Sometimes I hear from people who would homeschool if they didn’t have to work full-time. This post is written especially for them.
We bought our first house when we weren’t much more than newlyweds. We were the only people in the real estate office when we made our offer. The reason nobody but Tim and I were buying houses is that the prime rate was in the double digits. But we didn’t know any better, which is how we ended up with a 30-year fixed-rate mortgage at 13½%.
But it all worked out, because we only paid $65,000 for the house. A few years later, rates dropped and we refinanced for 10½%. Our house payment dropped $250 per month, and we used the difference to buy a new car. (Nowadays, rates are only around 6%, but houses cost hundreds of thousands of dollars, and you can’t change that amount by refinancing.) So despite our ignorance, things worked out very well for us. We sold that house seven years later for almost twice what we paid for it, and came out with a chunk of change that we put on the next house. We prepaid on the mortgages of both houses, which is how we ended up completely debt-free before we were 45.
But I digress. Back when we applied for that 13½% mortgage, I was appalled to learn that my income could not be counted on our mortgage application. At that time, loan companies only counted the husband’s income, figuring the wife would eventually quit work to have children, because that’s how most families did it back then. Nevertheless, I was insulted. Why, I had a degree. I had a good job. How old-fashioned to leave out my income!
I’m a little smarter now. Looking back, I can see that once mortgage companies started looking at both husbands’ and wives’ incomes when determining whether to approve a mortgage loan, home prices began to skyrocket. Eventually, prices got so high that most couples, and particularly first-time homebuyers, could not afford to buy a house with only one income. This contributed to the deterioration of family life, for sure, but it also made life more financially difficult for those who didn’t make above average incomes.
That second income, while increasingly necessary, has a very high opportunity cost, because it means there’s no one home to run the household. Now, I’m not saying all women should go back home. But having one person home, male or female, to run the household makes for a much more livable home while easing financial pressures.
How can this be if the family has lost one of its incomes? Well, home-cooking means better nutrition for less money. Cleaning the house means saves the cost of paying someone else to do it. Doing the laundry at home saves on dry-cleaning costs. The stay-at-home person can shop for the best deals on food and supplies, saving money on a regular basis. That person can also do yardwork, thus saving on lawn crew costs. The person staying home does all these things, thus saving money, plus that person saves even more money by not having the expense of a work wardrobe, lunches out, or paying taxes on their income. (The second income often increases the family’s taxes substantially).
These advantages become even more obvious once children come along. The stay-at-home parent saves the family the hefty cost of daycare. Kids raised at home instead of the daycare center pick up fewer bugs, keeping medical bills at a minimum. Since there’s a parent at home during the day doing household chores, the working parent has time in the evenings to enjoy the children instead of trying to do all the chores the couple who both work find when they come home in the evenings.
I’m reinventing the wheel here, because there’s a great book that explains all these advantages of having one family member stay at home. It’s called Two Incomes and Still Broke?: It’s Not How Much You Make, but How Much You Keep by Linda Kelley. Another interesting book on this topic is Shattering the Two-Income Income Myth: Daily Secrets for Living Well on One Income by Andy Dappen. Here’s a calculator adapted from Dappen’s book that will help you see how your family would fare by giving up that second income.