The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke

Rating:
Summary: GIVE ME A BREAK.......
Review: I was so disappointed in this book. This woman works at Harvard University? I couldn't believe all the excuses she came up with as to why Middle America is going bankrupt! In a nutshell, she blames 90% of it on the public school system. Apparently, people will sell their souls in order to get a house near a good school.

She completely dismisses the idea that people are spending more on fast foods, restaurants, luxury cars, and she totes the idea that an expensive pre-school is really a necessity, which presently costs over $8,000/year.

This book is so full of excuses it's ridiculous. Yes single mothers have it the worst, but guess what? Maybe people shouldn't have kids that they can't afford in the first place eh? Or maybe people should think twice about their future and that of their children if they get a divorce. The one couple she illustrated said it well. The husband lost his job, she nagged him, he had an affair, she kicked him out and headed for divorce court. Now both of them are broke all the time.

Yes people can be the victim of bad circumstances, but mostly, the main reason that Middle America is filing for bankruptcy in record numbers is because people live way beyond their means, end of story. Does the author really think that we DON'T have more expensive cars, bigger homes, fancier clothes and alot more gagets than 30 years ago?? People file for bankruptcy because credit cards are given out like candy, and many people can't resist living a luxurious life-style that they can't afford.

If you want to cut the risk of going bankrupt, here's a few ideas that I won't charge you a penny for:

1) By a home based on only ONE of your incomes. Too bad if it's not 5,000 square feet, the mortgage payments won't rupture your paycheck.

2) If you really need two cars, get the second one at an auction and pay CASH for it. Monthly car payments, plus insurance plus gas if you commute to work eats up between 1/4 and 1/3 of your entire monthly salary.

3) Buy your clothes at a good second hand store. That's where I get all my clothes from, and they look like they're brand new. Do this for your kids too. If you're buying your kids designer clothes at the age of 5, what are they going to expect when they're 15?

4) Take your lunch and snacks to work with you. This saves a bundle.

5) Don't buy anything on your credit card unless it's an emergency.

6) Learn some self-control and self-discipline. Instead of taking your entire family to a theme-park Sunday mornings, try taking them to church instead---it's free and they'll learn something of some value.

7) Buy birthday and Christmas gifts throughout the year when stuff is ON SALE!! That way, when December rolls around, you've got all your shopping done and you've saved a bundle.

8) If you spend a fair amount on alcohol, or wine specifically, try making it yourself. Some of those kits make excellent tasting wine for about $1.50 a bottle.

9) If you like to treat yourself to a Spa, try looking up to see where the local school is (where they train them in facials, manicures, pedicures, etc). They usually have a couple of days a week where they work on the public and you can get a day of pampering for about 1/5th of the price that a regular spa would charge.

10) Buy your food in bulk.



Rating:
Summary: Terribly depressing book
Review: Terribly depressing because I could follow the logic of the description of the problem, but either didn't agree with their solutions, or found them idealistic and unattainable as hopes for public policy.

I loved the book Affluenza, but I admit, it didn't sound like anyone I know. Maybe in the status-conscious city I grew up in, or in NYC, but not where I live now. This book though, speaks of most everyone I know. There are huge price differences between one school district and the next in our area and huge competition for 'magnet schools' and affordable private schools.

I think the fact that the reviews on here are one extreme or the other would suggest that this problem is largely regional, and those who live in different areas will draw different conclusions about it's accuracy.

One thing I wished they'd discussed in more detail is how different financial planning is when you have children. Our bank took our two incomes and our $260 car payment into consideration when they made our home loan, but they didn't take the $500 in childcare we'd typically have to pay for our eight month old child in order to have those two incomes, nor did they ask if we were planning more children.

People have criticized this book for letting irresponsible people off the hook, but it should be lauded for making people more responsible. If my bank doesn't take my children into consideration when lending me money, then it's something I'll have to do myself. That's what this book preaches.

Rating:
Summary: Good for Young People as a Financial Wake-Up Call
Review: The Two-Income Trap was a great financial reality check for me. Just to provide full disclosure about myself: My husband & I are in our early 30s, and we both are working professionals. We're making future plans for house buying & children. Currently, we live in an urban town in New Jersey (within the N.Y. city metro area).
I always assumed that eventually we'd move to a suburban town with a good public school district. My husband though dislikes the suburban-commuter lifestyle since he'd have to travel over an hour each way to go to work and back. As such, he thinks he'd never have enough time/energy for our future children. I always firmly held my ground that this would be the "best" choice for us. However, now with the local housing prices skyrocketing along with the property taxes I'm starting to question this "conventional wisdom." Starter homes in most of the well-regarded suburbs now START at $400,000, typically with property taxes anywhere between $5-$9,000. At our current income levels, if my husband and I purchase a home in the `burbs, we would fall right into "The Two-Income Trap" that the authors discuss with no room for error.
After lots of discussion, we're now strongly considering getting a multi-family property in the city where we currently live. That way, his commute is still short, we'll have rental income & we won't have to buy everything associated with a suburban lifestyle (i.e. 2 cars). We figure for the money we save on lower housing costs, we can send our children to one of the local private schools. We might still move to the `burbs but only if we can avoid relying on 2 incomes to pay the mortgage & fixed expenses.

