by Elizabeth Warren, Amelia Warren Tyagi
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Product Description
More than two decades ago, the women's movement flung open the doors of the workplace. Although this social revolution created a firestorm of controversy, no one questioned the idea that women's involvement in the workforce was certain to improve families' financial lot. Until now.In this brilliantly argued book, Harvard Law School bankruptcy expert Elizabeth Warren and business consultant Amelia Tyagi show that today's middle-class parents are suffering from an unprecedented and totally unexpected economic meltdown. Astonishingly, sending mothers to work has made families more vulnerable than ever before. Today's two-income family earns 75% more money than its single-income counterpart of a generation ago, but actually has less discretionary income once their fixed monthly bills are paid.How did this happen? Warren and Tyagi provide convincing evidence that the culprit is not "overconsumption," as many critics have charged. Instead, they point to the ferocious bidding war for housing and education that has quietly engulfed America's suburbs. Stay-at-home mothers once provided a financial safety net if disaster struck; their move into the workforce has left today's families chillingly at risk. The authors show why the usual remedies--child-support enforcement, subsidized daycare, and higher salaries for women--won't solve the problem, and propose a set of innovative solutions, from rate caps on credit cards to open-access public schools, to restore security to the middle class.
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Average Customer Review:
0 of 0 people found the following review helpful:
 Some Excellent Observations but Over-Blames "the System", 2008-07-04
In this book the author states that "having a child is now the single best predictor that a woman will end up in financial collapse," and this is true for both married as well as single women. In fact, the author boldly, and correctly, suggests that people avoid having children as a financial planning technique.
The author also shows that the dual-income family of the early 2000s is no better off than the single-income family of the 1970s. The second income is eaten up by increases in housing, education, child care, health insurance, auto costs, and taxes. There are structural changes in our economy that account for this, but the author avoids this topic.
The fact that our America is not the same as our parents' America is not our fault. But we've all got to adapt and make decisions, just like our parents and grandparents did when they went through the Great Depression.
My wife and I are in our mid-fifties now (2008). When we started out, we knew there was no way we could accomplish financially what our parents did. So we decided not to have kids, we stayed together, we moved several times to find jobs, we both obtained Masters Degrees, and we both went back to school to change careers. We've never purchased a new vehicle. We've rented most of our lives, but in 2002 we bought a small condo. Looking back, we struggled, but our current financial security is due to the decisions we made, and our willingness to adapt.
Likewise, the people we know who are less financially secure also made decisions - bad decisions - and they refuse to adapt. For example, an acquaintance got divorced after fathering a child, made a career change, is not making lots of money but refuses to go back to school, tried unsuccessfully to avoid making child support payments, and lives at home with his mother. He is self-employed, and works about 20 hours a week, which is fine with him. He says he is "a second class citizen," and wants socialized health care because he fears cancer and has no insurance, yet he doesn't want to go to the county hospital when he has chest pain because of the long waiting time.
My wife and I are supposed to feel sorry for him? We're supposed to get out the crying towel and ask our Congressman to increase our taxes so Uncle Government can help him out? I think not!
The author also contends that deregulation of the banking industry has resulted in unscrupulous lenders forcing debt upon naïve borrowers. She blames lenders for the fact that many families, including middle- and upper-income families, ended up with expensive subprime mortgages. Let's see, the lenders are at fault because these buyers didn't do a little reading and comparison shopping before they locked themselves into the biggest investment of their lives? Sorry, but I'm not buying it.
The author's solution to the credit problem is re-regulation. Unfortunately, that "solution" punishes the responsible borrower. Instead, I suggest that everyone who wants credit of any kind must first obtain a borrowers license. We don't let people drive cars without a drivers license. Likewise, we shouldn't let people take on credit without a borrowers license, because they can so easily harm themselves and others through debt mismanagement.
In fact, maybe we should also make people obtain a birthing license so they become aware of the author's major premise, that "having a child is now the single best predictor" of ending up in financial ruin. Of course, most people won't listen, but at least they can't complain that they weren't informed!
In closing, this book makes some excellent points, but it minimizes the importance of personal decision making by over-blaming "the system," and some of the suggested solutions are questionable. If you are interested in this topic, I highly recommend The Fragile Middle Class: Americans in Debt, co-authored by Ms. Warren. That book points out that the huge increase in consumer debt has made Americans more vulnerable to all financial setbacks, including the top three reasons for bankruptcy: job loss, divorce, and medical problems.
