No matter how hard you work, there’s one thing you can’t buy more of: time. But if you’re juggling a full-time job with a hodgepodge of other responsibilities, time is often in short supply. One solution is to scale back from full-time to part-time work. But can you afford it?
Making the Move to Part-Time: 5 Factors to Consider
If you’re considering the shift to part-time employment, you can’t ignore the financial consequences. Here are five questions to help you evaluate whether you can afford to switch from full-time to part-time.
1. Could You Pay Your Bills on a Part-Time Salary?
The most obvious thing to consider is, can you make a part-time paycheck stretch far enough to cover all your expenses?
To estimate how prepared you are, first figure out how much you spend each month. Look back at the past three to six months and average your monthly expenses. Then calculate how much money you’d earn from your part-time salary, plus any additional income sources you have. If you share expenses with a spouse or partner who works, consider their income as well.
It’s a good sign if the reduced paycheck would still leave you taking in more than you’re spending. Otherwise, look for expenses you could shave from your budget.
If you’d need to slash your spending significantly, consider a test run. Try living on a part-time budget for at least a month or two while you still have a full-time salary. That can help you gauge whether going part-time is realistic. Plus, it’s a great opportunity to build up your emergency fund while you’re still earning more.
If you’d have to take on credit card debt to make ends meet, you cannot afford to go part-time. Interest rates for cardholders who carry a balance are over 16% on average. It’s easy to dig yourself into a black hole of debt pretty quickly when you’re putting expenses on plastic.
2. Will You Save Money by Working Less?
There are some scenarios where you may be able to lower your expenses by working less. Maybe you’re a working parent who can save on daycare, or you’ll spend less on transportation if you have a long commute.
Going part-time often pays off for older workers who are already taking Social Security benefits. When you take benefits before your full retirement age—either 66 or 67—Social Security can reduce your payments if you work. In 2021, recipients will have their benefits cut by $1 for every $2 they earn above $18,960 until the year they reach full retirement age. The lower paycheck may be worth it if it means more Social Security.
You may also save if you have more time to do the tasks you’ve been outsourcing. For example, having an extra day or two could open up time for meal prep instead of ordering out. Just be realistic about how you’ll be spending your newly freed-up time. If you’re reducing your hours to go back to school or to spend more time caring for your kids or an elderly parent, you’ll probably be working just as hard, but getting paid for fewer hours.
3. Will You Still Qualify for Benefits?
There’s a good chance you depend on your employer for more than just your salary. Don’t forget to factor in how going part-time could impact your benefits.
Under the Affordable Care Act, most companies have to offer you health insurance if you work at least 30 hours a week or 130 hours a month. If you think your hours will dip below these thresholds, talking to your employer about whether they offer health insurance for part-timers is a must.
Otherwise you’ll need to factor in the costs of buying your own coverage through healthcare.gov or joining your spouse’s plan, if applicable.
Saving for retirement is another consideration. Most employer-sponsored retirement accounts, like a 401(k) plan, are covered by a federal law called the Employee Retirement Income Security Act of 1974, or ERISA. Under ERISA, as long as you meet the plan’s other rules, you’ll still probably qualify to participate as long as you work at least 1,000 hours a year, or about 20 hours a week.
Still, since you’ll have a smaller paycheck, you’ll probably be contributing less money. Maybe you won’t be able to contribute at all. If you get an employer match, saving less means you’re giving up free money.
Vacation and Sick Time
Don’t forget about PTO. Many employers give full-time workers paid sick and vacation time, but only offer unpaid time off to part-time workers. If you’ll need time off but won’t be getting paid for it, you’ll need to adjust your budget downward even further.
For example, suppose you get four weeks of PTO as a full-timer and you’ll still need four weeks off once you go part-time, but you’ll have to take it unpaid. If you’re cutting your hours from 40 a week to 20, planning for a 50% pay cut isn’t enough because you’ll only get 48 weeks’ worth of paychecks instead of 52 weeks’ worth.
If you don’t work at least 1,250 hours in a year, or 25 hours a week on average, your employer doesn’t even have to let you take unpaid leave under the Family Medical and Leave Act, or FMLA. If you think you’ll be taking time off for parental or medical leave, or to care for a family member, it’s essential to keep the 1,250-hour minimum in mind. Otherwise, your employer doesn’t have to hold your job for you.
4. What Are the Opportunity Costs?
Think about how your career prospects may be affected if you scale back. Will you be less likely to get promoted? Will it affect your ability to learn new skills that could lead to better-paying opportunities? If the answer to either question is “yes,” that doesn’t automatically mean that going part-time is a bad decision. But it’s important to think carefully about any decision that could lower your long-term earning potential.
On the flip side, what will you gain by going part-time? If you want to work less to spend more time with your kids or an ailing loved one, the benefits are impossible to quantify.
But in some cases, you can absolutely put a monetary value on your potential gains. If you’re reducing your work schedule to finish up your degree or pursue your side business that’s taking off, the long-term upside may very much be worth the short-term sacrifice.
5. Will You Really Be Working Less?
How likely is your employer to shift some of your responsibilities to someone else or hire another team member if you went part-time? If the odds are slim, this should give you serious pause.
Set hard limits about how much your time is worth and how much of it you’re willing to give. Make sure there’s a clear plan for what duties you’ll be giving up. You can only afford the pay cut when you go part-time if the end result is less work for you.
Confidently Switch to Part-Time Work
Going part-time will only benefit you if the end result is that you’re doing less work. Ready to make the switch? FlexJobs offers flexible and remote part-time jobs in more than 50 career fields. Join today and get full access to the database.
Going part-time will only benefit you if the end result is that you’re doing less work. Robin Hartill is a CERTIFIED FINANCIAL PLANNER™ and The Penny Hoarder’s “Dear Penny” advice columnist. Send your tricky money questions to AskPenny@thepennyhoarder.com.
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