Get a Job? - Part Deux
When I made the assertion last week that a family going from a single-income to two might not be as lucrative as having the stay-at-home parent more actively work to cut expenses, my most dedicated reader (Hi again, Mom!) asked me to demonstrate the high cost of that second income, by the numbers. So I got out my calculator...
Let’s say the Brokemeisters have decided that it’s time for Bunny to re-enter the workforce. Biff has been struggling to keep the bills paid on his $65K salary. Bunny manages to find a job right away, paying $35,000. Hurray! Six figures! They’re rich!
Not so fast. The Brokemeisters haven’t factored in the higher expenses that come with this income, starting with taxes. Biff’s $65K was at the upper end of the 15% tax bracket, and their federal tax burden would have been $8,915 for 2009. Bunny’s $35K knocks them into the 25% bracket, so they get to pay an additional $8,460.*
In California, where I live, Bunny’s $35K drives the Brokemeister’s income to the 9.3% tax bracket (up from the 6% on Biff’s salary alone), so now they’ll pay an extra $2687.25.* (I think the gov’t rounds that down to the nearest dollar on the tax forms.)
Don’t forget withholding for Social Security and Medicare! 7.65% of Bunny’s wages = $2677.50. (Which the gov’t rounds up to the next closest dollar, I believe.)
But wait, there’s more! The Brokemeister’s two adorable children, Biff Jr. and Buffy now need afterschool care. The program they found charges $5 an hour or $15/day for the 3 hours they’ll need. $15 X 5 = $75/week X 35 weeks of school = $2625.
That’s not the end of their childcare expenses. There are still summers and vacation days to contend with; about 15 weeks’ worth, assuming that the Brokemeisters get two weeks of vacation a year. Let’s assume they pay that same $5/hour for 8 hours each day. $40 x 5 days a week x 15 weeks = $3000. (If the kids are younger than school age, it’s even worse! Oh, and good luck actually finding childcare of any quality for that price - I wanted to price things as low as I could for a fair comparison to staying home.)
Are we done with the added expenses? Nah. With Bunny working full-time, there’s no one to keep the house clean, so they pay for someone to come every week, at $80/visit. $80 x 52 = $4160.
Of course, everyone’s too tired to cook, so they get take-out at least once a week, which costs $25 more than if they’d made something at home. They also buy more convenience food and school lunches, which cost another extra $25 more a week. $50 X 52 = $2600. (I think I’m being VERY conservative here!! Most families probably pay more.)
Transportation: Bunny’s commute drinks up a gallon of gas a day: $2.25 X 5 x 50 = $562.5. (Whew, it’s a good thing gas never goes up in price, huh?) Extra wear and tear on the car: $300/yr. (This is of course assuming that they already had a second car; if they have to buy one, add $300 or so per month for the car payment.)
Professional wardrobe = $500.
I’ll stop there because I want to keep expenses on the conservative side. What’s left of the $35,000?
Answer:
$7727. And seventy-five cents.
The Brokemeisters now have a dramatically altered standard of living. There’s added stress. Simple errands aren’t getting run anymore. Someone has to leave work to take the kids to doctor’s appointments, to stay home with them when they’re sick. The kids don’t see either parent for the majority of their waking hours.
Now Mrs. Brokemeister should be asking herself if she can work from home to shave expenses rather than heading to the office!
NEXT WEEK: Some fundamental ways to save money right now. These are easier if someone’s home, but dedicated two-income families can do these, too!
*Here’s how I calculated those taxes:
California 2009 tax rates are available here.
Federal 2009 tax rates are available here.
To figure taxes, multiply the applicable percentage rate on each portion of the income in its bracket. Don’t multiply the whole income by the highest percentage; it (thankfully!) doesn’t work that way!