Scott Burns - High Cost of Living as a Family

[intercst]

http://www.dallasnews.com/sharedcont...s.15624ca.html

You can understand exactly why it's difficult to make your paycheck cover your expenses if you'll spend a few minutes thinking about a tool once used by the Department of Labor.

It's called the revised equivalence scale and is one of the many devices that have been used to sort out the differences in cost of living for households of different ages, sizes and composition. Academics continue to debate the best tools, but a revised equivalence scale that's 20 years old tells the story.

Let's say that the cost of living for a young married couple without children gets an index number of 100. From there, the revised equivalence scale has an index to represent the cost of living for each size and age of family composition.

A young single person, for instance, would get an index of 71.

Marriage and the arrival of a first child takes the index to 127.

The arrival of a second child moves the index to 147.

The index continues to climb as the children age. It reaches 204 when the older child is 6 to15 years old and peaks at 231 when the older child is 16 to 17. (The index is apparently unaware that some children go to college.)

From there the index starts to descend, going down to 186 when only one child is at home (assuming the other isn't at Stanford or Harvard). It reaches a mere 120 when the couple makes "Empty Nester" status. It hits 104 when the couple is retired and bottoms at 57 when a spouse dies and leaves a widow.

Put all these index numbers together, and you have a life cycle. You also have an idea of how much your income needs to increase if you have the heartwarming and politically correct goal of having two children. Between the day we marry (index 100) and the day the index peaks at 231 – a period of about 17 to 19 years – real family income needs to grow at 4.5 percent to 5 percent a year to maintain our standard of living.

<snip>

Whatever the job, it's tough to argue that you deserve a raise just because you're a parent and need the money.

Many young couples, armed with visceral knowledge of this reality, decide to have fewer children. Some – an increasing number – decide to have none.

</snip>

intercst

Quote:

It reaches a mere 120 when the couple makes "Empty Nester" status.

That number doesn't work for us.* I know that when we make "Empty Nester" status (tomorrow at 8 AM!), we will spend a lot less than when we were a newly married couple.* We've already bought most of the stuff that we need, house paid for, etc.* *Apart from college expenses, I'd say we're at about 80.

[Nords]

When we're empty nesters (five years & counting!) we plan to move the "Childcare" budget account into the "Parental entertainment" account. There will be zero net savings.

[azanon]

A couple of things on that index seem odd to me.

>What if both you and your spouse work (as in my case).* I would think the index would be lower, not higher than for someone that's single.* *Its cheaper for 2 people to live under one roof than it is for 2 people to live separately on their own.*

I guess the index assumes that for married couples, one spouse doesnt work.* In today's world, that's a very naive assumption.*

> I have a 2 year old i pay 460/month for daycare because we both work.* That's a freakin car payment.* When he enters public preschool, that will go to 0, so i'm fully expecting my "cost index" to actually drop, not rise after then.

>Regarding the college costs, we started a 529 plan the day my son was born.* So that cost will actually be spread out over ages 0-18, not realized when he graduates.* *Whatevers there in the account at 18 is what he gets.* The rest he'll have to pay for (if there's an outstanding balance).

[moghopper]

Quote:

Originally Posted by intercst http://www.dallasnews.com/sharedcont...s.15624ca.html intercst

I suppose this article is true if one is keeping up with the Joneses and their kids.

My personal experience is different.

[haha]

Quote:

Originally Posted by azanon A couple of things on that index seem odd to me. >What if both you and your spouse work (as in my case).* I would think the index would be lower, not higher than for someone that's single.* *Its cheaper for 2 people to live under one roof than it is for 2 people to live separately on their own.* I guess the index assumes that for married couples, one spouse doesnt work.* In today's world, that's a very naive assumption.

This index is for the cost of living, not the cost of living per person. It also is not about the sources of income. So, if you accept his COL of 71 for a young single person, then two young single people living separately would combine their indices additively-ie. their COL would be 142. If they then married, it would drop to 100 as per Burns. I personally doubt that there is that much savings, if any at all, from the average young person who gets married. I guess to some extent, money that you spent going out and having fun you now spend on better furniture or something.

Obviously, some people might do things differently. If the mother of an infant works, then day care will indeed be a large portion of the budget.

In many families where the husband earns a good income, the mother of a preschooler would not work outside the home.

In at least one family on this board, the father of the preschooler stays home with the child.

Haha

[azanon]

Quote:

This index is for the cost of living, not the cost of living per person. It also is not about the sources of income. So, if you accept his COL of 71 for a young single person, then two young single people living separately would combine their indices additively-ie. their COL would be 142. If they then married, it would drop to 100 as per Burns.

Ahh, that makes sense and thanks for that clarification.* *

Quote:

I personally doubt that there is that much savings, if any at all, from the average young person who gets married. I guess to some extent, money that you spent going out and having fun you now spend on better furniture or something.

So you're disagreeing with the rationale you just listed above?* (142 vs 100)* *You really should reconsider that.* *Again, its cheaper for 2 people to share rent (or a mortgage) than it is for one person to pay it all.* *For example, 2 bedroom apts dont cost twice as much as 1 bedroom, they're like 20-30% more.* *Think about food recipies;* most ive seen are for average sized families, not single individuals.* * How bout health insurance; my federal insurance is "self and family" - much cheaper than 2 "self" plans.* And on and on and on.

DINKs are simply going to have a higher standard of living, i believe, than 2 single individuals. The so called marriage penalty is also being pulled back as of late.