Why Relying on Overtime Dooms You to Failure

by Kevin on October 20, 2009

Last week I was happily browsing over at CNN Money and came across a seemingly obvious  article arguing that retailers would hire fewer seasonal workers this holiday season. It makes complete sense — the economy is down and credit is tight. Your typical overspending American family is likely not going to spend a lot of money at Christmas (even if they wanted to!).

Nonetheless I clicked through to the article to take a quick read. My thinking was pretty spot on, but the article also talked a bit about how there were so many people looking for jobs that even if you wanted to get hired at a seasonal job the competition would make it extremely tough to land the gig.

That’s when a personal finance bombshell hit me like a speeding train of nonsense.

Expect Overtime? Expect Failure.

I was completely wiped out by this:

Jenny Posner Brown-Shern, 37, doesn’t want to get left out in the cold. She has a full-time job as a social worker. Her husband, Joel, has a good job as a fraud analyst for an office supply company, but his overtime was cut this year and so were some of Brown-Shern’s benefits.

“We were dependent on that overtime,” she said. Now, they are both trying to find seasonal jobs to fill that gap, and hopefully buy some Christmas presents for their children.

I’m going to skip the whole lecture on how presents should not equate happiness. We will cover that topic in the future.

Instead we will focus on the absolutely mind boggling idea of depending on overtime to make ends meet.

Relying on Overtime is Stupid

It is called overtime for a reason. It’s over the regular 40 hours per week you would normally work.

Three quick synonyms for overtime:

  • unexpected time
  • not normally on my paycheck time
  • accelerates my mortgage or debt payoff plan time

Relying on overtime is a dumb financial move. You are guaranteed 40 hours. Everything over that is gravy and should be used to further your financial goals a bit.

From the quote above this family appears to have set up their budget and lifestyle around an artificially high income anchored by overtime. That is tragic.

This family’s dependence on the husband’s overtime highlights some problems with their financial plan:

  • They are living a lifestyle above their income… by counting on overtime for the monthly budget.
  • They haven’t cut their expenses down to a budget-friendly level… and prefer to stretch themselves with overtime or a seasonal job.
  • The family may value stuff… even though times are tough the top goal is to provide presents for the kids at Christmas.

Some of you may be sitting there thinking, Wow, that is kind of harsh!

And you are absolutely right. It is harsh. I don’t know them and I don’t know their situation. Maybe the overtime was “guaranteed”. Maybe they provide presents to kids in poor communities or at hospitals.

But it is abundantly clear that if you can admit you are relying on overtime, you can admit you’ve made some dumb financial moves.

Depending on the Undependable Will Doom Your Finances

Relying on overtime is like relying on scratch-off games from the convenience store. Sure, you might go on a lucky streak and walk away with a few extra bucks every once in a while. But would you rely on consistently winning at scratch-offs? Obviously not.

That’s the core of this problem. Relying on the unreliable will eventually catch up with you.

Unreliable tenants doom would-be real estate millionaires.

Unreliable or late paying customers doom upstart companies.

And unreliable overtime that you are relying on will kill your personal finances.

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October 24, 2009 at 4:50 pm


grapkulec October 20, 2009 at 6:04 am

overtime? why didn’t they rely on blackjack or national lottery? 🙂

Lee October 20, 2009 at 6:41 am

So very true. Relying on the unreliable is just plain daft.

Overtime has helped me get out of $30k of debt this year (almost there – 1 month to go!), but will I rely on it to live on afterwards? Hell no. It’ll just be extra money in the bank.

Jeff October 20, 2009 at 6:53 am

Ok I know I’m going to get baslted, but here I go. I was one of those people who relied on OT. I work in the automotive business and have for 14 years. I have always had OT, usually to the sum of $2500 per month. Not anymore though. I have had to face the music and make the adjustments to live within my means. Yes I made the mistake, but I’ve learned from it and I’m pressing on. I can’t say the same for many of my co-workers though. Many are in foreclosure and haven’t made peace with their mistake. I hope they wake up soon because that is no way to live.
I was able to find that second job until I pay my debt off. The jobs are there, even in Detroit. I’m just seeing a lack of effort of people trying to find them here.

Kevin October 20, 2009 at 7:16 am

That’s the key difference, Jeff. Yes, you relied on it. But you’ve adjusted, cut back, and made changes to adapt to the new situation.

That’s all it takes!

Financial Samurai October 20, 2009 at 6:54 am

I’m not sure if I agree with this. I know nurses here in San Francisco who tell me they LOVE overtime. How can they not, when one makes $200,000/yr by working 15 extra hours a week?

Work overtime, just keep your spending the same.

We’ve gotta work on the income side of the equation as much as the cost side!

Best, FS

Kevin October 20, 2009 at 7:15 am

Woah, hold on there. I’m not saying overtime is bad. I’m saying basing your budget off of that overtime when it is not guaranteed (that is, part of your contract or something like that) is not smart.

OT is great. Who doesn’t love earning 1.5x more than they normally make?

Financial Samurai October 20, 2009 at 7:19 am

You’re right Kevin, regarding basing your budget off of overtime is somewhat dangerous. That said, if overtime is a common practice, it’s not unreasonable.

In finance, for example… their year-end bonuses generally always account for 30-80% of their entire compensation. Let’s average it out at 40%. ($100K base, $50K bonus for example). That is how the compensation is structured, and although it may not be wise to live off more than your basis, it has just been institutionalized.

Last year was dangerous, hence why it’s always good to spend the salary and SAVE the bonus.

Jeff @ Sustainablelife blog October 20, 2009 at 8:45 am

I read this article too, and was quite surprised by this woman. She says that she lives within her means (because how is going to be interviewed by a magazine and actually fess up to mistakes they made/are making) and that because her husband is not getting overtime, they cant make ends meet. Overtime is not really part of the budget, as you say, it should be for savings or paying down debt.
It does sound like the overtime was fairly common, but that’s not an excuse for including it in your budget.
I was just surprised when she said she was “living within her means”. It doesnt really sound like that’s the truth.

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