I have been thinking a lot about overtime lately.
From what I have heard ( the occasional comment posted on our Facebook page) there seems to be an underlying theme that
- It’s not worth doing overtime because it all goes on child support
- It’s pointless to try to get pay rises because it will just cost you more
- Overtime might be great at the time, but it will bite you in the arse the next year
In my own job I have the opportunity to do occasional overtime when I go on call. Also if I work hard and accomplish all my targets at work I generally get a (small) pay rise each year.
I am a paying parent.
So it got me thinking..
Am I shooting myself in the foot by trying to work hard and get ahead?
Well, from what I can figure out, no not really.
In fact it’s likely that I am helping 3 parties, the biggest share of the pie goes to myself, some to my kids that I’m paying for and the rest to the country in the form of taxes.
Here are the reasons why I came to this conclusion:
(I’m going to try to address the most common scenarios but feel free to add your own thoughts if I am missing something here.)
Several times I have seen parents post about doing overtime and then getting hit with massive amounts of child support.
This is obviously not a good thing, and I wanted to try to understand it a bit better.
As I see it there are two ways this could go down.
- Overtime that is regular (you could reasonably expect it the following year as well)
- Overtime that is irregular, maybe you have a busy year at work and lots of overtime
Lets say, for example in a week you do four hours of overtime @ $30 an hour = $120-00 Gross
Most of us pay around 20-30% in income tax and around the same in CS, depending on how many kids we have.
In this case I will do a best case and worst case scenario:
|Breakdown of $120||$$$ Best to Worst|
|(Tax) 17.5 to 33%||$21.00- $39.60|
|(Child Support) 18 to 30%||$21.60 – $36.00|
|(Left over) 37 to 52%||$77.40 – $44.40|
This is definitely one of those situations where less is more.
If you earn more, and have more kids you will get less.
If you earn less and have less kids, you will get more.
Best case (Lower Income, 1 Child)
Worst case (Higher Income 3+ Kids)
Example worked out over one year
I then did an experiment with what I consider to be a worst case scenario.
When I say worst case I do not believe that any amount of income (top tax bracket), or quantity of kids (top CS rate) could make this much worse than what I have calculated here.
If you can show us some different calculations then please go ahead and share them (despite what my other and better looking half will tell you – I’m always open to being proven wrong).
In this case we take a paying parent with a Salary of $80K (In order to hit the highest tax bracket of 33%).
This parent is paying for 4 kids with no nights of care at all to hit the max CS % which I understand to be approximately 30%. (All 4 kids are over 13)
Current payments of $1626 per month.
What happens if this hard working parent does 5k of overtime in a year?
|Breakdown of Overtime $5000||$$$|
|(Tax) @ %33||$1650|
|CS (worked out on calculator)||$1512|
|Left in pocket||$1838|
Yes they are left with less than half, but they are still getting money they didn’t have before and it is more than the child support amount, plus it’s more than the tax amount.
New payments of $1752 a month (an increase of $1512 per year).
Overtime one year, none the next
One thing to keep in mind is that when you get extra money, you don’t generally pay CS on it straight away.
As many of you will know if you don’t get the same amount of overtime/money the next year it can hurt you.
Note: if you earn considerably less i.e more than 15% you can apply for a recalculation
Here are two ways to avoid that “bite in the arse”
- Pay a little bit extra, say the equivalent of around 25% of your overtime into your child support account, yes it just sits there as a credit ( I do this sometimes on the rare occasion when I have extra money, to help buffer when things are tight).
- Open a separate bank account and put around 25% of the extra money in it, you might even get a teeny bit of interest as well.
I know its a hassle thinking about and planning for this, but at the end of the day either option is not overly strenuous or out of reach for most of us.
Some time ago I saw a comment on our facebook page along the lines of:
My husband turns down payrises at work, because he would end up having to pay more child support
I may not have phrased that perfectly but you get the general idea.
I don’t want people thinking that, because it’s not going to help anyone.
It may seem like a small amount that you get after all the deductions, but it is still money in your pocket.
So to sum up:
In my opinion, after careful research and number crunching, I believe that overtime and pay rises are worthwhile even if you pay child support.
In fact I know many of you are really struggling so hopefully you will now be in a slightly better frame of mind when it comes time to put up your hand to do a few extra hours.
Do you agree or disagree? Let us know what you think.
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