What do you think of the idea of a two-income trap? - Page 12

[CanidFL]

Originally Posted by That Is Nice

In this example, I think you need to look at taxable income and deductions. The couple making nearly $80k didn't have any kids, so they don't get all the deductions and credits associated with kids and child care.

If they didn't own a house, they wouldn't get those deductions.

They are probably falling into a very high tax bracket, and probably pay not only a lot more in taxes but a higher percentage of their income in taxes than you.

If you have children, childcare, are going to school, and own a home, you have all kinds of tax deductions and credits, and are probably are about as low in any tax bracket as you can get.

Their $80k might look pretty close to your $405k, after taxes and divided by 12 months.

Right. I should have been more clear. His wife is in school too and they own a house. So really the only difference is we have a child. But maybe the child really does add a lot of tax savings? I'm not all that savy with this stuff.

Originally Posted by That Is Nice

I think these two issues are totally separate and not cause and effect. Yes, much of mainstream America makes poor financial choices (or rather lives beyond their means and fails to save) but that does not mean the family could live within their means on one income.

We are a family who can not live on one income. We have made excellent financial choices. We have perfect credit, saved for a down payment, have paid off nearly everything we own, have never had credit card debt, and have over 6 months of living expenses saved.

I get this too and totally understand that not every family can make it on one income. I guess your area really factors in too. Obviously my income wouldn't cut it in California KWIM? Then again my income would be more then enough in other areas of the country and could probably add in some vacations! Good for you for having 6 months expenses saved. We do not have that. We used to have it but then DS came and I took 4 months unpaid mat leave then we ran into some hospital bills and the rest is history. Now we can't get caught up with savings

[MoonJelly]

Originally Posted by Luv_My_Babies

A lot of people make less than $30k per year and still work. I make about half that and I'm currently the only employed adult in our house (DH is on medical leave) and I HAVE to work. Any income is better than no income.

I took it to mean referring to the second income. It sure does seem like there is a point where you're just breaking even to have that second parent work. Having said that, if by working you are making it more possible to increase that income over time than you would by staying home, then it can make sense. It was almost that way for me. At first it was really barely worth working, but eventually I was able to get a 401K started and my career has gotten back on track. Plus, after I was working, DH lost his job. I think I would have had a much harder time finding a job and starting back to work under that pressure. But we didn't feel as stressed and he was able to relax a little bit and find the next job.

By the same token, we find it easy to fall into the trap of making more and then spending more and that's something we are working hard to stop doing.

There's pos and neg with any sitch. I feel for all parents today. It's very, very hard no matter what you do.

[slsurface]

Originally Posted by That Is Nice

I think these two issues are totally separate and not cause and effect. Yes, much of mainstream America makes poor financial choices (or rather lives beyond their means and fails to save) but that does not mean the family could live within their means on one income.

We are a family who can not live on one income. We have made excellent financial choices. We have perfect credit, saved for a down payment, have paid off nearly everything we own, have never had credit card debt, and have over 6 months of living expenses saved.

Now all that has come at a price. We have never gone on a "nice" vacation and the last vacation of any kind was years and years ago. We had a very cheap wedding, we live very frugally, we shop at thrift stores, we watch our spending carefully. We haven't done a lot of things that friends of ours have...



We also have never had any help from family or windfalls so to speak. Everything we've done has been 100% because of paychecks and saving. However, we also haven't had any bad illnesses, knock on wood, or lay offs that were very long, knock on wood again. So, some of it is indeed luck, and also how you respond to situations.

Despite all the frugality, though, we'd be hard pressed to make it work long term on one income.

Ditto. This is us as well. I am convinced that cost of living and income levels have a lot to do with whether or not both partners need to work. If my DH made more, then it might be possible for me to stay home all the time, or visa versa. But that isn't likely to happen, ever.