One of the negatives of this book though, as others have cited, is that the authors don't give enough credit to the "affluenza" effect. Many people I know live waaaaay beyond their means. My best friend works THREE JOBS so she can live in a luxury apt. building, drive an expensive SUV and shop `til she drops while drinking her Starbucks latte of course. Meanwhile her health is deteriorating & her debt is rising. This book really should expand more on how people can stay OUT OF debt, not just provide an explanation of how it happened. But, overall I think it's a good thought-provoking read. I also think this book is most effective if read by young people/couples who are still at a point where they can avoid The Two-Income Trap.


Rating:
Summary: The Myth and The Drill
Review: A silly romp through our country's pervasive "I'm a victim, it's not my fault, somebody take care of me!" mentality. Many other reviews point this out.

The essential contradiction that defines this book is nicely shown by connecting three short excerpts, one from The Myth of the Immoral Debtor chapter and two from The Financial Fire Drill chapter:

The Myth, p89: "Why don't we all agree once and for all that in most cases financial misfortune is simply a matter of bad luck ..." (Gee, OK, let's! What else could it be?)

The Financial Fire Drill, p165: "... advice to the family shopping for a home: Don't stretch yourself to buy a house you can't afford. If the only way you can meet the mortgage payments for your dream home it to tighten your belt and commit both incomes, don't do it. ... As painful as it may be, it is wiser to rent for a few more years or to buy a smaller home. That oversized mortgage will leave you with no room for error, no cash for even minor emergencies - let alone a real disaster."

The Financial Fire Drill, p172: "What if both parents prefer to work? By all means, do it. Two earniers does not mean an inevitable dive into the Two-Income Trap; it just means there is more risk and the family must plan accordingly. ... be careful ... If at all possible, think of that second income as a safety net, as special reserve for bad times. When times are good, put something in savings. ... If you can avoid committing it to the mortgage and the health insurance, you'll get to enjoy the benefits of having two incomes while staying secure."

The authors would do a great service by reissuing this book as a short pamphlet expanding on these two excerpts from The Drill. Perhaps a name-brand financial advice giver such as Jean Chatzky would help them with this project.

On a personal note, selfish as it sounds, I'd rather not spend much time trying to defend myself against bailing out lots of people who can't delay gratification, who want it all right now, who think "decent" things in life should be financed with zero down rather than worked for, saved for, earned.

Rating:
Summary: Wonderful non-partisan argument backed by facts
Review: This mother and daughter team (both working Moms) build a beautifully constructed argument showing how two-income families are actually at more risk for financial devistation and some possible solutions (individually and for the society as a whole). Although I don't always agree with their politics, I can't help but be impressed and persuaded by their conclusions and facts.

Wonderful book for anyone concerned about family finances!

Rating:
Summary: Dead On Accurate - Especially in Urban Areas
Review: This book discusses the vulnerability of the middle class to a financial crisis. It hit a raw nerve with myself and gives some insights. By the way it applies to many countries, not just the USA. The book does a good job of describing the financial problems, but is not so convincing on who to blame and finding solutions.

I recently started to look for a new home in Toronto, a city that one thinks as being middle class. What I found in my search was that the middle class areas no longer exist in the urban 450 sq. km core. Instead, the city is composed of alternating rich and poor areas (like mid Manhattan contrasting with Washington Heights and the Bronx), or middle income mainly singles and couples in condominiums.

The middle class has found a place to live and it is outside the city core in suburban clusters - mini cities made up of largely middle income folks - where they need their cars (often two cars per family and health insurance in the US, or high taxes for socialized medicine elsewhere) as a basic tools to function. Mass transit is very limted and cannot cover most needs. These residents have a relatively inflexible cost structure, i.e.: house, cars, heavy taxes, insurance, and day care if you have children plus spend many hours commuting, 5 to 10 hours a week for many.

What the book points out is that the middle income family is in a very difficult budget situation. It is almost impossible for average workers to accumulate savings for a crisis while living in a city or expensive suburban setting, and moving to the good urban areas with the good schools and trendy shops is essentially impossible, it is beyond their financial reach. They must live in the suburban environment, mostly bedroom communities around big urban areas, and balance transportation-housing-child care costs. The average worker is in a squeeze even with a one or two salary middle class family income. if something fails, it can lead to a complete financial meltdown.