1 of 1 people found the following review helpful:
Worth Reading, Gets You Thinking, But..., 2008-05-16
...there are some serious problems, too.
First, the good points:
-We need our usury laws back!
It is stupid and reckless to expect an eighteen year old kid to suddenly possess a JD and be a CPA to accurately wade through the ten pages of fine print attached to a credit card application. That is where the trouble starts, on college campuses, under the guise of a free Tshirt or 2 liter of Coke if you fill out an application.
-Health care is disaster.
It is diabolically stupid to connect health care to employment. Medicare For ALL!
-Colleges are out of control.
We need to price cap state schools, point blank. The authors are dead on with this one. Not every college needs to be the best in every program, and they are all trying to be. Let them prioritize and specialize- not every college needs trades and sports and culinary arts and fine arts... blah blah blah. All the schools I know are pumping money into housing, too, which is really stupid in the midwest, where off campus is usually nicer and cheaper.
-The Financial Fire Drill.
Thinking like a family at war; protecting what you value most; acknowledging that your children are more important than your credit rating or the creditor that yells the loudest; explaining that the longest financial commitments are also the riskiest- this stuff is worth reading and worth knowing.
-Car Seats: All That Safety Comes a High Price.
When my parents were kids (in families of 7 and 8), each family had two cars: a station wagon and a pick up. The station wagons didn't have seat belts, little kids were lap riders, and you could ride as many people as could squeeze in. If the wagon went on the fritz, the family piled into the bed of the truck. No more.
Car seats themselves are expensive, they expire after five years (no, I am not making this up- look it up), and God help the family with three kids. Even if the oldest is out of his/her car seat, unless you have a third row vehicle (a minivan or a big SUV), chances are you can't all legally fit. Even in the backseat of a big sedan (or larger), there is not enough room between two car seats for a five or six year old, much less a seven or eight year old to ride. Bigger cars are more expensive cars, and it is a huge burden, especially with gas at $4 a gallon.
The Cons:
- Though the title is the Two Income Trap, the authors don't explain thouroughly enough how to live within your means either on one income or two.
For example, two full time, out of home workers are going to rely much more on meals out and packaged, more expensive groceries. This is not a failing on their part, its just the reality that cooking from scratch takes lots of time (and often, lots of time to learn). This is frequently one of the means by which couples "downshift" when they move from two incomes to one. When joined by losing extra taxes, daycare, car payments, insurance, and gas, and the other expenses associated with working, a new picture emerges for most families. They could have gone into this, and they didn't. It's too bad.
-Vouchers.
Okay, I haven't made up my mind on this concept yet. I think that tying schools to a zip code is at least as stupid as tying health care to employment, but, again, the authors don't really explore the variables here. Can kids go to school anywhere in the state under their ideal voucher program? If so, do the best schools become boarding schools, the way the schools for the blind/deaf are? What are the implications there?
Also, as a homeschool advocate, I was disappointed to not even see non-institutional education get so much as a mention.
-Housing.
Yes, housing prices throughout much of the country got out of control. Yet there remained many areas where housing prices are low enough that it is possible to own a family size home on a single income. Our 3 bedroom, 150 year old house cost $31,000 in 2005. While it needs some updating, it isn't a shack, either.
(And no, low COL areas are not neccesarily low wage areas- rather, they are low COL because the cost of real estate is low relative to wages. Our mortgage is equal to about 18 months of my husband's net salary.)
My husband's coworker bought a 5 bedroom house on 2 acres last year, and while it's in need of some pretty serious remodeling, she only paid $17,000 for it. I think that's a bargain, considering you can't buy a new Honda Civic for that price.
I think there's a certain amount of choice at play here.
At the end of this book, I was left with the words of Amy Dacyzyn ringing in my ears: "If you are willing to live like a family did in 1960, you can survive and even thrive on a single income." Is this true in every area of the U.S.? No, but if you pick a place with a lower COL, it can be done. People just don't want to think about what this means- it means a more modest home; a single car payment at a time (if any at all), very few meals out; no paper towels or disposible dishrags, napkins, diapers, wipes, plates, cups, etc.; no cable or cellphone; no dishwasher or microwave. This is how people got ahead on a single income back then, and it's how people do it now.
