Families who have more than one income may have greater overall buying power than a family who relies on only one. However, while there are advantages, there also are disadvantages associated with relying on a dual income. It is essential for couples to understand both the benefits and drawbacks of having a dual income to decide what is best for their situation.
Money means different things to different people. To some, money is a tool for achieving goals. For others, money provides a feeling of security. Couples often argue about money, so it is essential to determine how best to deal with finances early in the relationship to avoid financial-related stress.
The difference in impact on the budget of a family between one income and two may be significant, or it may be negligible. Two professionals who each have strong earning power may potentially bring home a great deal more money than if only one of them worked. However, for lower income families, the cost of working may negate the earnings of one worker. For example, if the cost of child care, transportation and other costs associated with working add up to more than what one worker earns, the dual income may actually cost the family more money than a single income. It is important for families to calculate the opportunity costs associated with working to determine whether a dual income is actually necessary.
The impact of dual incomes on a family’s debt differ from one family to the next. In some families, the second income is used as a fall-back for hard times. For example, the family may choose to save most of the earnings of one worker and live on only one income. Conversely, another family may believe that the second income provides more of a safety net than it actually does, encouraging excessive spending that is not sustainable long-term.
In "Families Face Dual-Income Dilemma," an article on the Abri Credit Union website, Jeanne Hogarth, program manager of Consumer Education and Research with the Federal Reserve Board, said that dual-income families tend to feel more comfortable with debt than do single-income families. The article cited a Federal Reserve Survey of Consumer Finances, which found credit card debt for the average American family increased 50 percent from 1989 to 2001 as evidence that consumer credit has increased with the growing number of dual-income families in the same period.
Some couples may experience greater financial freedom with a dual income. They may feel more financially secure knowing they are able to rely on their dual earning capacity for survival. Conversely, some families may have dual incomes but no financial freedom if they find themselves trapped in a position where they must have two incomes to survive.
Standard of Living
A potential disadvantage of a single income, if the family has relied on a dual income in the past, is adjusting to a lower standard of living. So it is important that couples that make the decision to go from dual to single income plan ahead and put away an appropriate amount of savings or prepare themselves to make sometimes difficult budgeting decisions.
- More Than Money: Starting with Values: A Road Map for Couples - An Interview with David Bach; Pamela Gerloff; 2005
- Education Resources Information Center; Dual-Income Families; Eloise J. McKitric; 1984
- Abri Credit Union; Families Face Dual-Income Dilemma; Jan Garkey; May 2004
- Financial-Library.com: Budgeting Systems When There Are Two Earners in the Household