Two-Income Trap

[LivingAlmostLarge]

Since we talked about the price of children, did people read the book "The two income trap" by the Warrens? It was a very interesting read. Discussing how we are dependent on two incomes. A lot of it is depressing because it's mainly about our consumerism. However there are good points to the book.

I think it's a good read for anyone who is thinking of staying at home. But I wonder, like myself personally if I stay at home with kids no big deal. I'm a student making less than 20% of our household income. My income is play money for saving. But what happens when people are 50/50 in earning power or about the same? That 50% drop does not get made up easily. I think it's harder for couples in that case instead of people who have very disparte incomes.

[tabbycat31]

I did read the book. HOwever if I ever get married, I know that I will never want to stay at home. That's just not in my personality. In fact if someone wanted me to stay at home, and announced it before the wedding, I'd call off the wedding. I feel a sense of fulfillment when I work, and I actually like going to work.

That being said, i think that even if both spouses work, people should try to live off one of the incomes only,a nd use the rest for savings/debt/play money.

[Gruntina]

Life is like being on a boat going down a river. You can't go against the current but you can steer enough to try to avoid hitting some major rocks or take a certain path if you worked hard. Right now I am working hard to try to live on my fiancé income while saving mine for that reason. It’s hard but I am trying. I have the goal of staying home when I have children and possibly go back to work pt when they are in school or do some other projects. Nothing is perfect and a lot of trials and error will go on. But life seems to be always like that.

My fiancé makes more money but in the end we break even because my job has amazing health care insurances, 401k matching program, benefits and discounts when his job doesn't. His mother is a midwife in case we don’t have good enough insurance so that might be a great possible blessing. I am so curious to see how this all turns out.

[MonkeyMama]

I have not read the book but I am on par with the concept 1000%.

My husband and I Are 50/50 and the income trap would apply just as equally. There is no point whatsoever in him working - his entire check would go to daycare and taxes. Then there is gas and other work expenses, more eating out and paying more for convenience if we both worked, etc. At the end of the day there would be 0 left - maybe $100-$300/month. I'd rather try to find that money else where than working full-time. For now he stays home, watches the kids, cooking, laundry, etc. If I sell something on ebay I send him to the post office during the day, stuff like that, little things a SAH spouse can do to make life easier.

Frankly though most of the people I know, with kids, do not have 2 full-time jobs. My hubby and I were just discussing the other day. I think overall it is a pretty hard road. Most of the people I know have 1 FT & 1 PT time, and/or rely heavily on family for childcare. I don't really know that many people who are taking a 2-FT job approach in raising kids. I could not even imagine. & many have the 2nd PT job for sanity - which is different than relying on it for income.

We were able to spot from a very young age that living on 2-incomes is a trap we weren't interested in. We never relied on a second income. That is just trouble. If you have to, you have to. But too many upper-middle-class rely on it when they shouldn't really have to. It is a nice form of insurance to have 2 incomes and to only rely on one, in case 1 spouse loses a job. We used to make the same wage and as I move up the ladder and dh takes a break it worries me more because we have come to rely on more money than he could probably bring in. So we are working on that.

I know I have said before but I know many many many people making $30k more than us who bring home less because they are in a much higher tax bracket (& like their big tax refunds, etc.). The tax hit would be huge if my dh got a job. For now we keep 90% of my gross, and don't take refunds at the end of the year - helps us stretch more money out of my paycheck.

[Budgeteer]

My wife and I don't have kids yet, but this is something we've been tossing around. Her income is about 1/2 of mine, but it's still significant enough that we'd have to make major changes for her to stop working. Maybe more importantly, I'd really like to not be working full time when we have children so that I can have more time to spend with them.

To that end I'm working very hard at finding income opportunities outside my job. I really want to build up a stream of income that I don't have to show up to work to receive. Realistically I'll probably still need a job, but my employer is very flexible about people working 75% or 50%.

[hrbatyfan]

Originally Posted by MonkeyMama

I have not read the book but I am on par with the concept 1000%.

My husband and I Are 50/50 and the income trap would apply just as equally. There is no point whatsoever in him working - his entire check would go to daycare and taxes. Then there is gas and other work expenses, more eating out and paying more for convenience if we both worked, etc. At the end of the day there would be 0 left - maybe $100-$300/month. I'd rather try to find that money else where than working full-time. For now he stays home, watches the kids, cooking, laundry, etc. If I sell something on ebay I send him to the post office during the day, stuff like that, little things a SAH spouse can do to make life easier.

Frankly though most of the people I know, with kids, do not have 2 full-time jobs. My hubby and I were just discussing the other day. I think overall it is a pretty hard road. Most of the people I know have 1 FT & 1 PT time, and/or rely heavily on family for childcare. I don't really know that many people who are taking a 2-FT job approach in raising kids. I could not even imagine. & many have the 2nd PT job for sanity - which is different than relying on it for income.

