Most Helpful Customer Reviews
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103 of 110 people found the following review helpful:
4.0 out of 5 stars
This is One Scary Book, February 12, 2004
The mother/daughter team of Elizabeth Warren and Amelia Warren Tyagi have written one scary book. What exactly makes this book so frightening? The fact that many of their conclusions are probably correct.A friend who happens to be a CPA who counsels families in financial trouble told me about this book. She actually is warning her clients not to read it because it paints a fairly bleak and depressing picture. Naturally, after she told me this, I had to read it, even though she was correct, much of the information contained in it is depressing. For one thing, in many ways the integration of women into the workplace and the rise of the two income family has not had the positive effect one might have hoped it would. Because so many families are now two income dependent they have become trapped and are more financially vulnerable than previous generations. Many families use all of the income they receive from both husband and wife, and barely get by. As a result, any interruption of the income flow can result in disaster. One telling statistic: today's two-income family earns 75% more money than its single-income counterpart of a generation ago, but actually has less discretionary income once their fixed monthly bills are paid. This is generally blamed on overconsumption and claims that we are a credit card generation that it is paying the price for its free spending ways. And no doubt credit spending has its role in the financial problems of middle America. But Warren and Tyagi make a compelling case that this is not necessarily the whole story. Instead, they propose that the culprit is in large part the ever escalating cost of housing and education in America's suburbs. As many parents chase the better schools in an attempt to assure their children the best possible education, real estate prices in areas serviced by those schools rise and with it the cost of the homes. At one time, families could count on stay-at-home mothers as a kind of financial safety net if disaster struck. If dad lost his job or some other financial problem arose, mom could go to work either fulltime or part-time to help tide the family over until the crisis abated. But today, when so many families are dependent on two incomes, families are at a frightening risk should any financial crisis arise in the family. The authors do propose some modest solutions, but its doubtful many of their suggestions would ever be implemented on anything more than a limited basis. Among their suggestions are rate caps on credit cards and open-access public schools, but none of their suggestions can truly provide a fix for the problem. Some people have dismissed their findings and conclusions. Unfortunately, I believe they are truly on to the core of the problem. While this book does indeed paint a bleak picture, with bankruptcy often proving to be the only solution for many families, it is a timely and recommended book for anyone concerned about the financial future of Middle America. I would criticize the authors for not offering more realistic solutions to the problem, unfortunately in the current economic environment there may not be any.
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68 of 79 people found the following review helpful:
3.0 out of 5 stars
Yes Virginia, many Americans are over-consuming, January 28, 2004
By A Customer
I have just started reading the book "Affluenza: The All-Consuming Epidemic" by John De Graaf, which has an interesting statistic. Fifteen years ago there were more high schools than shopping centers in the US. Today there are two shopping centers for every high school. Also, 70% of Americans go to the mall once a week. I recommend that you read Affluenza in addition to The Two-Income Trap, so you can compare and contrast. Affluenza somewhat contradicts the premise of The Two-Income Trap. If Americans really are spending less than their parents' generation why has the number of shopping centers skyrocketed? Why is there so much debt and bankruptcy? It?s because creditors are extending a lot of credit to the uncredit-worthy. This includes people with bad credit and college students who earn little or no money. Many young people graduate from college with enormous amounts of credit card debt at excessive interest rates, on top of student loans. With the interest rapidly building it can take years to pay off the debt. Those are also years spent saving and investing little or no money. As a result many people have a lot of debt and no money saved when they marry, have children and buy a home. Smaller down payments mean higher mortgages. Of course, nowadays a car is no longer good enough for young urban and suburbanites so they buy costly SUVs and add higher auto payments and enormous gas bills to their problems. With little or no savings and high debt loads many people don't have the savings and the insurance to get through job losses or illnesses. The authors' claim that "over-consumption" is not the problem simply doesn't stand up to scrutiny. Imagine a scenario. A college student lives as cheaply as possible. He graduates only with student loan debt. He gets a job, brings a bagged lunch to work, makes dinner at home and only buys clothes he needs. He puts $1000 a month into savings and pays more than the monthly minimum to quickly pay down his student loans. He gets married and he and his wife now put $2000 a month into savings. By 30 they have well over $150,000 saved, so they make a big down payment on a house. They now have an affordable mortgage. A child is born and thanks to their frugal habits and lack of debt either mom or dad can afford to stay home and raise it. They buy an insurance policy that will pay their mortgage if they can't make payments due to illness or job loss. They also buy life and disability policies, which they can afford because they are not overwhelmed with debt. How do I know this is possible? I'm 35 and I did it. This book is pretty good and is worth reading, because it discusses many important issues and makes many good points. For example, I agree with the idea of rate caps on credit cards and I agree that universities don?t do much to keep costs down. However, its unfortunate that the authors have downplayed the obvious over-consumption that is widespread in America today. Frugality and saving from a young age are the simplest solutions to the two income trap.
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140 of 170 people found the following review helpful:
5.0 out of 5 stars
Are You One Of These People?, October 22, 2003
The financial decline of the middle class families began 30 years ago and continues to this day. So why are they only people that are proposing solutions to this decline academics who do quantitative and qualitative (case study) research, and then propose public policy societal solutions? Elizabeth Warren and Amelia Tyagi have the experience and are appropriate authorities on this phenomenon. They identify the primary reasons of it: fixed expenses. Those expenses which are constant and "come in every month" has increased substantially in the last 3 decades. Remember in the 1980s when the acronym word "DINK" was in vogue? Double Income No Kids. It may have sounded hip then but DINKS earn less today than one person earned thirty years ago, in 1973.
It is a commonly known fact that middle class two-income earning families have been and still are losing economic ground. And they will continue to lose ground. Warren and Tyagi correctly argue with ample and valid evidence that it's not spending sprees, lavish vacations, or luxury items that are doing it. It's the necessities stupid. Property values supported with gargantuan mortgages are pushing debt ratios beyond the 38% considered the maximum safe and acceptable limit. Housing prices have outpaced wages significantly. Insurance premiums are constant and steady expenses that take a higher percentage of income today than in previous years and they too, are necessities. Education costs have risen dramatically more than wages. What's the American solution? Simply to borrow more money to pay for the higher tuition. Taxes have risen to mammoth proportions and take major chunks out of hard working families hard earned paychecks (taxation is not an issue delved into by the authors.) Again, the killer is the fixed expenses classified as "necessities." Both incomes today are significantly committed to necessities, such as mortgage and car payments, health care costs, insurance premiums, and children's and adult's education costs. The authors provide many practical and proven ways to assist folks in these situations (i.e., the "financial fire drill"). But the solution provided by the authors, who are experts in this field and are renown for their work is: public policy changes. Public policy changes take place when collective and coordinated societal "thinking" changes. Is this likely to happen? If the economic situation has been allowed to get to the point that it has gotten to now, then why would change finally be implemented now? Citizens didn't pay attention. Policy-makers (who are citizens) didn't pay attention. Most are still don't pay attention. Now a couple of academics are examining the origins and and growth of this problem and offering remedies for it. Few will understand and act accordingly. The masses will simply keep struggling and asking "why?" We know what the dilemma is and we know some of the solutions that can help resolve it, but will these proposed solutions ever take place?
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