Vol. 5 - Taking a Travel Assignment to Tackle Debt
In this episode, we are answering a listener question who wants to know should they take on a travel nursing job to pay down student loan debt. We cover:
How to decide whether to rapidly pay down debt vs focusing on loan forgiveness
What a zero-based budget is
How the debt snowball works
How to approach debt repayment looking at this nurse's numbers
Childcare cost while traveling
Working overtime as an option
Tightening up cashflow
The importance of knowing your numbers
Pursuing local per diem jobs
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TRANSCRIPT:
Jason Hamilton (02:13): Hello and welcome everybody. Good morning. Welcome to our fifth podcast here, the Nurse Your Wealth Podcast. We are back again today to answer another really interesting question we have for you today. So I'm back with my good friend, Naseema. Naseema, you want to say hello?
Naseema McElroy (02:26): Hey everybody, welcome back.
Jason Hamilton (02:28): Hey, so we had a question submitted. It's an anonymous question, but I think it's a really good question. And so we want to have some dialogue around this. So I think a lot of nurse clients that we speak to are still dealing with things like student loans and they're looking at these big numbers, you know, 10, 20, 30, 50 maybe even more $100,000 and a big question sometimes is, should I take on an extra job or in this case, should I travel nurse to make more money and pay down debt? So we're going to have a little conversation around that today and help you think through this situation. Because I know sometimes the stress of probably working 50, 60 hours as it is, thinking about adding another job, leaving your family can become a lot. So Naseema, how would you answer this question? If this was you in the situation, you're sitting there $50,000 in debt and we should lay out that this particular person is making $80,000 living in Connecticut. So it's not super low cost of living there, but it's not super high. What are your thoughts on that?
Naseema McElroy (03:21): Well, another thing to highlight is this person is a single mom and so they have kids and that they're responsible for solely and without knowing what the support network is in place. This is how I'm going to answer the question. So the way that I look at tackling student loans is how much you actually owe to your income. And usually if it's less than a one to one ratio, so she's making $80,000 and her student loans are $50,000, I would say that this is something that you can tackle right now with your income. You can knock out those student loans rapidly and aggressively. If it's higher than a one to one ratio, then I went look at different student loan repayment programs, refinance and other advanced strategies. But if it's less than a one to one ratio, I would always say this is something that you can aggressively knock out where you are.
Naseema McElroy (04:11): And so to answer the basic question of should I travel? And when we answer these questions, we are answering off of the information that we're giving. Unfortunately, if the person has in line here with us, we can't ask clarifying questions. But from the information given, yeah, I feel like with her income, she can aggressively pay off her debt. And the way that I aggressively paid off my debt as a refresher is by using zero-based budgeting and just the debt snowball. And you know I have a lot of information on my page about that and that's just something that you can Google. But yeah I would just recommend that she knocks out her debt where she is.
Jason Hamilton (04:49): Okay. So you mentioned two things there. You know we haven't really laid a foundation on all of these kinds of basic financial skills yet. So maybe we can take a step back before I kind of get my thoughts on that. Can you talk about what zero-based budgeting is and then also what the debt snowball is?
Naseema McElroy (05:02): So zero-based budgeting is a form of budgeting where every one of your dollars is given an assignment in advance. So zero-based budgeting is where you give every one of your dollars in assignment in advance. So telling like if you make $10,000, you allocate every one of those dollars and assignment. So whether it's paying down your debt, down to paying for clothes for your kids, every month looks different and every dollar has an assignment. And so with that, I always prioritize whatever my debt payoff goal was. If I knew that I had to pay off my debt by a certain time, I say, Hey, $2,000 needs to go towards this no matter what, and I adjust everything else around that. So that's your basic budgeting. It doesn't mean that you have $0 million a year account. Just means that you're giving all your money in assignment.
Naseema McElroy (05:46): And then the debt snowball is where you list your debts from smallest to largest. You focus on paying off the smallest debt and you pay the minimum balances, the minimum payment on everything else. And so you list out all your student loans. In this case, you will list out, you usually have multiple student loans within your student loan service's site. And so you list those all out and then you focus on the smallest balance debt. You throw every single one of your dollars towards that. And then once you pay that off, now you have that minimum payment that you no longer had to make. And then so that gives you, that frees up even more money to throw at her next debt. And so it snowballs though that every month, every subsequent month or after you pay off a debt, you have more and more money to throw at your next day.
Jason Hamilton (06:32): Good. I think that's helpful for people and you know, even coming from like a Certified Financial Planner perspective, even though financially paying the highest interest rate, you know, technically pay off things faster, actually recommend the debt snowball where people pay the lowest balance first. Because when you're dealing with folks that have debts, we're not usually dealing with, you know, pure rational type of thoughts. Usually there's some behavioral issues there. So when I'm dealing with behavioral issues, I'm going to take a behavioral approach. Actually 100% agree with that. And I do think, you know that zero-based budgeting is great where when you sit down and everything is mapped out so you know exactly what you're putting to your debt payment plan and then you just drop that payment right away. 'Cause If not, I thought that somehow that money will just find a way to get spent on something else.
