Tuesday, December 6, 2011
Do Well: When is a Second Income Worth It?
Work Outside the Home
or a start Home-Based Business?
by Jonni McCoy
http://blog.crown.org/2011/12/02/do-well/ [get your free copy!]
Q. You will
have less free time. Will your busier schedule mean buying groceries, household items and clothing at full retail prices, instead of shopping sales?
When I worked full time outside the home, our grocery bill was $400 more per month. This was partly because I did not shop sales, and paid full retail for whatever we decided to cook. Plus, we needed more ready-to-eat foods, since we were short on time. Convenience foods cost 6-10 times more than the unprepared ingredients. Since I had less time, I needed to shop at one store for everything, making some items more costly than if I could shop at various stores throughout the week.
Q. Have you calculated in the cost of driving to the extra
job (gasoline, car maintenance, etc.), lunches needed on the
job (even lunchbox food can be costly if you buy prepackaged
items in convenient sizes), and tools you might need (e.g.,
laptop, tablet, special clothing, etc.)?
Once you calculate these costs, you will see your true take-home pay.
Sometimes it becomes apparent that working the extra job is not
advantageous to the family after all. Other times the income is
much-needed and the new work hours can fit into the family plan
without significant disruption. Discuss the pros and cons with your
spouse, reviewing the time impact on the family and balance that
with the net benefit (income after expenses), then decide together
if it is still worth it.
Working at Home
Working at home can offer the best of both worlds: earning
an income while tending to the home and family. The lure of not
commuting to a job, not dressing up for work, and keeping flexible
hours make this income choice appealing. While it’s possible to
earn a very good income from a home-based business, as with any
job there are hidden expenses to examine before investing time or
money. Here are a few things to consider before launching into a
Q. How many hours can you devote to the job?
I remember taking on work at home when my children were
young. I started working only after everyone was in bed and continued
late into the night; that was the only time I could concentrate
on my work without interruptions. Be honest with yourself about
the amount of actual free time you have each day. Often, stay-athome
parents long for a mental challenge, and as a result, they
believe they have time available for productive work. In reality,
they usually have only a few minutes here and there.
Net Pay for a Second Job Outside the Home
Q. Do you own all of the equipment
necessary to do the work (computers, software
Q. Are you self-disciplined?
When you work from home, no one is there to
remind you to stay on task. Your success is up to you.
An average business plan allows 30 percent of
the budget to be spent on advertising in order to
Q. Will the profit (after taxes) justify
Self-employment brings higher tax rates for Social
Security and Medicare. In 2011, those working for
someone else pay 4.2 percent in Social Security tax
and 1.45 percent for Medicare. If you’re self-employed,
however, you are essentially paying the employer’s
part as well, so the rates rise to 10.4 percent for Social
Security (only on the first $106,800 of income) and 2.9
percent for Medicare (on every dollar you earn).
Even after allowing for the expenses involved in
running a business from home, the net income tends
to be higher than with a “paycheck” type of job. And
depending on how much time and advertising you are
able to invest, a home-based business offers the potential
for improving your net return. At-home businesses
also allow you to work off-hours without interfering
with family time.
If working at home is the more desirable of the two
sources of additional income, choosing a profession is
the next step. Some ideas for jobs include (but are not
limited to) word processing, freelance writing, product
sales, answering service, accountant/bookkeeper
Creating a business of your own from scratch
requires a bit more work up front. It may take time
and extra advertising to inspire trust in your service
or product. Advertising could include a flier for your
business delivered to companies and individuals that
need your services, free promotional items at local fairs
or events, radio interviews and giveaways, etc. As an
aid to your success, check out books from the library
on how to begin a home business.
Many home entrepreneurs choose to become distributors
or consultants for an existing company. This
allows an instant return on your investment, and many
times the product and company already have a loyal following.
When searching for the right business for you, beware of companies
that take advantage of people who want to work from home.
If something sounds too good to be true or requires a great deal of
cash to buy in, investigate it thoroughly. Check with the following
agencies on the legitimacy of a company by typing “at-home” in
their search boxes:
The Federal Trade Commission (ftc.gov)
Better Business Bureau (bbb.org)
Direct Selling Association (dsa.org)
National Fraud Information Center (fraud.org)
Being your own boss can be rewarding and liberating. As long
as you understand what it requires of you (and you form good work
habits while maintaining your family priorities), working from
home can be a very successful experience. That said, the peace of
mind that accompanies a paycheck-based job outside the home is
also appealing. I have worked both and benefited from each. List
the pros and cons for yourself. Remember, there is no one-sizefits-
all answer; you and your family should embrace the option that
works best for you.