How much does it cost you to work? It's the dual-income conundrum.

My husband and I were having the ubiquitous “uneven-distribution-of-household-labor” discussion. I laid down an empty ultimatum – either help out more or I’m quitting my job. My husband said, “Okay. Quit.” Um…what? Definitely not the response I was expecting. But it got me thinking...was it feasible? Could we actually afford for me to quit?

We tend to think of our gross salaries as what we need to keep the house running. I was absolutely stunned when I took a look at the actual numbers. I did some math and it was amazing how much less my income actually contributes to the household in terms of real dollars.

The biggest hit on any second income is taxes. As deductions are the same regardless of one income or two, the second income is taxed in its entirety, less actual out-of-pocket expenses. So you already know to take off your 10%, 25% -- or even 35% if you’re really raking it in. What is often not considered is the eye-popping loss of household income when the second salary bumps the couple into a higher tax bracket. Then both salaries are hit at a higher percentage rate.

For example, let’s take a fictitious couple, Jen and Bob. Let’s say Jen makes $50,000 and Bob makes $40,000. If Jen was the sole breadwinner, their numbers would be like this:

Income: $50,000
Exemptions: 7,000
Taxable income 43,000
Taxes @ 15%: 6,450
Net: $36,550

With Bob’s $40,000 salary bumping the couple into a different tax bracket – one that’s 10% higher – we now have this scenario:

Jen:
Income: $50,000
Exemptions: 7,000
Taxable income 43,000
Taxes @ 25% 10,750
Net: $32,250

Bob:
Income: $40,000
Exemptions: NA
Taxable income 40,000
Taxes @ 25% 10,000
Net: $30,000

Total income: $62,000

Yes, Bob’s salary adds a very significant $30,000 to the household, but Jen’s income drops by $4,300 from Bob working.

If a couple has small children, the added cost of care really slams the second income. Let’s say Jen and Bob just had twins. Child care can cost around $12,000 per year per child – even more depending on where one lives. For families with children in need of any type of child care, the second income becomes even more tenuous. To stay in the mid-range of the hypotheticals, let’s say Jen and Bob are lucky and they found full-time care for two infants for $18,000.

Combined income: $62,000
Childcare: 18,000
Net: $44,000

But wait! Those little bundles earn child care credits as well as two more exemptions, so we get to add a little back:

Previous net: $44,000
Credit: 3250
Net: $47250

With taxes and children only, Bob’s $40,000 salary is now contributing less than $12,000 a year to the home. And there are still other hard costs involved in working, such as commuting. The average US commute is 16 miles in each direction. That’s 32 miles per day. With a car getting 20 miles per gallon and gas costing $3.30 on average, that’s over $100 per week in fuel.

Second net income
(less taxes and childcare): $12,000
Less fuel: 1,200
Net: $10,800

And that doesn’t include dollars spent on wear and tear on the car, tolls, parking, as well as additional insurance for heavy mileage. Then there are other hard costs of dual income homes, such as work clothing, business accessories and electronics for work (such as Blackberries). And even the most disciplined brown bagger will have an occasional lunch out with co-workers. These numbers add up to expenses that shrink the bottom line for the home.

Then there are the soft costs of dual-income homes, as well; the extra nights of carry-out and the extra expense of prepared foods because there isn’t time or energy to cook. There are costs incurred because no one has the time or energy to shop around for better prices on everything from insurance to groceries to bank fees. Even without those costs, for this fictitious working couple with two children, a $40,000 second salary has dwindled to just over $900 a month in additional income.

Yes, these numbers are hypothetical and don’t take a lot into consideration – not everyone has two pre-school aged children. Not everyone commutes. Some people don’t ever order pizza and always prepare every meal at home because their budgets make these behaviors a necessity. And most of us need that $900 extra per month to survive, regardless of how much money has to head out the door before the rest even hits the bottom line. However, the numbers can also swing the other way. Some families have three pre-school aged children; have 50 mile commutes; get worse gas mileage.

For us, once we did the math, I probably could have quit – for a while. But there were other considerations; what happens when childcare is no longer an issue? Then that salary really adds up. Taking time off during those preschool and after-school care ages can damage a career. There is also the significant issue of security. My husband’s business had a good year, making my quitting something to possibly consider – but what would happen during a bad year? My staying in the work force provides more than a little extra income; it offers peace of mind.

Regardless of why one works, whether it’s love of career or necessity to pay the bills, it’s a worthwhile endeavor to determine the true cost of one’s job. At the very least, you’ll know where all that money went.

Do you know the real dollars your salary brings into the home? And would you quit if it were an option?

From the Community…

Comments 1-10 of 10

Posted by Dory Devlin, Shine staff Fri Apr 11, 2008 2:48pm PDT

Micki, we did this math when I decided to step away from a full-time job when my kids were little. But I have to say we need to figure in the retirement savings that are being socked away when you've got an income, too, and not just the day-to-day expenses that eat up the second income. It's one more thing to consider in the equation.

