About book The Two-Income Trap: Why Middle-Class Mothers And Fathers Are Going Broke (2003)
Family economics is of particular interest to me for two reasons: (1) I keep losing my job so it seems like we are always struggling, and (2) As a case manager, I work (when I am working) with mostly economically dis-advantaged people for whom I feel it is part of my job to educate for their own protection. So, I really loved this book.In this book the authors point out that the disappearing middle class is a result of not over-consumption but our desire for safety and education coupled with the loss of our safety net - the stay at home mom. (She is very pro-feminism, so don't get the idea it's going to be sexist) It is very well written in that the authors provide researched based evidence of what has caused our current situation and then even propose solutions! (I know that shouldn't be too much to ask but this is the book I expected Nickled and Dimed to be- present a problem, offer solutions!) Not all of their ideas are an easy sell but everything they have to say is defiantly worth thinking about. I found this book to be full of information to quote and share: On p. 131, they say, "No advertisements trumpet, "when your husband leaves you, there's MasterCard." nor do we hear: 'American express: don't lose your job without it.' but those slogans would be closer to the truth about how credit is used today. " (HA!, so true.) With anecdotes, wit, science and math they show that we can blame public policy and big business for creating the mess we are in today, NOT the average American family who is actually NOT "blowing their money on vacations and luxury items" as proponents of the over consumption myth (big business and their lobbyists) would lead us to believe. Another quote I have to share is: "Sears reportedly earned more money from the interest and late fees the company charged it's credit card holders than it earned from selling merchandise." Wow. I had numerous moments with this book, those that Oprah would call my "ah ha moments," and this one stands out as one that really made me think: It's no wonder things aren't made as well as they used to be. Since companies do seem to be more concerned with huge profits than with providing a service to their customers it only stands to reason that they are more concerned with their banking business than appliance building. Also clearly explains why Wal-mart did away with their layaway...Anyway, this is not a financial planning book, although she recommends you read one. But she does finish with a chapter of what we can do as individuals. On pg164 the authors advise NOT to cut back on frills but instead on fixed expenses during good times. Sounds counter intuitive, but is what I'm already figuring out for myself: if you are already squeezed during "good times" and can't afford ANY frills then "you have a much bigger problem than an occasional dinner at the Olive Garden." Also the authors say, "Never mind the looks from the over consumption camp as long as you are staying out of debt. If tough times come you can drop this expenditure in a heartbeat." This goes along with advise that any good financial advisor would give. Don't enter survival mode unless there is a real need to survive. (unemployment, illness, etc.) She advises cutting fixed expenses instead and avoiding long term commitments. For example you should only take out a 36 month car loan- if this drives the payment up too high then hear the warning that you can't afford it . "Think of every long term commitment (in borrowing) as walking a tight rope- so long as your family is on the rope, there is a risk for disaster. Take the shortest walks that you can." She also offers advice to people who "missed the fire drill" and are already in a financial disaster. For example, I did not know that, "It typically costs a creditor an average of $350 to send a truck to your house and cart something away and even more to resell it. " How great would that kind of information be to be armed with if the creditors come calling?Very well rounded, well written, intelligent book. Highly recommend to those with families struggling on two incomes and to those to believe the myths that overconsumption and poverty have a causal relationship.