(Oh, and for what it's worth, I am a dyed in the wool liberal.)
0 of 0 people found the following review helpful:
Interesting read; but doesn't really offer any applicable solutions to the modern family., 2008-04-23
There were a lot of interesting facts in this book, that really make you think about two-income families. However, while the author(s) are excellent at describing tear-inducing situations that tug at the heart, they are unfortunately unable to provide very much in the way of applicable help for the families who are struggling within the 'two income trap'. The changes that they do suggest would take monumental governmental intervention and a very large dose of time to fix.
4 of 5 people found the following review helpful:
 Yes and No, 2008-02-23
On the positive side, this book offers some interesting interpretations regarding why people are going broke, most notable is their belief that it can all be changed by reforming the public education system. This was an intriguing idea. However, I could not get past the fact that they argue AGAINST the fact that Americans over-consume on everything. In short, they say "it's not their fault" for living way beyond their means. I have a huge fundamental problem with this attitude. I don't know where Warren lives or who her friends are, but within my middle class community and everywhere around me, almost everyone I know or see has a sense of entitlement to have the latest and greatest, biggest and best. People are duped into thinking that every luxury (cable TV, SUVs, cell phones, etc.) are a necessity. NONSENSE. Just a generation ago people were much better at living within their means, doing without if necessary, and making do with what they have. I get so disgusted with today's attitudes. Dave Ramsey's philosophy is much much better and more practical. Eat beans and rice, take on extra jobs if you have to, and LIVE WITHIN YOUR MEANS. This book was not for me.
4 of 6 people found the following review helpful:
 A sobering but worthwhile read, 2008-02-02
Back in the mid to late 60s, average real income in the U.S., which is just economic terminology for income adjusted for inflation, started to decline for the first time. Once that trend gets started in a country, for whatever reason, it's almost impossible to reverse, as any economic historian will tell you.
Now, forty years later, the impact of that dire trend is here for all to see. The American middle class is moribund and on the verge of extinction, if it isn't already. And in the last 15 years, the middle class has suffered through the worst of it, with job flight overseas in the late 90s, and the corporate restructurings of the early 90s. What is not well known is that most of the increase in profitability that drove the great bull market of the 90s was widespread and extensive corporate downsizings, restructurings, and layoffs during that period, which made companies leaner and and meaner. It wasn't that American companies were now better managed or were producing better products, although there were a few exceptions.
That's the sad macroeconomic backstory to the current situation. In this book, Prof. Warren examines the personal toll this economic sea change has produced, and how it has affected the families themselves. And her claims are backed up with massive amounts of data. And at this point, no one, even conservatives, denies it. Liberals and conservatives just disagree on the reasons for it.
Warren provides convincing evidence that it isn't frivolous spending that is driving most Americans into debt, which is the conservative view, but needed fixed expenses such as a mortgage, medical insurance, education, and so on, all of which have climbed precipitously in recent years, much more than the level of inflation, and more importantly, of average income.
Reckoned in these terms, I can't disagree with her conclusions. My only quip is that I'm sure that the millions of people who took out piggy-back loans were only too happy to take those cash payments, without the bank twisting their arms too much. There's the old saying about when a deal sounds too good, it probably is, but apparently no one was thinking in those terms. On the other hand, it was the mortgage lenders "loan to own" strategy that backfired on them, when interest rates went up. Word to the wise--no one can predict interest rates for very long, including economists--let alone your average citizen.
Also, Prof. Warren's data notwithstanding, which is very convincing, I should add, nevertheless, we've all seen people who have come into windfalls who've just frittered it away on frivolous consumption instead of doing the wise thing and saving and investing it. In fact, at my age, I've been around a while (I'm pushing 60) and I can't count the number of people I've seen do this.
Overall, though, I agree with almost all of what Warren has to say. But the likely cure for the current situation--balancing the budget, increasing taxes, ending the war in Iraq, creating better paying jobs and not simply more low paying ones, providing affordable medical insurance, buying smaller, more economical cars, eating out less often, and spending more responsibly when necessary--is probably more than Americans can stomach. Debt has simply become a way of life here, and that isn't going to change anytime soon. Not to mention the fact that creating more and better jobs would require some real creativity and rethinking of our whole work economy. Does anyone think our current crop of leaders (whether republican or democrat) is up to this task?
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