Physicians Fall into the Two-Income Trap

Physician's Money Digest, October15 2003, Volume 10, Issue 19

Physician's Money Digest

Is today's middle class family on thebrink of financial suicide? A newbook by Harvard Law School bankruptcyexpert Elizabeth Warren andbusiness consultant Amelia Warren Tyagiargues that it is. They say middle classfamilies (72% of physicians claim to bemiddle class, according to a recent survey) are sufferingfrom an unprecedented and totallyunexpected economic meltdown.

The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke

Publisher's Weekly

(BasicBooks; 2003) has received quite a buzz. In fact, calls it "a needed examination of anemerging social problem."

Ironically, earning 2 incomes has not helped mostfamilies. The problem, according to Warren andTyagi, is not caused by "overconsumption," butinstead by the ferocious bidding wars for houses inareas with good school systems. When families takeon high mortgages, added to other necessary expenses,they often leave themselves financially at risk.While a 2-income family earns 75% more money thanits single-income counterpart of a generation ago, itactually has less discretionary income once its fixedmonthly bills are paid. An event like the loss of a job,unexpected medical expenses, or divorce can topplethe precarious balance.

Physician's Money Digest

interviewed Tyagi, whooffers advice for families and points outwhy physicians are at risk too:

How do you expect people will reactto the book?

This year, more children will livethrough their parents' bankruptcy thantheir parents' divorce. When people hearthat, they gasp, which is the reactionwe're hoping for. We want people tochange the way they think about middleclass life in America—how they thinkabout the neighborhood they live in; theschools they send their children to; their personalfinances; and what it really takes to raise a middleclass child in America.

The Two-Income Trap

is about big changes in theeconomy, which a small family cannot reverse. Ourgoal is to give families the information they need tohelp them play smarter. We're delighted that the mediais picking up on this important subject.

Do you have any specific recommendations forthe families who are struggling?

The Two-Income Trap

In , we offer a Financial FireDrill that helps families protect their financial well-being.It starts with some advice that no one else gives:Don't cut out the frills. The secret of financial securityis not to count pennies. Fixed costs, not restaurantmeals and fancy sneakers, are making families broke.

Families who are already struggling need to knowthat they're not alone. Nearly 1-in-7 decent, hardworking,play-by-the-rules families is in financialtrouble. If you're in financial trouble, know that youhave choices. You—not your creditors—are in control.Protect your home, health insurance, car—whateveryou care most about. A family in financial troubleneeds to think like a family at war. Your goal is notto satisfy the loudest or most obnoxious creditor;your goal is to protect your family.

The majority of our physician-readers considerthemselves to be middle class Americans. Do youthink they share the same sort of dynamic as thosediscussed in your book?

The Two-Income Trap

tells the story of hardworkingmiddle class mothers and fathers, which certainlyincludes plenty of doctors. Many doctors runtheir own private practices, which can have huge personaland financial rewards, but also carries a lot ofrisk. Many doctors today are in the uncomfortableposition of knowing that if they get too sick to work,they don't get paid.

The Two-Income Trap

In , we have some data thatmight be of particular interest to doctors. For example,we found that illness is the second leading causeof personal bankruptcy (job loss is first). And, to oursurprise, the majority of families who file for bankruptcyin the wake of an illness or disability actuallyhave health insurance, but they don't have disabilityinsurance.