"The Two-Income Trap" is a book I've been meaning to read for years. I discovered it in college when I read the first fifty pages or so in a Barnes & Noble between classes. I found it fascinating, and vowed to eventually read it in full. And now I have!There's so much in this book that its hard for me to know where to start. Written by the mother daughter team of Elizabeth Warren and Amelia Warren Tyagi, "The Two-Income Trap" examines the current financial weaknesses of the middle class, and there are many. But the most surprising for me is the weakness that gives this book its name: having two incomes instead of one does not necessarily make a family's finances stronger. In fact, according to the Warrens, but putting themselves in a position where they need two incomes to cover their fixed expenditures (housing, car, health insurance, etc.), families are making themselves weaker than they were in the 1960s and 70s."The Two-Income Trap" examines the middle class by looking at families and individuals who have filed for bankruptcy. When beginning a study on bankruptcy, they were shocked to learn that there was one trait that an overwhelming majority if bankruptcy filers shared: have a dependent child present in the home. What, the Warrens wondered, is it that makes parents - and especially mothers - so financially vulnerable? What is going wrong?The answers are complex, and not necessarily what you'd expect. The Warrens dismiss many of the common myths surrounding bankruptcy - that those filing for bankruptcy are immoral spenders, that they bought themselves into dept with meals out and designer jeans, or are committing fraud. What the Warrens find is that in 90% of the bankruptcy cases studied, filers were hit by one (or more) of the following three crises: medical bills, job loss, or divorce. Middle Class families, the Warrens find, have already stretched their two-income budgets so far that they cannot accommodate any disasters. Why are middle class budgets stretched to so thin? There are many reasons. The Warerns look at the relationship between schools and housing prices, and the second income that allows middle class families to enter bidding wars for houses in good school districts; they look at how the current school system fails parents of young children by not offering pre-school; they look at how single mothers in the 1960s and 70s provided a safety net for families during times of crisis; they also look at how deregulation of the finance industry in the early 1980 has changed the way banks operate, and how these changes hurt consumers.This book was great. It is well researched, easy to read, and really help gave me an understanding of household financing.I also like that the solutions Warren offers in this book all deal with changes to our financial law, education system, disability law, and other policy changes rather than suggesting a that families simply revert to the one-income model (though she does briefly talk about that in chapter seven). The world isn't going back to one-income households, probably ever. What the Warrens focus is that middle class families need more social safety nets to help in an emergency. They also need to eat out at restaurants more when things are going good, so that they actually have luxuries to cut when things are going bad. Ha. How many finance books are going to tell you to eat out more? :P
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Only now starting to comprehend the reasons for the foreclosure crisis, and this book goes a long way towards helping that. Talking about the methods of credit card companies and the deregulation of the credit industry puts a lot of recent events in perspective. On a personal financial front, the trap mentioned in the title is more the evolutionary result of 1) women entering the workforce and 2) parents bidding each other up on housing prices in order to live in a good school district...which results in a family's fixed costs making up a larger percentage of their net income, and without the safety net of a stay-at-home mother to get a part time job to help bridge the gaps of unemployment, or relieve the burden of a catastrophe such as huge medical costs. Warren also debunks the myths of over-consumption, the idea that bankrupcy is the result of indulgences and poor planning. Seems like a must-read for anyone trying to understand personal finances.
—Adam
I read this in 2007, around the time that I saw the documentary "Maxed Out" and also around the time my husband was reading several financial blogs that presaged the current recession(for e.g., Calculated Risk). Actually, the author, Elizabeth Warren, was interviewed on that documentary, and she was so compelling I sought out her book. This book is very good, helping one understand how house prices became so insanely inflated---the bubble---and also giving reasons to be sympathetic, rather than judgemental, towards people who did buy property that they could not afford.I remember there is a chapter on Hillary Clinton, her brilliance and also her choice of politics over integrity with regard to bankruptcy laws. There is also a clear description of the sub-prime mortgage situation and an interesting side-piece on how divorced fathers may not be able to pay child support.I think that in this book there is a certain nostalgia, or preference for, or modelling of the way family finances used to be organized: one parent (father) working, while one parent (mother) stays at home, looking after sick relatives, able to step into workplace if other parent loses job, etc., and expenses are reckoned on a one-income budget. Thinking about this book now, the tension between this model and the model pursued by the authors themselves (E. Warren writes it with her daughter)---two-income, working-mother family---is never resolved satisfactorily. I recall they suggest that even if your household is two-income, then to budget your expenses as though you rely on only one, in order to avoid being stretched out financially, especially when difficulties like lay-offs, sickness, stock-market crash, etc., occur. I think this sounds sensible in theory, but I can't imagine it in widespread practice in America. But! It is really easy to read, concepts presented clearly and interestingly, and I am glad that I read it. Broadened my mind, and all that.
—Leila T.
This book had the potential to be SO interesting, with a lot of thoughtful points about middle class families. Instead, it's a pompous piece of self-indulgent writing from a pair of know-it-alls. I tend towards liberalism and this book still pissed me off. If they're not insulting conservatives and making snide remarks about those of us who believe in concepts like personal responsibility, they are advocating for a paternalistic government that tells us what we can and cannot do because we're incapable of making decisions for ourselves. (Must legislate against credit card interest rates because people can't control themselves enough not to spend money they don't have! People NEED a suburban because how could they possibly fit two whole carseats in a family sedan!). Feh. Someone should muzzle these two before someone takes them seriously. Unfortunately, I think it's already too late for that.
—lindsay
