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Summary: The most informatively, fact-based, depressing book I’ve read in the entire personal finance series, and it’s a must read.

The Two-Income Trap: Why Middle-Class Parents are Going Broke

This year the oldest millennials will or already have turned 37-years of age. While it might be cute for publications to use stock photos of teenagers eating pizza and avocado toast with headlines focused on our marriages, or the lack thereof, if you live anywhere on Earth, you know our real interest have shifted towards discussions on life, personal finances, and our stagnant incomes, or lack thereof. Yes, of course, pizza is still delicious, but now we’re serving it to our own children, not our dorm roommates. We grew up. When will the media join us?

If current trends continue, by the end of the decade one of every seven children in the US will have lived through their parents’ bankruptcy. … In any given year more children will live through their parents’ bankruptcy than their parents’ divorce.”

Despite its release over 15-years ago, the evidence-based information found in The Two-Income Trap stands the test of time by exploring fertile financial ground with informative discussions that remain absent in far too many “current” media publications. To be frank, the financial facts facing us are depressing.

We affirmed as much from our own personal experiences and through our great discussion with reporter Michael Hobbes who researched the same topic: Why Millennials Face the Scariest Financial Future Since the Great Depression. You probably don’t need to read 15 personal finance books or listen to our podcast to know millennials are struggling, however, just in case you’re closet Boomer or Millennial-skepticist who requires convincing:

Starting in the 1970s and 1980s, the world began to shift beneath our feet. As we describe in the Two-Income Trap, middle-class incomes flattened and expenses kept rising. … From 1980-2014, the 90 percent got nothing. None. Zero. Zip. Not a penny in income growth. Instead, for an entire generation, the top 10 percent captured all of the income growth in the entire country. 100 percent.”

I encourage you all to read this book. My own self-imposed word limits will prevent me from hitting all the valid points. I know that’s hard to believe since this post is long AF, but below is my best attempt to summarize. For the purpose of this review, I’ll focus on three primary themes: the myth of overconsumption; the increasing and real cost of doing living; and the perils we will all face in a two-income world.

The Over-Consumption Myth

Assuming you read any headline ever this year, you are well aware that Millennials have destroyed the world, or at least the profits of the corporate world. The media has blamed those crazy millennials for destroying everything from Buffalo Wild Wings to the mortgage industry and childbearing (industry?) due to our preferred affinity for avocados. As you might suspect if you are an actual living millennial–or not an idiot of any age–the facts do not support these claims.

There is no evidence of any “epidemic” in overspending—certainly nothing that could explain a 255 percent increase in the foreclosure rate, a 430 percent increase in the bankruptcy rolls, and a 570 percent increase in credit card debt.”

If you paid a bill or two at any point in the last decade the following might resonate with you more than the scourge of sautéed buffalo wings impact on your monthly budget:

The average two-income family earns far more today than did the single-breadwinner family of a generation ago. And yet, once they have paid the mortgage, the car payments, the taxes, the health insurance, and the daycare bills, today’s dual-income families have less discretionary income.”

You might hope for something complicated to explain these events, but the story of why so many are struggling is straightforward. While Millennials were figuratively and literally unborn, the financial landscape they would face as adults completely transformed.

By the mid-1980s, credit had become a highly profitable consumer product, like running shoes or soft drinks, and the new game was to sell as much as possible. … Credit card debt has increased accordingly: from less than $10 billion in 1968 (inflation adjusted) to more than $600 billion in 2000, an increase of more than 6,000 percent.”

The Cost of Doing Living

I researched how much debt you can afford according to industry standards for Paychecks & Balances. Many household expenses aren’t easy to control for: home, children, (PB59: Kids Cost What?!!?) and tuition costs are just a few familiar budgetary plagues that come to mind.

Today, after an average two-income family makes its house payments, car payments, insurance payments, and childcare payments, they have less money left over, even though they have a second, full-time earner in the workplace. … The two-earner married family starts out just slightly better off than the divorced woman of a generation ago, with only 25 percent of income available for food, utilities, clothing, and all other discretionary purchases.”

“The Rent is Too Damn High!”

Now adults or near-adults, many millennials still refuse to increase their debt burden just to co-own a home with a bank, “the expenditures that have shown the biggest increases—e.g., housing, health insurance, college tuition, preschool—are the purchases least likely to appear on a credit card bill.”

Perhaps, on average, watching the economy crash three times before your 25th birthday might give you a little post-traumatic stress about long-term debt; much to the chagrin of the mortgage industry. These “kids” just continue to defying their financial overlords! Our failure to indebt ourselves further—in addition to school the trillions in school loans we already owe—for another 30-years of our lives continues to baffle the industry. The Wall Street Journal promulgated the industry’s latest “remedy” to this generation’s debt allergy: No Savings? No Problem. These Companies Are Helping Home Buyers With Down Payments.

What could possibly go wrong?

