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| Hammocks Beach State Park, North Carolina |
Part time work or gig economy may become more prevalent in the foreseeable future, as more companies look to shed workforce and/or replace with a more ‘mobile’ (on standby) workforce. How does someone who’s a part time worker or a gig worker supposed to retire?
In this post, I’d like to discuss financial independence and retiring early for more than 1/3 of US working population who are part time or gig workers.
Let’s first define the term:
A part time worker or a gig worker is defined as someone who works under 30 hours per week at one job. In many cases, someone may be working multiple jobs. Worker’s hours may be over 30 hours or even 40 hours depending on how busy the work gets. This is in contrast to a full time worker who typically works 40 hours per week for one employer.
Most part timers will not have access to benefits like the 401k (or health insurance). Instead, part timers need to figure out their own retirement via an IRA (individual retirement account), or a Roth IRA. *Check out my post about retirement accounts here.
When my wife and I lived in Hawaii, we worked part time. I worked at a transportation company while my wife worked retail. My hours were counted when I was driving, and not counted when I was on standby. This meant I would rarely work 40 hours on paper. I may start at 7 am, then come home around 7 pm, which should equal about 12 hours per day (not counting commute times) but on paper, I was working much less than that, as the actual driving time was less. My wife worked on the other hand, around 35 hours per week in her retail job.
My wife and I both made around $9 per hour in Hawaii (I made some tips but this was hit or miss...). We understand what it’s like to work part time and making close to minimum wage.
One saving grace of living in Hawaii was that every employer had to provide health insurance to all employees. We paid 1.5% of our salary for health insurance.
When we lived in Hawaii, we lived a very Spartan lifestyle. We owned a condo near Waikiki Beach, in Honolulu, but that was about it. We didn’t own a car, but rather bikes. I commuted using my bike, while my wife walked to her work. We learned to budget each month by taking a calculator to supermarkets so we could make sure we didn’t go over our $80 grocery budget for the week.
Everything was budgeted in Hawaii as we couldn’t spare much making minimum wage. We had to plan our dining out budget, grocery budget, and other spending budget. We got real efficient at budgeting after awhile. Even with this limited cash flow, we somehow got money left over to pay off additional mortgage on most months.
We understand how tough it is to survive on minimum wage or similar, and we understand there are sacrifices to be made to make budgeting work. I’m not going to say it was easy, but we did manage for over two and a half years while living in one of the most expensive cities in the USA.
It comes down to making sacrifices to plan for a better future. There’s just no sugar coating it...
These are some things I’d like to recommend for those who are part timers or gig workers:
- Budget, budget, and budget:
Write down how much money is coming in vs how much is going out. Without knowing that, it’s impossible to put away money for retirement.
See what you can reduce each month (cheaper housing, cheaper transportation, cheaper groceries, cheaper cell phone plans, etc.). Cut out other ‘fat’ in your budget like streaming services (if you have more than one), cable tv (cut the cord), shopping for stuff (cut out or drastically reduce), and even cutting your own hair.
If you find some money is left over, then great! Save that money to go automatically to your IRA or Roth IRA. The more you can save, the better. Don’t be satisfied saving $100 per month. Keep going, push yourself!
- Find another job or learn a new skill that pays more:
If you don’t have money left over, then try getting another part time job or look for a full time job. Better yet, learn a new skill that pays better. There are options if you’re willing to work at it. I sold cars for about 5 years before realizing I needed a new career. I learned computers then got a job in a start up company, paid my dues, which would then lead to my last job. This was the job that allowed me to retire early!
Like Dave Ramsey (one of my favorite finance gurus) says, “If you don’t like something, then change.” It’s always better to change while you’re younger than to attempt the change later in life...
Remember, we only have one life to live. You don’t get another life...Do things in this life that you want to do. Don’t wait...
- Max out your IRA / Roth IRA (save more if you can):
As of year 2022, you can max out IRA / Roth IRA at $6,000, or $7,000 if over 50 years of age. This is what it takes to get to financial independence. Ideally, you should save more even if you maxed out your IRA. Once you max out your IRA, then you should open a brokerage account. *
See my post about brokerage account here.
Here’s an example of what saving $6,000 per year for 25 years does if you get 8% rate of return:
$438,635
Here’s the same example but now saving $8,000 per year:
$585,139
You need to be looking at these numbers often to realize that retirement is possible. With these numbers, you can theoretically live off of it without running out of money in your retirement. When you add whatever social security gives you after retiring, you should be all set. ***Note: You can Google ‘compounding interest calculator’ to try different scenarios. I like the one from ‘investor.gov.’
In conclusion:
My wife and I understand part time workers have it difficult. It’s never easy juggling multiple jobs and just getting by. Sometimes, these part time workers have to take care of other family members on top of their own immediate family.
Despite all these challenges, one thing we can all control is what kind of jobs we have. We can, if we wanted to, learn a new skill to get a better job, that pays better with benefits. Even if at this moment it may seem tough to imagine a better you and a better future, it is possible, if you really wanted it bad enough.
Be ambitious and try to change if you’re not happy with your current situation. We only get one life to work with!
Thank you all for reading!
Jake
Wandering Money Pig
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