Moonlighting Financial Pros/Cons

[hightower]

mxg67 wrote:

I’m considering doing some moonlighting as a fellow, some other fellows double or even triple their income from moonlighting alone, but I’m wondering what the financial pros/cons are of increasing my income as well as associated AGI.

Pros: more money, qualify for larger credit card limit, higher disability/life insurance benefit maximums, social security tax phaseout at $127k (is it $127k of income or $127k after subtracting health insurance?)

Cons: higher tax bracket, roth ira income limit at $184k, AMT, negative effect on loan repayment, negative effect on some tax deductions (seems all education-related tax deductions/credits that don’t affect me)

If it helps, I’m married, no kids, in the 15% bracket (but nearly 25%), renting, minor debt, and I take the standard deduction.  I certainly want to pad my income and don’t mind going up in tax bracket, but I’m not sure how far I want to go and what the trade-offs may be (besides time and more taxes).  Would appreciate further input and ideas regarding pros/cons.

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Absolutely zero financial cons to increasing your income.  Yes, you'll pay more in taxes, but that's life. What negative effect on your loan repayment are you talking about?  You are early in your career, you have some debt, I assume someday you'll want to purchase a home, so you need to rake in as much money as you can now.  Don't work so much that you have zero free time or make yourself miserable.  But, if you can stand to work extra now and double or triple your income, definitely do it!  Trust us, your future self will be happy you did it, especially if you use the extra cash to pad your retirement accounts.  The money you make now and place in retirement savings will grow a lot more than money you put in there 10, 20, or 30 years from now.  But, again, don't make yourself or your wife miserable
I worked extra as a senior resident (moonlighting for the hospitalist group).  My only regret in doing that was that I spent all the extra money on travel and a car.  I don't regret the travel at all, but I wish I had not bought the car and instead put extra money in a Roth.  But, I hadn't found WCI yet and had no idea what financial independence was or anything like that, so oh well, that's life!  Now as an attending, whenever I work extra I save the extra income (I'm actually going to be setting up direct deposit to my Vanguard taxable brokerage account for the new side gig I'm currently pursuing).  It makes the extra work feel more worthwhile when you know you're immediately/directly increasing your net worth.

[Kamban]

mxg67 wrote:

but I’m wondering what the financial pros/cons are of increasing my income as well as associated AGI.

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You are overthinking this, as others have stated.

You are married with no kids. So you can earn more or spend some time more with your spouse. Or maybe a balance between the two.

The best option would be to work when the other option is just sit in front to the TV or browse the net. Use the extra money to invest in retirement, pay off student loans or other loans that you have and maybe take a nice vacation that as a young attending you might not be able to take due to time constraints. Enjoy the life now.

[RadDoc6876]

Agree you shouldn't worry about tax brackets, etc.  It may help if you define certain goals for your moonlighting income to help gauge how much you want to work/earn and define how much time you're going to devote to it, which is what it comes down to.  For example you may have a certain savings rate or targets you want to achieve, you have school debt you want to pay off by a certain time (sounds like you don't), save up a down payment on a house by a certain date, pay for your wedding, etc etc.  It can be great but also can be an open-ended commitment that starts to impact your health and life...if you're skipping your gym workout in order to moonlight you may be doing something wrong.  Maybe create a written investment plan as recommended elsewhere here, write down some goals, then gauge how moonlighting fits into that plan.

[DMFA]

mxg67 wrote:

Thanks for the thoughts, and I certainly understand that, but I’d still be interested in other pros/cons.  It’s more a thought experiment than anything else.

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You're overthinking it.  Is the time worth the money?  That's the only question.

Tax deductions are not an issue.  Actually, moonlighting (if you're paid as an independent contractor) gives you more opportunities for work-related tax deductions (not subject to the 2% rule like W-2 employees) and another retirement account in a solo 401(k), and can put 20% net profit as "employer" contribution.  You can only deduct $2,500 of interest if your AGI is < $150,000 MFJ anyway...in the 25% bracket, that's $625/year back to you.  That's likely less than one moonlighting shift.

Roth IRA income limit is not an issue.  If you're over the income limit, just do backdoor Roth (trad IRA contribution, not deducted, and converted to Roth before it earns).

Credit card limit is not an issue.  I think they're actually changing the way credit scores are done, the thought process now being that a large amount of available credit is actually a bigger risk than less available credit.

Loan repayment is not an issue.  If you're on the hook for the loan, you need to pay it off anyway.  The longer that takes, the more interest accrues.

All those concerns are slightly more money to pay, but since you made more money than that anyway, it's not a big deal.

[Peds]

No cons to more money. Work whatever extra you want then move on.

[mxg67]

Thanks for the thoughts, and I certainly understand that, but I'd still be interested in other pros/cons.  It's more a thought experiment than anything else.

[ENT Doc]

You will almost always benefit from making more money.  The question is: what is the marginal utility of that money and experience compared to what you're giving up - as Vagabond stated, your time.

[VagabondMD]

I think that you have framed it in such a way that it is more complicated than it need be.

When you moonlight, you trade your otherwise free time for money. All that other stuff is relatively inconsequential, especially in the longer run.

[mxg67]

I'm considering doing some moonlighting as a fellow, some other fellows double or even triple their income from moonlighting alone, but I'm wondering what the financial pros/cons are of increasing my income as well as associated AGI.

Pros: more money, qualify for larger credit card limit, higher disability/life insurance benefit maximums, social security tax phaseout at $127k (is it $127k of income or $127k after subtracting health insurance?)

Cons: higher tax bracket, roth ira income limit at $184k, AMT, negative effect on loan repayment, negative effect on some tax deductions (seems all education-related tax deductions/credits that don't affect me)

If it helps, I'm married, no kids, in the 15% bracket (but nearly 25%), renting, minor debt, and I take the standard deduction.  I certainly want to pad my income and don't mind going up in tax bracket, but I'm not sure how far I want to go and what the trade-offs may be (besides time and more taxes).  Would appreciate further input and ideas regarding pros/cons.