Managing Two Incomes

Managing Two Incomes

Today, dual income couples account for about 60% of U.S. households.  Many depend on the second income to make ends meet, while for others it provides financial security and a way to afford “extras.”  Often, however, the second income does not add as much as expected to the bottom line.  With it may come higher expenses — such as child care, taxes, clothing, dry cleaning, transportation, and lunches — that consume a large portion of the second paycheck. 

When analyzing a second income, one must also consider the intangible costs and benefits.  Taking a part-time job while the children are young may not add much to household income, but it could keep the spouse on a career track and ease the transition to full-time work later.  Clearly, one should consider personal circumstances and goals when assessing the costs and benefits of a second income. 

For this reason, two-income families should develop financial plans that consider the possibility of the loss of one income for any reason.  These reasons could include a spouse’s staying at home with young children, going back to school, or losing a job.  In some cases, couples use the second income to meet the basic expenditures associated with their luxurious lifestyles.  They should analyze past income and expenditure statements to study spending patterns and identify areas where expense reductions are possible.  Such reductions would then be incorporated into the budgeting process.

Couples may experiment with different strategies until they find one that works best for them.  Consideration, of course, must be given to the amount each spouse earns and various emotional and behavioral factors in their relationship. Regardless of the money management system, each spouse needs to have some money of his or her own that he or she can spend without accountability.

Influence of Women’s Income on Family Budgets

The incomes of women have become an increasingly important part of family budgets over the last quarter-century, according to new Census Bureau data, but economic progress has come at a cost: less time with children.  Wives’ incomes amounted to only 26.6% of their families’ household incomes in 1970, but made up 41.2% in 1996, the latest year for which the Census Bureau has data.