Jason Hamilton (07:13): So I think if you are facing some debt then that's definitely, I agree with that 100% even though financially, interest rate high will be first. But I just, I've seen a lot more success. So people that following smallest amount of debt, regardless of interest rate and then just paying that off and then stacking up next one and next month in there. So here's my thought. So I have this little calculator here and I think it's pretty cool that it's a basically a salary tax calculator and you know, I think it's pretty good, may not be perfect. But when I was able to do is put in $80,000 for our question here, and then it takes out the taxes in Connecticut and it tells us, you know what we would getting, we'd be getting net. Okay, so $80,000 gross, that's going to be $6,666.67.
Jason Hamilton (07:54): So net pay per month would be about $4,660 okay. So we've got $4,660 per month after taxes to be looking at paying these things off. There was also a note in there, but mortgage was about $120,000 so I'm gonna assume the house payments somewhere between a thousand and $1,500 because that's pretty reasonable. Somewhere in that range, let's say $1,500 so if we have $1,500 that's going to be to the house payment, and we're left with about $3,000, $3,100 right there. And out of $3,100 we have to take care of ourselves and a kid. So at $50,000 the debt payments, my guess is somewhere between five to $800 a month, somewhere in that range, unless they're on a income-based program. But so the probably the minimum payments somewhere, again, let's call it $1,800 so we have $1,500 plus $800, we have $2,300 and now it's about 50% of our money is going to those two payments.
Jason Hamilton (08:41): And we have about 50% of our money now get used for other things. Okay. I think a very reasonable, again, depending how many people are in the home, they mentioned one kid. Was that the message there?
Naseema McElroy (08:51): I think so, yeah.
Jason Hamilton (08:51): Okay. So let's say a single mom and one child, $150 a week for food, I think that's pretty reasonable. That's about what I spent, me and my wife. So we spend that three kids, all three kids. Okay. So let's call it $200 a week. I still think that's pretty reasonable for that. So you know, we go from $2,300 minus $800 there. Let's put another, so now we're down to $1,500 of free cash flow for everything else. And so let's call it $500 on the rest of her bills, gas, those types of things. So I think that leaves us with a thousand dollars leftover to put towards this debt.
Jason Hamilton (09:26): So the question is, should you travel to get this paid off? And based on this scenario, there's probably about a thousand dollars there unless there's some loose spending that you're not following a zero-based system. So I really think you should have about at least a thousand dollars and I'm probably being conservative. You could probably have a little bit more, 'cause I think $800 is kind of a lot, even for three kids. Again, just being flexible and understanding, we have to eat out and things like that. So we have $1,000 a month that we can put towards this. So if we're paying our initial $800 and we can take another thousand dollars towards that, I'm sure we're going to have some interest on that. But if $50,000 you should probably have that paid off in less than a year. Right? So when you really break down the numbers, we're looking probably somewhere between nine months to a year to get this taken care of.
Jason Hamilton (10:08): Okay, so you brought up a really good point is if you have three kids and you're going to travel well, okay, so what's going to happen with the kids? You're going to have to obviously get them taken care of. Maybe you have grandma or you know, sister or somebody that can help take care of those kids. But if you have to pay for a sitter to watch those kids, then you really got to look at what's the cost and benefit of doing all this because you're gonna have travel costs, right? So you're gonna have gas, food on the road, time away from family, possibly paying for babysitters and things like that depending on what you make. Right. So what would you say an average travel nurse would make in that part of the country? If you have any idea?
Naseema McElroy (10:43): I'm not sure about Connecticut. Usually the rates are similar. I think $80,000 for a salary is pretty good. And travel nursing, let me speak to the Bay Area. So when people come to the Bay Area to do travel nursing, the salaries are much lower than a staff salary, but they do have housing costs taken care of and they have non-taxable expenses that they can kinda write off. And so it kind of makes it equivalent to what, say my salary would be in the Bay Area. And this is where a lot of people like to travel. This is what I'm assuming this person is trying to do. But ultimately, you know, the salary isn't going to be too much different. And you know, the cost of living out here is way, way higher. So even if their housing expenses or their housing costs are taken care of, is still going to be a significant chunk of money. So they're not really going to be making too much more than what they're making in Connecticut.
Jason Hamilton (11:34): Okay. So $80,000 a year, it's 40 bucks an hour basically is what it comes down to here. So at 40 bucks an hour. And then travel nurses, do they work generally like an eight hour shift or is that more like the overtime shifts, like you work in hospital a lot of times?
