> but two-earner households are often also more economically fragile
Can you elaborate on that? It doesn't make sense to me. When we were on a single income in my family, it felt a lot more fragile than now that we have two incomes.
Can you elaborate on that? It doesn't make sense to me. When we were on a single income in my family, it felt a lot more fragile than now that we have two incomes.
There's three things you need to understand about personal finance:
1. The first is that shit happens and most people don't plan for it (because they haven't been educated on personal finance). Most resources suggest that you keep an emergency fund of 6-12 months of living expenses saved up for when shit happens. We know that most people do not have this. I'm not even going to bother providing a source because there are so many sources on how Americans don't save.
2. The number one expense for any given household is going to be housing (whether owned or rented).
3. While you can cutback on many things, you cannot cutback on a mortgage. So if there are permanent setbacks to your finances: someone loses their job and gets another one that pays less, someone gets hurt and can't work for a while or ends up on disability, someone has to stay home to take care of an unhealthy relative, etc, then you can be pretty much shit out of luck unless you're house has equity on it and you can sell and downsize (although most people will just take a loan out against their equity lol).
So these are the characters of our stage. If you get a mortgage based on 1 person's income and something happens, there is another person there to step up. This provides a powerful safety net for the family. If you get a mortgage based on both people's incomes, you are putting yourself at greater risk because if something were to happen to either person you would not be able to afford to keep your 15-30 year agreement. And the cost of getting out of that agreement is enormous (as we saw with the recent housing crash).
I encourage you to read more on personal finance. It's incredibly fascinating.
Right now we pay more than what we'd like on rent, but next year we'll move to a cheaper place.
We're saving for a large down payment for when it comes time to buy a home. Also, we'll get a mortgage as if only one of us were working, we have already agreed on that. And we're planning on moving to a state with a low cost of living when that time comes.
So in our case, two incomes is pretty solid.
You realize that a lot of people don't have savings because they live paycheck to paycheck trying to survive?
http://badmoneyadvice.com/2009/03/whats-wrong-with-the-milli...
It is more fragile because 1) it encourages living well beyond your means and 2) the odds of job loss/income reduction is now doubled and the stakes are higher as the second partner can't get a job to pick of the slack in the event of job loss.
It goes back to the old observation that people living paycheck to paycheck on $30,000 tend to also live paycheck to paycheck if their income increases to $60,000.
So if there is a hypothetical one income family making $40,000/year is unable to pay bills instead of reducing spending (who wants to do that?) the other partner starts working. Their lifestyle tends to rise with income and now they are just getting by with $60,000/year and put themselves in a more fragile place. This is how people tend to behave.
Instead they could have reigned in on their expenses a bit and perhaps taken on a second income to save for a rainy day.
The way to do two incomes (if at all possible) is to base your standard of living on just one. Use the other income to invest, save, or fuck around (travel, dinner, etc.). This type of two income house is much less fragile as savings and investments can accumulate, emergencies are easily taken care of, and spending can be reeled in in case of financial heartship. Either way with two incomes savings should be a very high priority to reduce fragility.
So two income households certainly can be less fragile but often aren't in practice.
So, instead of having a household where you have one parent working to support the family and another parent who can occasionally add income but doesn't have to, now you have lots of people where they are fully tapped out and both parents are working full time.
As a couple with two high incomes you actually have to try really hard not to let expenses get to the point where you can't live without both incomes. So in effect you now have 1 big income that you rely on.
In terms of the fragility, there is more chance of losing 1 out of 2 jobs (i.e. 50% of the income) than there is of losing 1 out of 1 jobs (i.e. 100% of the income). (I hope I explained this right - but it's how my thinking goes).