The "devil is in the details" and clearly this book shows the details of family economics. We see the strong forces that are burdening the middle class such as day care and health care (or substitute taxes in socialist countries like Canada) that are far out of balance with what we would call average salaries. Many people live too close to the financial edge with no real net worth other than their mortgaged homes and small savings, and must go into bankruptcy when health costs suddenly rise or there is a similar crisis. According to the book, the crisis is caused by the costs of the basic family fixed costs - housing, health insurance, cars, day-care. etc. - not by frivolous purchases, or even food and clothing which have declined as a percentage of total costs.

This is a very interesting and in some ways innovative book. For a solution, it is hard to find one, but better planned communities with more mass transit would help reduce transportation costs, and especially an emphasis on encouraging more high paying jobs for the middle class would help on the income side - maybe through less government. I do not know how we can do that in a free society, and I prefer non government solutions, but it is worth pursuing, especially basic medical coverage, energy, transportation, education, and business development. They all need attention.

To solve the medical burden we must proceed with a better plan. We can make hamburgers for $1, computers for $200, and fly people coast to coast for just hundreds of dollars - all without the government giving us vouchers. So it follows that we should be able to come up with a plan, or ideas to both reduce costs while improving health care and other services - and without the government raising taxes or printing and borrowing money for vouchers or similar. But who will manage that(?), hopefully not the inefficient governments, they probably are already part of the problem through the high tax burden.


Rating:
Summary: Some very interesting ideas, worth reading.
Review: The were some very interesting ideas discussed in here, particularly regarding why a couple where both work full time may put them at higher risk for bankruptcy, and the details of why bankruptcy is related more to banks' lending practices than to the turpitude of the current generation. However the authors' solutions to solving some of these issues are at times unrealistic and are not always supported by solid evidence.

Rating:
Summary: Highly Recommended!
Review: Mother-and-daughter authors Elizabeth Warren and Amelia Warren Tyagi tell the frightening tale of a rising tide of bankruptcies and financial difficulties in middle-class America. Their statistics show that families with children, including single parent families, are hardest hit by this epidemic. The authors, who make no pretence of objectivity, blame corporate greed and government neglect. Their politically improbable proposals include school vouchers removing geography as a placement criteria and the re-regulation of lending. The book doesn't ever really define its pivotal audience, the "middle class." It trusts your conventional wisdom about what it means to be middle-class, while passionately questioning conventional wisdom about consumer debt. Yet, despite the book's flaws, the authors make a thought-provoking, eye-opening argument about lending practices and they issue clear warnings about debt. We recommend this book to families, and to anyone concerned about social justice, family-friendly policies and consumer debt.

Rating:
Summary: Worth a read
Review: As other reviewers have noted, 'Two Income Trap' suffers from dodgy statistics, simplistic analysis, and unrealistic recommendations. But in spite of these shortcoming, the book merits a read.

The Ms. Warrens make a credible case that the 'two income' mindset of the past few decades is in large measure responsible for setting up a situation in which many families find themselves in a financial mess.

What's missing from title however, and what is key to the authors reasoning, is that the 'trigger' of financial disaster is most often family devolution - a divorce, or the separation of a non-married couple.

Families set themselves up for a financial collapse by committing the whole of their two incomes to 'fixed expenses' and leaving themselves no safety reserve. The crash occurs when the family breaks apart. This is because, following the break-up, where two incomes once supported a single household, those two incomes must now support TWO households.

There's nothing novel in their analysis up to this point, but the authors part company with those who conclude that deadbeat dads and profligate spending on luxury automobiles and other toys are the financial issues that cause families, single moms in particular, to slide below the poverty line.

In their view, the fundamental financial problem is not an undisciplined spending on 'things', but a bidding war over houses in communities with decent school systems that has driven the cost of housing to unrealistic levels. Single parent families, or two income families in which one wage earner is temporarily unemployed, desperate to provide the same advantages to their kids as the two-income families, are unable to compete without assuming unsupportable levels of debt.

The authors conclude, for a number of reasons (see the book) that financial de-regulation is responsible for the problem. Their recommended solution involves re-regulation at the federal level with the intent of driving down housing costs to the point where a decent house in a decent school district can be managed on a single income.

Conceptually, one can see merit in the argument. However, one can also forsee the possibility of financial disaster overtaking many families if home values - which are the foundation of many a family financial plan - are arbitrarily halved, as the authors recommend. Perhaps the 'cure' would prove worse than the disease?

In spite of this rather... unique... conclusion, the book has much to recommend it. The authors challenge conventional notions about the sorts of things that drive family finances to the brink. The discussion of financial deregulation, and examples of predatory lending practices in particular, is educational and, one might hope, would motivate policy makers to more thoroughly consider the affects of their decisions.

Readers should be aware that the analysis and recommendations found in 'Two Income Trap' reflect a particular political slant. But balance can be found in the author's support for policies such a voucher system to fund public education, and the occasional 'ignored child' swipe at Hillary Clinton, who failed to adopt the author's recommendations regarding bankruptcy reform legislation.

Oh the whole, 'Two Income Trap' is a worthwhile read.