Naseema McElroy (11:47): They work twelves. Usually they come in and work 12 hour shifts.
Jason Hamilton (11:50): Okay. So that's 480 bucks, right? You're going to get gross for taxes. And if you're a single mom, yes you have some kids, but you're probably going to be in a 22% bracket somewhere that reads federal plus whatever States taken out. So a neighborhood of 30% can be gone after you take things like social security and Medicare tax out of their 30 to 30 plus. So if you're going to make 480 gross and you're going to take home only, you know, 70% of that or so, maybe less if you're contributing to retirement vehicle. So we're looking at 330 or so, something like that take home. So this is what you really have to ask yourself. Like is it really worth 300 bucks to travel, deal with getting the kids somewhere following up on that, having to deal with kids that might be having some issues if other it's they're not at home, they're not on their schedule, not eating the foods they normally eat.
Jason Hamilton (12:33): Doing things in the way you normally do them. I really lean more towards can you find ways to tighten up your budget or at the end of the day, a lot of times there's opportunities for overtime in primary. If you can get overtime in a primary job and you can't get that $60 an hour. Then you only need about six to seven hours to make up what you would need on that extra day. So if you can work an extra hour a day or maybe a day with two extra hours, so it's only two or three days a week you're doing that. I lean more towards going that way. If you really want to get passionate to get this paid off. But keep in mind that if you're really not looking at what you're currently spending, that's probably a big miss on why you are not paying things off as fast as you'd like.
Jason Hamilton (13:11): Because if you're being six to $800 a month on your basic payment, plus you have an extra thousand dollars of cashflow to use towards other things, and maybe even if it's half of that, but that's still, it's 1000 bucks a month. It shouldn't take you more than a year to get this paid off. So with the life disruption dealing with three kids, I haven't all the drama that goes in between that. I think I'm with you and I think I'd rather see this person find a way to get some overtime locally and get tightened up on that cashflow or also known as the budget. Those are my thoughts, I think.
Naseema McElroy (13:39): Yeah, I agree. Concur. Thank you for breaking down those numbers because I think that's super helpful.
Jason Hamilton (13:44): Yeah, I think getting to the actual numbers sometimes, and this happens with people all levels, right? Most people have no idea what their numbers are, when the challenges or whether it's funding retirement or funding longterm goals, like buying a car, buying a house or short term goals, like getting out of debt.
Jason Hamilton (13:59): A lot of times people just have never sat down and looked at the numbers and say, okay, well if I give up a day a week, right? So if this particular person was going to earn additional $300 traveling for a day per week, right, so that's an extra thousand dollars a month. She's probably going to pay at $12,000 a year. She'll pay her debt off in what, an additional three or four months early maybe. So three, four months early. It seems like a lot of time, but it's like if you think back at January is almost over. If you think back into October until now, is it really that much time? It's really not a lot of time in the scheme of things and the headache drama, possibly whatever your children do to these other people, 'cause I know some kids are a little bit more high energy than others. You know, whatever suffering you put these people through every single week. I don't know. I think it's, I would way more towards focusing on cleaning up whatever you're currently working with and then seeing if you could pick up a couple of showers 'cause I feel like you can end up in the same place and by just staying focused and actually working through the numbers we've talked about today in more detail. That's my thought. So I think where I'm at on it. Do we get any other questions this week?
Naseema McElroy (15:02): No, that's the, the one question that we got. So yeah, I think just to piggy back when you said to work extra hours, actually locally, you can actually pick up per diem job too which you don't need the benefits. And so the pay is actually higher. And so I think that would even be a viable option if you're looking at ways to bring in extra income besides traveling. But like I said, I think that the focus needs to start at where you are and making sure that you're maximizing every one of your dollars that you take home.
Jason Hamilton (15:31): Same for me. I agree with that and then try to pick up some overtime locally. Here's how to deal with all the drama traveling. So folks, if any nurses out there have a question, we would love to answer your questions. Naseema, you want to give them the page that you want them to submit the question to?
Naseema McElroy (15:43): Yes. So submit your questions to nursesonfirepodcast.com/ask. So that's the website. So the nursesonfirepodcast.com/ask is where you can go in and submit your questions. You can remain anonymous if you like. Try to provide as much details as you want us to know to answer your questions. But we love to answer your questions live here on our Monday episode and then they'll re-air on the podcast as well and those episodes drop every Monday.
Jason Hamilton (16:14): Excellent. Well I hope you guys enjoyed this. Hope you saw a little bit of value in this and if you have any questions. We're happy to answer for you guys every Monday, 10:00 AM Pacific time, 1:00 PM Eastern time, and of course we'll be here for you, either on Facebook or on the podcast if you'd like to watch it later. All right, have a wonderful week and we'll see you guys next time. Bye bye now.
Hey there I’m Naseema
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