According to one study, families that make a down payment of less than 5 percent of the purchase price are fifteen to twenty times more likely to default than those who put down 20 percent or more.”

Over the years, I’ve done my best to remain objective about the business practices of an industry obsessed with drowning an entire generation in debt for the sake of shareholder profits. It is, after all, a choice to take on debt, and these companies are in the business of making a profit, right? Fair enough. But, then you learn of standard industry practices like…

It has become routine for lenders to issue unmanageable mortgages. … Anyone whose housing costs exceed 40 percent of their earnings would be considered ‘house poor,’ spending so much on housing that they jeopardize their overall financial security. … The proportion of middle-class families that would be classified as house poor or near-poor has quadrupled.”


The Federal Reserve lowered interest rates nine times in 2001, which meant that credit card companies’ cost of borrowing fell considerably. Even so, they held steady the rates they charged most of their cardholders. The result? A $10 billion windfall for credit card companies.”


  • “More than 75 percent of credit card profits come from people who make those low, minimum monthly payments.”
  • “Within six months of filing for bankruptcy, 84 percent of families had already received unsolicited offers for new credit.”
  • “This year credit card companies will charge more than $7 billion in late fees (quadruple what they charged less than ten years ago).”

Resulting in…

Over the past generation, average savings has dropped from 11 percent of income to negative 1 percent, while credit card debt has climbed from 4 percent of income to 12 percent.”

Struggling on One Income in a Two-Income World

Without significant changes in policy, in any given year the following will remain unchanged or worse for this generation and the next.

More people will end up bankrupt than will suffer a heart attack. More adults will file for bankruptcy than will be diagnosed with cancer. More people will file for bankruptcy than will graduate from college.”

I ask again, which topic dominates headlines despite affecting fewer individuals? Why do you think that is? I can tell you what it is not. It is not due to Millennials buying iPhones and avocado toast. Only someone ignorant of the facts, ignorant of common sense, or absent of both would suggest as much when, “nearly nine out of ten families with children cite just three reasons for their bankruptcies: job loss, family breakup, and medical problems.”

Why Are Those Crazy Millennials Delaying Childbearing and Marriage?

I laugh when people wonder why the most informed generation—in terms of formal education and access to information—refuse to do things that do not make sense because they do not make any sense to do. For the sake of debate, maybe a few evidential reasons why marriage, childbirth, and homeownership occur later in the lives of young people might include the firsthand knowledge of the following facts or even the casual observation through their friends’ Facebook timeline since 2004:

  • “In 1981, about 69,000 women had filed for bankruptcy. By 1999 that figure had jumped to nearly 500,000—an unimaginable leap. … In just twenty years, the number of women filing petitions for bankruptcy had, in reality, increased by 662 percent. … The predicament of divorced mothers has worsened not because divorce itself is any harder, but because couples today are in worse shape before they split up.”
  • “Two-income families are more likely to file for bankruptcy than their one-income counterparts. … Single mothers are now more likely than any other group to file for bankruptcy—more likely than the elderly, more likely than divorced men, more likely than minorities, and more likely than people living in poverty.”
  • “Families were swept up in a bidding war, competing furiously with one another for their most important possession: a house in a decent school district.”
  • “By forgoing childbearing, a woman decreases her chances of going bankrupt by 66 percent.”
  • “Our study showed that married couples with children are more than twice as likely to file for bankruptcy as their childless counterparts.”

Yes, why aren’t millennials knocking down the doors of the homes they can’t afford to raise the children they also can’t afford? It is really anyone’s guess, I guess.


As I alluded to in the beginning—and thank you for reading this far—these are scary times. When it comes to personal finance or otherwise, I do not believe ignorance is bliss. I’m glad I’m aware of these facts.

What happens to a nation that rewards the childless and penalizes the parents?”

The Two-Income Trap ends with several solutions; most are focused on policy changes. I remain cautiously optimistic about policy. For one, there are few non-existent issues the government can’t create policies to make bad, and there appear to be even fewer already existing bad policies the government can’t somehow make worse.

Further, even in the best of times, the impact of even the most well-crafted, targeted government policies typically take an entire generation or more to alleviate the problem(s). Contributing to my pessimism is the fact that these issues started 20-years ago and have only worsened since. As the book itself admits:

If America’s crippling addiction to debt could be shaken off with a simple regulatory change, what are the politicians doing about it? The answer, quite simply, is nothing.”

Presently, it seems the best hope is for individuals to learn about their finances, invest wisely, and fend for themselves. For those looking to salvage their own financial destiny, the authors offer this 3-step Financial Fire Drill:

  1. Can you survive for six months without one of the incomes that you currently rely on?
  2. Can you downshift the fixed expenses? – Think of every long-term commitment in terms of walking a tightrope—so long as your family is on the rope, there is a risk of disaster. Take the shortest walks you can.” (36-month car loans vs 60-month, etc.)
  3. What is your emergency backup plan?