It's Not How Much You Make

When I had to consider finding a "job" in 2001 after closing down my business, I was faced with the reality of making a fraction of what I made as a business owner. My business had $6 million a year in revenue, and provided a nice six-figure salary for my family. Afterwards, with both my wife and I looking at our likely income levels, would make less even when we both went to work. If that wasn't enough, my saleable skills were primarily in management, especially after the computer training business market was severely depressed, my other skills from the business. For quite a while there really were no management jobs, and computer training jobs were being cut back. I simply couldn't find work. I was either over qualified, or in the wrong industry.

This eventually forced me into taking a close look at the economic realities that existed. How do we "downsize" our lifestyle to live within my wife's sales income? She had much greater potential for bringing in money than I did in this market. In time, she'd be able to get close to where we were in our business, income-wise, than me. When I started cutting the budget, I realized we were already operating pretty efficiently, and there wasn't much room to cut. That was actually bad news. It mean't our "necessities" were too high. That is when I realized that the middle-class families in my area are stretched beyond their means due to housing costs. Our mortgage payment was almost 50% of our lean budget. It seemed prudent to consider selling. My wife wouldn't have it. Our son was in a good school and we couldn't move him. When I read Elizabeth Warren's book The Two Income Trap, it confirmed my findings.

So where was my solution? I started looking at how much we were saving by my staying home. To get a good handle on this I picked up a book by Linda Kelley titled, Two Incomes and Still Broke?. It detailed the costs of a second job in the family, including the income tax effect. I was surprised at what I found. I would have to exceed my realistic potential starting salary by a wide margin to just pay the costs of the second job. That means I would most likely be losing money if I took on a job. What impacted me the most was that about 60% of my salary would be eaten up in payroll taxes, before I even could start paying for the job related expenses I would incur. I decided it would be better to stay home and be a full-time dad. I'm glad I did. So instead, I am moonlighting by writing books and doing ministry work.

The rules have changed. The economics of running a home are not as simple as they used to be for our parents. A second income isn't always better. Focusing on how much is leftover after taxes and basic needs are met is the key. I highly recommend Linda Kelley's book.