Second job is Step 2 in debt-free plan (spending cuts is Step 1)

Dear Pete,

My wife and I are both 29 years old and struggling. We made a series of bad financial decisions about three years ago, and they still haunt us today. We owe more on our house than it’s worth, we have a giant car payment ($500/month) and we have about $6,000 in creditcard debt, which we pay about $450/month on. I honestly feel like we’ve turned the corner in terms of decision-making, but still need to deal with the ramifications of our past. I’m consideringtaking on a second job to make the debt pay-down process go faster. Thoughts? — Rob, Denver

Dear Rob: Your thinking has shifted. And it has shifted to a beautiful place. Now we need to shift your cash flow. A second job is a great strategy for doing just that. Once you’ve cut wasteful spending, fixing cash-flow struggles with a second job is almost a perfect solution. If you could somehow virtually promise me you’ve cut wasteful spending, I can almost guarantee your second job will be the genesis to your financial success.

We must first rewind. There are two ways to fix a “more going out than coming in” problem — decreasing expenses or increasing income. Anecdotally, most people feel like the best solution is more income. It’s not. What can more resources provide the unresourceful? More ammunition to do themselves even more damage. I have never witnessed more money solving a resourcefulness problem. “I’m bad with money! Give me more!” Yeah, no.

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This is exactly why you must always begin a financial reclamation project with cutting expenses. A financial culling is transformative. When your use of money damages you and those around you, then more money isn’t the solution. But once you’ve become efficient with money, more money can solve your problems. Don’t join the countless others who bang their heads against the wall for years wondering why they can’t get ends to meet, even with consistently increasing income.

When ends meet, and you can eliminate a lack of resourcefulness as the protagonist, get a second job. Like you surmised, a second job will speed along the process. Whether you turn your car into a car service, work at the mall on the weekend, or listen to people’s problems as you hand them beers, this additional income will eliminate your debt forever.

Rob, once you secure your second job, give your job a job. Your job’s job is to systematically eliminate your credit card debt and car loan. Do not, under any circumstances, throw your additional income into the pot of money with your other household income. Each dollar you earn must do its job. If you absorb the new income and increase your lifestyle, you’ve just made your problem worse. Assigning your second income solely to debt reduction is trickier than you think. Increased hours can lead a person to look for conveniences to make life a bit easier. Remember, convenience is when you exchange money to buy time. You can’t afford to make that exchange in this scenario. You gotta promise me, Rob. A dollar earned is dollar paid toward your debts.

On the first day of your second job, the Beautiful Struggle can begin.

I’ve talked about the Beautiful Struggle in this forum before. It’s what takes place when you fight and scrap your way out of debt. Getting out of debt is not easy. It requires sacrifice, long hours and persistence. The reward for getting out of debt, when done correctly, is financial enlightenment brought about by the Beautiful Struggle. There are two priceless benefits of the Beautiful Struggle. The first is the conviction that you never want to go through it again. Don’t underestimate the power of this. Negative reinforcement is paramount. It only takes one grab of a pan in the oven to never forget a potholder again.

Don't confuse 'saving' with 'not spending'

The second benefit to the Beautiful Struggle is what will complete your financial renaissance. Your debt currently stinks because it consumes so much of your primary income. The reason you want to speed along the process is because you don’t want to run in place for so long. Once that debt is eliminated, not only will you eliminate the monthly obligation, but since you’re used to not having access to that $950/month, that $950/month can now fuel your future. The $950/month of debt obligations you will eliminate could translate into $1.5 million at age 60 (8% avg. rate of return), once you redirect that cash flow to your future.

A second job can save your financial life. If your financial life needs saving, have the courage to clean up your expenses first, then get a second job.

Peter Dunn is an author, speaker and radio host. Have a question about money for Pete the Planner? Email him at AskPete@petetheplanner.com