on the extra work and while it may be financially rewarding, moonlighting comes at a price, your time and health.
Budget for convenience
The obvious trade-off for taking on a second job is your time. There's no way around this. With that said, being intentional with your time becomes crucial for both your physical and mental health. At times, we may be able to juggle all the moving parts in our lives without breaking a sweat, but doing so on a consistent basis, with a second job, can become burdensome. So what can you do about it? Budget for convenience. Since you're trading your time, you will be earning a little extra so make sure to budget for things like meal preparation rather than cooking, a house cleaning service a couple of times a week, and a grocery delivery service. If there's anything I love more than saving money is saving time.
Monitor your spending
I'll admit from first-hand experience that anytime I've earned a little more money than the previous year or job, my spending shows it. I'm a huge advocate for making a spending plan every year. This is what guides me in accomplishing things like paying down debt, putting more money into investment accounts, or making big-ticket purchases. I usually like to check on my spending/savings goals every quarter to see what progress I've made and hold myself accountable. Some people are good at this and some are not. Consistency is key and keeping in mind the reason why you're trading your time for extra cash helps.
Save enough to cover taxes
It almost never fails that when one of my clients decides to take on more work and earns more money, withholding more money for taxes becomes an oversight. I believe the oversight stems from the excitement and happiness of accomplishing things like paying down debt, super saving for a home, or other business ventures that ultimately, taxes take a backseat. The key thing to remember is to be sure and pay enough taxes to meet the IRS' "Safe Harbor." What does this mean? The IRS will not charge you a penalty if you pay 90% of the taxes you owe for the current year or 100% of the taxes you owed the previous year (110% if your AGI is over $150, 000) OR if you owe less than $1,000 in tax after withholdings and credits.
I've found that the best way to ensure you are paying your fair share of taxes is to work closely with your tax preparer nearing the end of the year and do a tax projection. This will at least give you a clearer picture of how much tax you'll have to pay for the extra earnings.
Pay for tax planning and financial planning expertise
Taking on a second job in the medical field typically means you'll be a contracted employee. There are several moving parts to this like saving enough for taxes, deferring extra money into tax-deferred accounts, and if you are moonlighting to pay down student debt, a financial plan can help answer what a solid debt repayment plan looks like without cramping your lifestyle. After all, no one wants to work two jobs for the rest of their life.
Athletes pay trainers, business owners pay business coaches, and people pay doctors for checkups. At the end of the day, we don't know what we don't know.
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MyLife Financial is a fee-only financial advisory firm providing objective and independent advice virtually. Our clients are busy professionals that face daunting questions of how today's financial decisions will affect their long-term financial success. Everything written is strictly for informational use only. Please seek the advice of your CPA, Attorney, or financial professional before implementing any strategies.