Can your family survive on 1 income

Can your family survive on 1 income3

Cricket Jones was a stay-at-home mom for 28 years and raised five children. Then she and her husband divorced.

The Boise, Idaho, woman doesn't regret staying home, but she does wish she'd finished her college degree and kept one foot in the work world with some kind of part-time employment.

"When I divorced, I was left without any skills to get a decent-paying job," Jones said. "I went back to school at the age of 48 and became employed a year later. Not the best way to do things."

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How much of your pay should you save?

Many discussions about becoming a stay-at-home parent focus on the benefits to the children and the immediate costs -- having to live on a budget, eating out less and so on.

But deciding to become a one-income family carries some long-term financial risks as well, especially to the person who's leaving the workplace. Without careful planning, the result can be more debt, less in retirement savings, atrophying job skills and greater vulnerability to economic setbacks.

The stay-at-home parent not only gives up current income but may also face lower lifetime earnings and retirement benefits because of time away from work. In her book "The Price of Motherhood," former New York Times economics reporter Ann Crittenden estimated her decision to stay at home cost her between $600,000 and $700,000 in reduced income and lost pension credits, while economist Shirley Burggraf calculated that a couple earning a combined income of $81,500 could lose more than $1 million if one partner stopped working. Even a lower-income couple where one partner earns $30,000 and the other $15,000 faces a $600,000 difference if the lower-earning spouse stays home.

Taking just a few years off from work wouldn't be as expensive, but labor economists warn that any substantial time away from the working world can result in lower earnings when you return.

When I asked my Facebook fans who lived on one income to offer their best advice, it boiled down to this: Prepare well in advance for what you're about to do.

"Plan, plan, plan," wrote one. "One of the best things we did was refinance our home at a low interest rate while we still had two incomes (so we could qualify) under stricter banking rules. Also, we started living without my husband's check to see if we could live on one income. His checks went into our emergency savings fund."

Kristina Olson of Delta, Utah, and her husband started living on one income while she was pregnant with their first child. Before that, they paid off $28,000 in credit card debt. Her one regret is that they didn't start living on one income earlier and retire all their nonmortgage debt.

"I do wish we had used more of my income to pay off more debt before that, but all of our rates on student loans and vehicles have always been lower than 5%," Olson said. "We have paid off some here and there, but probably could have been completely out of debt a long time ago."


Candace Thelen Rose of New Richmond, Wis., echoed that sentiment. The family trimmed utility, insurance and food costs, but such moves ultimately weren't enough to prevent her from having to go back to work.

"It would have been so much easier to stay on one income if we had not had $400 a month to pay on debts," Rose wrote.
Source:MSN.com

Obama Releases $3.73 Trillion Budget

WASHINGTON—President Barack Obama released a $3.73 trillion budget for fiscal-year 2012 Monday where he sought to balance two competing and conflicting agendas: dramatic cuts to federal spending while also investing in programs to improve U.S. competitiveness. He ended up with a product that offers up more than $1 trillion in deficit reductions over a 10-year period—three-quarters coming from spending cuts and the balance from tax increases or the elimination of existing tax breaks.

In fiscal 2012 alone, the administration proposed reducing or closing 200 federal programs at a savings of $33 billion.

"My budget makes investments that can help America win this competition and transform our economy, and it does so fully aware of the very difficult fiscal situation we face," Mr. Obama said in his budget message.

Many of these proposed budget cuts and tax increases have been proposed earlier and met strong opposition in Congress.


Mr. Obama is proposing cuts to programs such as the Low Income Home Energy Assistance Program, which would stand to lose $2.5 billion, while $300 million would be cut from community-development grants. In doing so, Mr. Obama said his budget includes cuts to "many programs whose mission I care deeply about, but meeting our fiscal targets while investing in our future demands no less."

The president called for a five-year non-security discretionary-spending freeze and a two-year freeze of federal government employees' salaries.

But those proposed savings go nowhere near the short-term reductions that House Republicans are pushing for. Friday night, the party's leaders released details of a plan to slash $62 billion in the remaining 7½ months of fiscal 2011, and they promised to cut more in their fiscal 2012 budget plan.

The Obama budget reductions don't come close to the $4 trillion in savings recommended by a White House-appointed deficit commission. This is largely because the president's budget shies away from pushing for any substantial changes to entitlement programs Medicare, Medicaid or Social Security. Nor does it include a specific outline for overhauling either the corporate or individual tax codes.

The budget acknowledged that the proposed cuts to discretionary spending were only a beginning to addressing the core fiscal problems facing the country.

"But non-security, discretionary spending represents approximately 12% of all spending," the budget said. "The solution to our long-term fiscal problems cannot rest on this alone."

On Social Security, Mr. Obama sought to start the conversation by outlining a series of principles for an overhaul effort. He is proposing no reductions in basic benefits for seniors, and future beneficiaries could not see their "benefits slashed."

Republican lawmakers criticized Mr. Obama for failing to spell out how to reduce entitlement spending.

"We're not having any leadership" at all, Sen. Jeff Sessions (R., Ala.), the top Republican on the Senate budget committee said on CNN. "I do believe he deserves serious criticism for that."

Mr. Sessions added his party stood ready to begin negotiations with Mr. Obama on overhauling the entitlement programs.

White House Budget Director Jacob Lew said the budget did in fact attempt to meet the goals set out by the deficit commission.

"We accomplished the goal that the commission was set out to accomplish, which was to get to a sustainable deficit as a percentage of the economy in the middle of the decade," Mr. Lew said on CNBC.

Under the president's budget, the deficit as a share of U.S. gross domestic product would decline from its projected 10.9% in fiscal 2011 to 2.9% by fiscal 2018. Most economists agree that a deficit lower than 3% of GDP is sustainable.

But then under the White House budget, the deficit would begin increasing again as a share of GDP in the latter years of the decade, largely as a result of the costs of the entitlement programs.

Mr. Obama does propose aggressively cutting the Pentagon's budget—which along with the entitlement programs and interest on the national debt account for the lion's share of federal spending.

He would cut defense spending by $78 billion over the next five years, bringing the Pentagon budget down to zero real growth. Combined with reduced expected spending on the wars in Iraq and Afghanistan in the coming years, that would reduce defense spending substantially.

On the investment side, Mr. Obama called again for making the research and development tax credit permanent—at a cost of $106 billion over the next decade.

The president proposed $36 billion in loan authority for the construction of new nuclear-energy power plants as well as $2 billion in loan guarantees for other new renewable-energy projects.

The $7,500 tax credit available toward the purchase of new electric vehicles would be transformed into a rebate available to all consumers upon purchase. The president reiterated his goal of having one million advanced-technology vehicles on the roads by 2015.

The budget would create 100,000 teaching positions in science, math, technology and engineering over the next 10 years.

It would maintain the current maximum of a $5,500 grant available to poorer college students—it would pay for the substantial cost of doing so by eliminating the grant's availability during summer school, and interest would begin accruing on loans taken out by graduate students from their inception.