[Labbemama]

I am currently in a debate with someone who has been a SAHM for a long time but went back to work at a dept store for $7.00 an hour because she is bored and wants more spending money.
She is of the attitude that a job at McDonalds would solve everybody's financial problems. And can't see why someone wouldn't take ANY job. I'm trying to explain to her that if you are laid off from your 30k job a job at McDs for 5k a year is like putting a bandaid on a severed artery. She says anyone who can't work at a dept store or McD's is a deadbeat.

My kid has been looking for work since she turned 14 with no luck. She has had one call on an ap. but they thought she was 18, so they wouldn't hire her. (I guess she presents herself well. LOL) One call on probably 20 aps. And lately there is nothing to apply to. Her teenage friend has been looking for a job for a year and he's 16 almost 17 and about as clean cut, smart, and responsible as any boy could be.

So here we are two working parents and because of cost increases to utilities we are struggling to pay the bills. It's not that we have fancy cell phone plans or satelite tv and live extravagantly.

I think we could do better to find a more energy efficient home, but it costs money to replace things like the washer and dryer. KWIM?

We are at a point where our two incomes are not enough and I make right around 30k, but the student loans are coming due.

We just paid off one huge bill though. :-)
But recent medical issues have caught us by suprise.
I was feeling badly because I was so short this week and then I tallied the medical receipts! I worked one week just for COPAYS!!! But Thank God we have health ins.

I think our kids have conspired to bankrupt us.

[That Is Nice]

Originally Posted by MoonJelly

I feel for all parents today. It's very, very hard no matter what you do.

:

But we don't have to do everything all at once every day. What I mean is there may or may not be a two income trap for us personally, depending on a lot of variables in our own personal situations. And if parents can move in and out of the workforce as needed, working more when they need to, working less when they have young children or parenting obligations, overcomes some of the trappings of the two income debate.

Generally, I do not see a two income trap as much as high cost of living or consumer spending traps.

But I don't think that everyone has the option to be a SAHP based solely on learning frugality tips and tricks.

I found this passage very inspirational and uplifting. I love the idea of parents being able to move in and out of the workforce, as needed. If I personally do this, the two income trap is a moot point. I can work, save up, then take time off for my children, then plan to go back to work, building back up to my pre-baby career status and more as my children get older. I just love this idea.

And I really love this passage from a new book in 2008 called "The Comeback" by Emma Gilbey Keller. It is about mothers who go in and out of the work force around their parenting roles.

This passage is about "having it all" just not all at the same time, which basically sums up my personal philosophy as a woman and mother.

"Start to think in terms of your whole life. Here you are in your twenties, energetic and a dedicated careerist, working hard and probably travelling in your job. Now you are a mother with babies and small children. If you want to stay at home and take care of them full time (and not every mother does), then do it. It doesn't mean you will never get another job. It's a finite stage.

Eventually those children will start kindergarten and you'll have some hours to yourself during the day. Perhaps you'll volunteer with those hours or find part time work. You won't want to disappear completely as a mother. Children still come home from school, want help with homework, and have games and practices that they to get to. Their needs change, but they don't disappear. They'll still cry and need to be comforted. They'll want your praise. They'll look for your answers to their questions. During this period of your life, you'll need some flexibility. You won't be alone.

Today nearly 30 percent of the entire workforce in the United States (both male and female) have a flexible work schedule that allows them to vary the time they begin or end work, according to the latest study released by the Bureau of Labor Statistics."

[MoonJelly]

Originally Posted by That Is Nice

But I don't think that everyone has the option to be a SAHP based solely on learning frugality tips and tricks.

Absolutely true.

In certain areas of the country it may be easier. But I live in a very expensive area compared to much of the country. You simply can't get blood from a stone. There's only so much you can do to whittle down costs.

I can tell from reading on this board and others that people in other parts of the country have no idea what it's like in the over-priced areas. I don't say this as a criticism of them at all. I'm just saying what I see from years of chatting with people on the net. And, frankly, it's hard to know there are places where I could live and not have to WOH full time. It feels very unfair. I feel like I should be able to live in the place where I grew up but not be struggling. I didn't choose to be born and raised here. My parents did. But it's home to me and I feel like I should be able to stay and have a good quality of life.