Report Abuse

Posted by Joe B. Fri Apr 11, 2008 3:24pm PDT

Also to be considered is the added costly restaurant excursions, work clothes, and work-at-home purchases (computer, etc.). On a non-monetary child-rearing level, access to free time since the inevitable household jobs are (mostly) done is priceless.

Report Abuse

Posted by my1stkitty Sat Apr 12, 2008 1:30am PDT

Health care coverage would also be important. My coworker was quite frantic when her husband's company was laying off people. Just in case, she immediately added her kids on to her plan at work.

Report Abuse

Posted by valleymom2alex Sat Apr 12, 2008 4:40pm PDT

Micki,
The tax calculations are not correct. The IRS taxes our income based on a "tiered" system, so being bumped into the next tax bracket only affects the top portion of your income. For a married couple, the tax brackets look like this:
The first $15,650 of your taxable income is taxed at 10%
Taxable Income between $15,650 and $63,700 is taxed at 15%
Taxable Income between $63,700 and $128,500 is taxed at 25%
So, for the scenario you presented, the taxes would actually be $13,597.50 on $83,000 of taxable income. (15650x10% +48050x15% +19300x25%) This is based on the 2007 tax rate schedules. Take care!

Report Abuse

Posted by Micki LeSueur Sun Apr 13, 2008 5:31am PDT

Thanks, valleymom2alex.
Sorry for the miscalculation. Taxes are definitely not my forte. And for everyone else, there are many, many variables, especially health insurance and retirement savings. There are so many scenarios and reasons to work. My only point was to illustrate that working is expensive! And with kids, it can sometimes wipe out an entire salary. Thanks for all the thoughtful (and correct!) responses.
Micki

Report Abuse

Posted by Gabriela L Sun Apr 13, 2008 5:48am PDT

I think you also should also add the cost of not developing a career. Kids will not be around for long and to go back to the work market after such a long absence is difficult. Plus, women abandoning the workforce also help to this "punishment" in the salary of females, and bring reasons to continue this ideas that many men have about women not being so engaged to work, so, by quitting you are also affecting people who share your gender. You also feed this situation where men are more "free" to stay for extra hours because they have a "person" who takes care of things at home, being this one more obstacle for a women to compete with such men. Plus, giving up economic independence also places you in a dangerous situation in case of divorce, it is proved that women do worst economically speaking after a divorce than men.... “Okay. Quit.” is, sadly, a common answer from men in couples who think that a men's career is always more important than a woman's... very less men quit their job to make home chores and raise the kids even thought the salary of the woman would also be enough to keep decent living standards... one wonders why (think about the hidden costs ).

Report Abuse

Posted by medontworryaboutit Sun Apr 13, 2008 8:18am PDT

I did the same thing, i calculated babysitting, gas, lunch bc i never took lunch to work, my everyday coffee and it always came out to minus. So when i quit my job i didnt think we were going to be able to make ends meet but its been so awesome! I mean i still work but for myself, i do passion parties 2 nights out of the week. If anyone is interested check out my website www.yazminspassionparties.com and click on be a consultant. This is not a get rich scheme its for people that want to supplement their income or just bring in more play money for the family.

Report Abuse

Posted by Passionate Gin Sun Apr 13, 2008 7:29pm PDT

I found a way to work from home! It was so much better for my children and my marriage. My income brought exactly $125 a week into our home after childcare and taxes and that didn't include commuting 32 miles a day and lunches out for both of us. I now make my hubby's lunch every day so we save money there as well. In five months, I now bring TWICE what I did before into my home.

Report Abuse

Posted by susiegauthier Mon Apr 14, 2008 5:40am PDT

Don't forget other expenses we sometime don't consider : even if the kids are in school, there is till the before and after care. Plus, summer camps are REALLY pricey. That can set you back a lot. After my kids were both in school, I considered going back to work but I still had a hard time with it because of that. And also add all the activities that they need to get to as they get older, the appointments to doc and orthodontist, etc... My youngest has asthma and misses at least 3 weeks of school every year. And I enjoy the fact that once we all are home in the evenings and on weekends, it's play-time for the whole family : no cleaning, shopping with the kids tagging along. Finally, I know it put a damper on my career but my philosophy is that when I am ready, I will either go back to school to change field or find whatever job I like and will have me. In the long run, to me, it's all worth it.

Report Abuse

Posted by FlN Mon Apr 14, 2008 11:14pm PDT

I gave up my career 11 years ago to raise my kids.It has been great being around for them however there have been sacrifices. One income for us means we don't have money for all the extra things like vacations. And trust me, when you stay home the desire to spend money is stronger because there's nothing else to do. There's only so much laundry and cleaning to be done. And when the kids are in school and then hanging out with friends I wonder if I made the right choice. At the time my income wasn't great so it was an easy choice to make. But now I'm 40 and I have to start at the bottom again. If I could do it over I would try to work part time just to stay in the game.
The decision is very personal and you should consider everything to be lost and gained, the money is only a part of it.

Report Abuse

Comments 1-10 of 10

Work + Money