We were able to spot from a very young age that living on 2-incomes is a trap we weren't interested in. We never relied on a second income. That is just trouble. If you have to, you have to. But too many upper-middle-class rely on it when they shouldn't really have to. It is a nice form of insurance to have 2 incomes and to only rely on one, in case 1 spouse loses a job. We used to make the same wage and as I move up the ladder and dh takes a break it worries me more because we have come to rely on more money than he could probably bring in. So we are working on that.

I know I have said before but I know many many many people making $30k more than us who bring home less because they are in a much higher tax bracket (& like their big tax refunds, etc.). The tax hit would be huge if my dh got a job. For now we keep 90% of my gross, and don't take refunds at the end of the year - helps us stretch more money out of my paycheck.

Hey, sorry to be nosey, but how do you keep so much of your income?

Are you self-employed and paying almost the exact correct amount of estimated taxes?

Thanks!

[Ima saver]

I never made much money, never more than minimum wage. I was bringing home between $20-$40 a day in tips at my last full time job. My dh decided he wanted me to be home at nights with him, so He just started working long hours so I could quit.
We learned to live on one income, so when I got a part time job, I just put the money in my roth. I did that when I took the census in 2000. If I ever went back to work, I would just save the money I earned.

[disneysteve]

I read the book a couple of years ago. I don't remember all the specifics - have to get it from the library and reread it. I do recall it gave a great history of credit in America that really made clear how we got into the mess we are in today.

I also recall, and again I don't recall the specifics, that the authors made several conclusions that I didn't think were accurate, though overall I think a lot of good points were made.

[Snoopy2645]

Well when I worked ft I made the same as dh did & I have too tell ya it was a huge change!!! But I quit because I didnt want my 2nd dd being raised in daycare I had to do a complete turn around in everything I learned how to get lots of stuff for free & I mean alot or close to nothing. We saved alot on daycare by me not working. And we save a ton by having 3 girls they do alot of hand me downs. Well when I had my 3rd dd things got super tight but by then we were also paying for dh to go to school he started 2 weeks before she was born. SO I got a pt gig on the weekends & mystery shopped too for awhile for money.
ANd my mom watched the kids so no daycare expenses & now my oldest babysits so the money stays in the home what we pay here well I feel at least I am paying her & not a stranger KWIM.

We also had to tighten things up again with #3 it ended up being ok we have always been ok somehow this far but we did change spending with the times thats for sure & I did alot of things on the side to make some spare cash. SO I know it can be done thats for sure & it is so worth it for the kids not to have to go to daycare.

[Lonewolf]

A very interesting Thread. My wife and I both work full-time jobs and have a 3 month old son and 19 month old daughter. My job is more of a paycheck, but is close to 70% of our income. My wife's job is a passion, she loves what she does. If she was making the income I was, I'd have no issue staying at home and raising the little ones, but that is just not the case. So although having the two little ones in daycare (just started back the first of the year with both of them) is close to breakeven from a cost perspective with my wifes salary, my wife can still do what she loves, and is lucky to be off around 2pm each day so she can still get one on one time with the little ones. So although her job is full-time, her hours are very favorable.

Her job will also be perfect for when the kids are in school being able to drop them off in the morning, and then be there when they get home, so we know things will get easier. There are times I wish she would stay home, as that would be more "convient" as mornings can be hectic (I was used to the 15 minutes roll out of bed and run), but there is something to be said to be able to be excited to go to work everyday like she is. I actually envy that. As with everything with children, you adjust. So instead of sleeping into 7am, you wake up to "Daddy, where are you" at 5:30am.

Wolf

[LivingAlmostLarge]

I think I will want to work too, and I won't make as much as DH, so I guess my job will be for pleasure. Chances are though I'll have to put the kids in daycare because of it. But there is a lot of gain in enjoying what you do and doing it.

[vsjhoc]

Originally Posted by tabbycat31

I did read the book. HOwever if I ever get married, I know that I will never want to stay at home. That's just not in my personality. In fact if someone wanted me to stay at home, and announced it before the wedding, I'd call off the wedding. I feel a sense of fulfillment when I work, and I actually like going to work.

It's great that you have a strong work ethic and enjoy what you do. That's pretty rare this days.

But never say never. Having kids is one of those things that you don't know how you'll react until it actually happens. A close friend had a high-powered career and swore she would go back to work one month after the baby was born. He's about to graduate high school, and she hasn't worked a day of his life.

As I recall, the theory behind the Two Income Trap is that women used to earn "pin money" and their income, if any, was not necessary for the family's survivial.

This changed when the key to the American Dream meant a college degree. Getting into college means going to a good high school. Going to a good high school means living in a "good" neighborhood. With everyone having the same Dream, they "bid up" the prices of houses in the good neighborhoods. Now families do need two incomes to pay the mortgage, the property taxes, and all the other bills. If they lose one income (which happens very often due to job loss, medical problems, etc.) they are up the creek.

I think this makes a lot of sense, but hey, it's not my theory, so don't attack me if you disagree.

