The Two Income Trap

We decided to crack down and track expenses after we realized we were both making decent money working full-time outside of the home but were struggling financially to put gas in the car and food on the table. When we added up our living expenses we realized we were missing one entire income. How could it be that we had “lost” that much money?

We started digging through the bank statements and through reciepts and we realized how much we spend of our paychecks just to enable us both to work. Doing some research I found that this is not uncommon at all. In the book, The Two Income Trap, the author, Amelia Tyagi, explains why the average two income family is falling into financial trouble. This interview with Amelia Tyagi at Mother Jones gives a lot of insight to the issue facing families today.

Still thinking we can’t possibly afford to lose one of our incomes, I found this article at MSN Money about how to thrive on one income and then used the calculator from the NY Times Home Finance Blog. What I found was shocking! After extra taxes (raising our income with two incomes put us into a higher tax bracket in effect, penalizing us), child care, expenses for me to commute the 330 miles a week (figured on the standard IRS guidelines), convenience foods, eating out, and a professional wardrobe for work, I went from the top earner of the family to netting only around $4000 a year.

Numbers are hard facts and a good reason to take pause. Is my family worth sacrificing for $4000 a year? Can I trim $4000 a year worth of expenses to make up for my lack of income? Can I find a way to suppliment my husband’s income by working part-time or from home?

This is our goal:

1. Trim expenses.
2. Pay off debt.
3. Save as much extra as possible for an emergency fund.

Hopefully by meeting those goals, I will be able to be at home full-time. Right now it is a one year goal. In the meantime I am looking for ways to speed it up either by starting a home business or supplimenting my current income to pay down the debt and save up a nest egg faster.