Dual-Income Families Come with Big Costs

Thursday, January 16, 2014, Vol. 129, No. 11

Ray’s Take: DINKs (dual incomes, no kids) might not actually be bringing home as much additional gross income as they think. When kids enter the picture, it’s probably time to take a long and hard look at the pluses and minuses – financial and otherwise – of continuing to have both parents work outside the home.

A salary is not the same as take home pay; and take home pay is not the same as actual additional income. It’s important to look at the real bottom line to determine if two incomes are worth the extra stress and emotional hardship. You have to do the math.

Start with taxes. Not only are there federal income, FICA and possibly state taxes to consider; two salaries could also throw you into a higher tax bracket. That alone could negate some of the benefit of a second salary.

Then there are work-related expenses: transportation, gas, and parking; business clothing; lunches out; obligatory office donations. These all take a big chunk. Add to that the cost of daycare, which can easily exceed $10,000 annually for just one child. You may find you’re actually gaining mere pennies on the dollar from that second income.

However, before opting for one stay-at-home parent, be sure to consider health care coverage, retirement benefits and career objectives. These all matter too.

Ultimately, this decision is about more than just money. There are certainly psychological and career benefits to both parents working. Further, having two separate sources reduces the risk of a solitary breadwinner.

Dana’s Take: To work or not to work? That is a question few parents can afford to ask. For those who can, it is an emotionally loaded issue. Each couple has to weigh the financial and emotional costs and rewards to the family.

I recently read the book, “How Children Succeed,” by Paul Tough. In it he presents a study where baby rats were better able to cope and learn when they received more grooming from a parent or caregiver. The author raised questions about whether children raised with extra nurturing might develop better coping and learning skills. Talk about a guilt trip for working moms.

Over the holidays, our family watched home movies from when our teen children were toddlers. It kept coming to me was how grateful I was to have stayed home when our children were small. Ray was willing to work full-time while I played with babies on the floor and strolled them through the zoo.

The costs? We gave up a few levels of lifestyle so that I could quit my job. Also, my cocktail party conversation started at laundry and ended at potty training and orthodontia.

Think creatively about working options for both parents. Carving out additional hours to spend with your precious children is priceless – not to mention a limited time offer.

Ray Brandon is a certified financial planner and CEO of Brandon Financial Planning (www.brandonplanning.com). His wife, Dana, has a bachelor’s degree in finance and is a licensed clinical social worker. Contact Ray Brandon at raybrandon@brandonplanning.com.