[tinapbeana]

two income trap really only applies if one hasn't (or won't) do the math about what employment really costs. most folks don't do this whether they're by themselves or part of a couple: they fail to take out the costs of transpo, food, wardrobe, etc.

with that said, i would venture to say the 2 income trap is much less likely to be about women staying at home nowadays that it was in the past. so many jobs are business casual now that the clothing costs (typically higher for a business woman than a business man) are almost equal, and that brings the cost of having a job pretty much even regardless of gender. and now women who make more than their spouses is not nearly the oddity it was 20 years ago.

in my household i make 60% more than my husband. we could survive on my income, but not on his. at the same time, the typical 'work costs' don't apply to his job: they provide the cell phone, the truck, and the gas. his work clothes are the same as his weekend clothes, so no real wardrobe costs either.

[kv968]

This reminds of the story my parents tell me about when they went to get a mortgage for their house back in 73/74. They said that as they were going over financials with the lender my dad thought he'd really make sure they were approved by telling the guy that my mother was currently working full-time as a bookkeeper. The mortgage lender just said "Yeah, that's nice, now let's get back to you and your employment situation." He couldn't have really cared less that my mother had a job or not. And it's not like my parents we rolling in dough or anything, he just didn't care either way if my mother contributed to the income of the household or not. Which I guess in a way was kind of prophetic of him because she did end up quitting and becoming a stay-at-home mom

[boefixepa]

This is something my soon-to-be hubby and I have already discussed. We are basically the same on income and we both have adequate insurance. So we will both work until the I get too pregnant to function, or the baby comes. We don't plan to wait, 2 months max, to try and get pregnant. We are going to live off of his salary and then use mine while it lasts to set up the baby fund, retirement accounts, EF, and pay down the house. Neither of us have any debt (other than the house), and the wedding will be paid for up front. Over all we are starting off in the best situation I can imagine and are blessed in that area. I don't know of anyone, personally, who had a better start and feel VERY fortunate. On top of that, my field is such, that if needed I can always jump back in without too much hassel and his mom is happy to help out with child care. Anyway, we are going to avoid this trap byt not gettin 'use' to the two incomes.

[LivingAlmostLarge]

[quote=MonkeyMama]I have not read the book but I am on par with the concept 1000%.

My husband and I Are 50/50 and the income trap would apply just as equally. There is no point whatsoever in him working - his entire check would go to daycare and taxes. Then there is gas and other work expenses, more eating out and paying more for convenience if we both worked, etc. At the end of the day there would be 0 left - maybe $100-$300/month. I'd rather try to find that money else where than working full-time. For now he stays home, watches the kids, cooking, laundry, etc. If I sell something on ebay I send him to the post office during the day, stuff like that, little things a SAH spouse can do to make life easier.

Monkeymama, do you really think it's easier with equal incomes versus a huge difference?

[LivingAlmostLarge]

I also wanted to know, a lot of the book says if a job is lost by the breadwinner husband, then the other spouse can go out to work. But I know many women who wouldn't be able to bring in enough after years of not working to pay the bills. More than a few didn't bring in enough to pay the bills before staying at home. They stay at home because of a discrepancy in income. So what to do in that case? Also what about women who don't want to work, so why would they go out and get a job? Or how is it likely they can get one, if they really are not interested?

[cschin4]

I think people get in over their heads because they really don't think far enough ahead. Alot of women I have met along the way talk about how they want to continue working full-time after they have kids because they think it would be boring to stay home, they love their jobs, etc. But, in reality, once the baby comes, many families find it extremely hard to have 2 people working full time and trying to care for the baby and get all the work done at home, etc. And, many times these families go out and get a new minivan, buy a bigger home, etc and then realize their lives would be easier if someone was home more but are now in the 2 income trap.

[tinapbeana]

Originally Posted by LivingAlmostLarge

I also wanted to know, a lot of the book says if a job is lost by the breadwinner husband, then the other spouse can go out to work. But I know many women who wouldn't be able to bring in enough after years of not working to pay the bills.

even scarier are the times when the wife hasn't worked for whatever reason and also hasn't handled the finances, and the relationship goes south. completely up a creek without a paddle...

Originally Posted by LivingAlmostLarge

Also what about women who don't want to work, so why would they go out and get a job? Or how is it likely they can get one, if they really are not interested?

again, i would say this could apply to men and women both. very few people, regardless of gender, find such a truly rewarding and inspiring career that they'd be willing to work for free. if you're not willing to work for free, you're doing it for money, not love, and that can happen no matter what your gender.

as for folks who don't want to go out and get a job or who aren't interested: i guess it's a great gig if you can get it, but when times are tough you gotta buck up and deal. if that means taking a job you hate to be able to afford to keep the house, deal with it. if it means OT so you can pay for a car repair, that's life.

[PrincessPerky]

Originally Posted by tabbycat31

I did read the book. HOwever if I ever get married, I know that I will never want to stay at home. That's just not in my personality. In fact if someone wanted me to stay at home, and announced it before the wedding, I'd call off the wedding. I feel a sense of fulfillment when I work, and I actually like going to work.

That being said, i think that even if both spouses work, people should try to live off one of the incomes only,a nd use the rest for savings/debt/play money.

I would never go get a job without extream need. I feel a great sense of fullfillment when I work with the kids and am keeping the house running properly. I actually like staying with my kids, and teaching them and learning with them........