The Two-Income Trap; Why Middle-Class Parents are going Broke

by: Elizabeth Warren and Amelia Warren Tyagi

The last chapter of the book is called “The Financial Fire Drill.” The authors point out that personal finance help books don’t talk about risks. One parent vs. Two parent families have different risks… and this must be taken into consideration.

1. Can your family survive without one income?

– It’s possible someone can get fired, lose a job because of medical problems, get laid off because their job is moved overseas, etc.
2. Can you downshift the fixed expenses?
– If you eliminate all the treats like eating out so you can pay on your debts, what do you do when you can’t even afford your debts let alone eating out? The fixed costs need lowered… This is where the authors suggest things like waiting to make large purchases.
3. What is your emergency back up plan?
– This is where worry/what ifs are discussed… What do you do if someone loses their job?

The authors also point out some things might look like they help, but probably won’t. Credit insurance being one of those things.

There’s also advice if “the house is already on fire,” which includes advice on how to survive paying off bills when the bills are more than the money coming in… There’s some interesting statistics included too. Like, based upon a 2000 statistic of divorce, more children will live through a bankruptcy than a divorce.

That might make you wonder the next time a politician explains themselves as doing something for the children, or trying to help American families.