[quote=bearishgurl][quote=Brutus]A $250K a year income can disappear as quick as you can say “pink slip.” I’ve never made anywhere near $250K a year, but if I did, I would save like hell because that job can vanish overnight leaving you with an income stream that looks more like the bottom 10%.
Real wealth is measured in tangible assets (including stocks, etc…), not in year to year income. $250K a year isn’t rich, it’s just real comfortable. However, if the person making $250K puts their mind to it, they can become rich very easily, but they must hold onto that job and invest wisely.[/quote]
Brutus, an employee often has no say as to whether and when they will be riffed, laid off or fired. This is why I don’t think it’s wise for young families with school-age children to voluntarily try to live on one income of an employee, no matter how much they make. While most of them tried to financially expand and “grow-into” the raises their “breadwinner” received by upgrading the size of their home and choosing it in what they believe to be a “better” school district, they are in reality just one paycheck away from default and possibly eventual BK. A family making these choices really needs two decent incomes for security and health coverage in case of unemployment or long-term illness of one of the parents and to be able to save money every month.
I think there are a lot of these families in financial distress only because they were unrealistic about the cost of real life and what could happen to them and NOT due to buying or taking out equity at the peak.[/quote]
Actually, if a family isn’t saving a good portion of their income, the single-earner family is better off than a dual-income family (assuming both are living paycheck to paycheck). That’s because the single-income family has untapped income earning capacity that the dual-income family does not.
As households gained purchasing power as the first waves of women entering the workforce (which also coincided with Baby Boomers entering their peak earning/buying years), prices of everything went up to offset the increased purchasing power. This (and the Baby Boomer effect) are two of the main reasons we had such a battle with inflation during the 70s and 80s (IMHO).
The fact is that many second-income earners are actually working for negative income, especially if they have young children. When one considers the taxes (usually taxed at a rate equal to or greater than the first income), childcare expenses, clothing expenses, commuting expenses (accelerated car maintenance, accelerated car purchases, more gas, higher insurance, etc.), higher food expenses (tend to eat out more), and also the inability to spend time searching for better deals (you can save a tremendous amount on household maintenance, for instance, if someone is home to interview multiple contractors, etc.), maids/extra help needed, etc., etc… You have to make over $50K to break even in many cases, and that doesn’t even take into account the problems with sick children, lost family time, etc. More often than not, a family is better off with a single earner.
Elizabeth Warren covers it well in in her book:
And also in her lecture about the collapse of the middle class here:
