How to Avoid the Two-Income Trap

I was engaged at age 21.  You should have seen the surprised, confused, or downright disgusted looks on the faces of the “young professionals” (most were in their 30s and 40s) I encountered around the DC metro where I lived at the time.  Outside my existing friends in the area, the most common response was something along the lines of, “are you sure?”  Even the smiling older couples couldn’t resist a, “but you’re so young!”  Yeah, that was kind of the point.

There a definite allure to wanting to get your own house in order before going off and joining another one.  Building a career can be a difficult and insecure process.  It may require sacrifices, long hours and low pay and sudden travel and diplomatic socializing.  Is it fair to drag another person into that uncertainty, knowing you can’t guarantee to give them enough financial support or even your full attention?  Won’t they just weigh you down with extra commitments you can’t afford, prolonging the process?  It would be better to establish your career, grow your earnings potential and savings, figure out who you are and where you want to be, before bringing in that missing piece of the puzzle, someone to share in your success.  You’ll have a lot more to offer them and be less likely to face hardship.  It’s smart to wait.

But it’s a trap.  Getting married is a big adjustment.  Having a kid takes a lot of time and money.  The more comfortable you are in life, the more established your routine, the more ingrained your spending habits, the harder it will be to sacrifice for the sake of someone else.  This is especially true for couples where both spouses are working.  When you have a kid, are you going to give up the second income to take care of the child?  Or are you going to put the kid in daycare that costs more than college tuition, working mostly just to pay for the privilege?  You’ve probably gotten used to spending more than one income, bought a house (or are renting) in a better neighborhood than you can afford on one income, and it’s not like having a bid means your other expenses are ever going down or you need less space.  

You can make it work, of course, plenty of families do, but the older you get, the longer you wait, the higher the costs of starting a family, relative to your standard of living, at a time when you are less able to bear the toll.  Better to be poor and stressed when you are young.  Consider it an investment in your future.  Your older, less energetic self will appreciate it.

I should know.  Though we married early, my wife and I fell right into the trap.  At first, we got by just fine on one (very tiny) salary while she was in grad school.  We lived in a small apartment backing up to a Walmart, owned basically nothing that wasn’t a wedding present, and had date nights at the local Mexican restaurant for under $10.  But we lived in a city on the beach that we loved, we had good friends and family nearby, and we knew it would only be a few years.  Looking back, those were some of the easier times in our lives.

Once my wife graduated with an expensive degree and the student-debt to prove it, we moved back to Charlotte so she could start working.  I was a few raises into my career, and her job paid better than mine ever would, so for the first time in our adult lives we actually had a little money left over.  No more constant worrying over meeting the monthly budget, no more buying only the cheapest necessities at the grocery store.  We could actually go on our own vacations or out to a nice dinner even when it wasn’t our anniversary.  It was nice, I must admit.  Then we decided to have kids.

For us, it wasn’t a financial decision.  We never considered the costs.  No spreadsheets were involved at all.  Good thing, too, because otherwise we might never have done it.  We just knew we wanted a family.  Things were going pretty well, so why wait?

The realization started to hit us when my wife was put on bedrest halfway through the pregnancy.  Losing over half your income is never easy, especially when you’ve just rented your first house to accommodate a baby and acquired a bunch of medical bills, but you can survive for a few months.  The really hard questions come once the baby is born.  Because someone has to take care of the thing.

After a tough pregnancy and further difficulty postpartum, my wife was torn on going back to work.  No one wants to give up their newborn to a daycare, even a good one.  It hurts to hand over the baby you just spent nine months carrying, sacrificing your body and pain and time for, that you finally got to see and hold and feed.  Maybe it wasn’t best for either mother or child, but we didn’t have a choice.  We couldn’t afford her (or me) to stay at home.  For us, it turned out fine.  My wife needed to work for her own sanity, to have some productive use of her time, and she could work parttime while still covering the daycare costs.  Our daughter thrived, and we found a satisfying compromise.  Not everyone is so lucky.

Elizabeth Warren, before she got into politics, used to call this the “Two-Income Trap.”  It has wider ramifications than family finances.  I often see social media posts of young people lamenting the fact that their grandparents could live the ideal American dream on one income while they can barely scrape by after college.  It’s usually a gripe about the unfairness of today’s economy, or the low minimum wage, or a call for universal income, but it points to this underlying issue.  The truth is that it’s perfectly possible for a family to live a good life on one income, only it’s much more difficult to do so in the same ways and in the same places.  Economics is complicated, so there are a plenty of factors involved in this change, but the proliferation of dual income couples is a significant and often overlooked one.

From a Reddit post, one example of many

In a competitive market, a family with double the income can outbid a single person or income for the most desirable locations and amenities.  Prices, especially for real estate, thus skyrocket in the cities where people most want to live and work, crowding out both those with lower-paying jobs and anyone who can’t live with a single bedroom or roommates.  Couples are locked into dual incomes just to afford to live in the area, and children become a real luxury.  There’s a reason family life is often a slow progression toward the suburbs.  It’s a necessary compromise for most families, doubly so for those with a stay-at-home parent, and as a suburb becomes more crowded, the cycle repeats.  The costs redound primarily to mothers, who are denied the choice of whether to work or manage a family, to children, who are sent away for much as their days at the earliest of ages, and to young singles, who find it increasingly difficult to get by on their own in places they want to live.  As a father, I don’t particularly like it, either.

There is a way out.  If you’re a young couple who wants to start a family someday, don’t fall into the two-income trap.  Be patient.  Make compromises while you are young.  Whether you have one income or two, live as though you only have one and save the rest.  Don’t get into a habit of spending on new cars and fine foods and expensive vacations.  You can learn to cook some simple meals; it’s a fun way to spend time with your spouse.  Instead of going out to a bar for drinks, invite friends over to your place.  You can be comfortable in a small apartment when it is just the two of you.  You really don’t need seven different streaming services.  Plan ahead.  Leave some space in your budget, call it a “baby fund” if you want, imagine you are saving for their college.  I know it’s hard, but the future will pay you back double in freedom and flexibility.

Now you can have children with the assurance you can afford it, at the time when you are ready.  If you or your wife want or need to stop working or go part-time, you can.  Few things are as heart-wrenching, as soul-crushing, for a mom than wanting to be with their child but needing to work.  Don’t put your wife through that.  If you both want to work, though, you’ll be able to afford daycare (trust me, guys, it’s way more expensive than you think) without taking a hit to your finances.

The big payoff comes years later, at that glorious moment when your last kid goes off to school.  You will suddenly find that you have more time and money than you know what to do with, enough for private school or for those vacations you never took or the house you didn’t buy.  The kids are old enough to appreciate fun things and go on new adventures.  It’s a perfect time to continue a career or start a new one for yourself or your wife.  There’s still plenty of responsibility, not to mention expenses, but the newfound freedom is exhilarating.  I can only imagine what it’s like when they go off to college.

If you get the hard part out of the way early, while you are young and energetic and naive, you will be in much better a position than all the young professionals who, whether by choice or circumstances, focused on themselves and their careers and now find it difficult to pause to start a family in their 30s or 40s.  Don’t fall into this trap.  Wherever you are in life, if you want to have a family, start preparing now.  If you’re young, don’t wait, falsely thinking it will get easier when you are older.  If you’re not, make the tough decisions and sacrifices now so you will be ready when time comes.  You can’t always choose when you find the person you love or when you will finally get pregnant, but you can choose to live in a way that doesn't dig yourself a massive ditch to faceplant into.