I guess I am just giving an example of how there are no easy answers for anyone. It's not just a matter of change this or that and everything can be the way you want it.

[That Is Nice]

Originally Posted by MoonJelly

I guess I am just giving an example of how there are no easy answers for anyone. It's not just a matter of change this or that and everything can be the way you want it.

Very true.

Cost of living is such a huge determining factor, maybe even the foremost. I always read threads in the SAHP forum discussing what people's husbands do for a living or make for a living. My DH is on the higher end, always when compared to all areas of the country.

We could probably live on one income very well in a lot of areas.

But we live in a pricey, high cost of living area. Sure, there is a salary premium here (maybe ) but the cost of living outstrips that easily.

DH would make a little less in less costly cities, and it would be very easy to live there on one income.

But we can't easily move, you know?

And also, I have to think about my career too. I want to stay at home for a while, not forever. I want the option, but I don't want an imposed mandate. Or lack of options to work.

I try to encourage myself by working on my goal...saving to make staying at home for intervals possible, returning to my career and keeping my resume strong, and balancing the career side of life, the money side of life, and the parenting side of life. It's not easy.

[madskye]

I live in a high COL area and I don't think much of the idea of a 2 income trap.

My DH just lost his job at AMEX this week (one of 7000 reorg'd out of a job) and I am REALLY happy that I am still working and didn't quit when I had our daughter. There is enough stress knowing that we'll have to figure out health benefits--I cannot imagine what this would be like if I weren't making a salary.

[That Is Nice]

Originally Posted by madskye

I live in a high COL area and I don't think much of the idea of a 2 income trap.

My DH just lost his job at AMEX this week (one of 7000 reorg'd out of a job) and I am REALLY happy that I am still working and didn't quit when I had our daughter. There is enough stress knowing that we'll have to figure out health benefits--I cannot imagine what this would be like if I weren't making a salary.

I know exactly what you mean.

I have long thought the concept of having one parent in reserve is an absurd idea.

It doesn't seem like that would work well if one person is laid off, or loses their job for some other reason.

I hope all works out for you. Good luck.

[madskye]

Thanks--honestly, because we both work we have enough saved that we're ok for a year or so--but if we had cut things to the bone for me to stay home and this happened? We'd be in much worse trouble.

[That Is Nice]

Originally Posted by madskye

Thanks--honestly, because we both work we have enough saved that we're ok for a year or so--but if we had cut things to the bone for me to stay home and this happened? We'd be in much worse trouble.

I can so understand that. The only reason I was able to be a SAHP for a finite time period was because we both worked for many years, and saved, and paid things off, and put our financial house in good order.

That is also the reason, among many others reasons, that I do not plan to stay at home permanently or long term.

There are recessions, job layoffs, resume obsolescence, and other worries, not to mention retirement, that compelling reasons not to have a long term SAHP in our household.

The two income trap doesn't apply to us. Two incomes have allowed us to save, instead of live paycheck to paycheck, and to meet some goals.

[That Is Nice]

Along the lines of this thread I posted a while back, I wanted to share a really good book title that I am reading.

It's called, "Opting Out? Why Women Really Quit Careers and Head Home" by Pamela Stone, published in 2007.

I'm about a quarter of the way through and it's fascinating. The title is a bit misleading...the subject is very similar to the content in the book, "The Price of Motherhood" by Ann Crittenden.

[That Is Nice]

This thread is cross-posted in the frugality and finances forum...just FYI.

[schreiberwriter]

I've skipped all the discussion and I'm commenting on the original post.

I don't know very many couples who are 100% one income. Most involve one person making most of the income with the second person (usually the mother) making a supplementary income doing something inside or outside the home. Most of the couples that I know that rely on just one income are very wealthy.