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Plan a shift to one income very carefully

  • Article by: CHRIS FARRELL
  • Star Tribune
  • March 2, 2008 - 11:48 AM
Q: I'm looking into the feasibility of my family cutting down to one income. One of the big obstacles might be that the remaining
income does not include benefits. We have small kids so we'll want to continue having good health and dental care. Can you recommend books or websites with information to help cut expenses and self-manage health care benefits?

A: You're right to worry about benefits, especially health insurance. For most families, that shift to one income is eased by the "working" partner having health and dental benefits from their employer. I don't know if it's practical for your partner to take a job that offers good benefits, but that's one option.

Another tactic is to investigate a health savings account. An HSA comes in two parts. You must buy a policy with a high deductible -- and I'm not kidding when I say high deductible. The minimum deductible for a family in 2008 is $2,200 and the out-of-pocket maximum is $11,200 (the comparable figures for an individual are $1,100 and $5,600).

The premium you will be charged is relatively low because the deductible is so steep. In essence, you will end up paying more out-of-pocket for minor ailments, but the insurance will protect you against a catastrophe.

As you're well aware, the shift to one income involves trade-offs. Many two-income households find cost savings on such expenses as child care; wardrobe expenses (including dry cleaning); the cost of commuting; unreimbursed business expenses; the extra costs of take-out meals from the lifestyle of the working couple; additional income taxes from that second income pushing you into a higher tax bracket, and paying for minor repairs you could do by yourself if you had the time. Still, you won't replace all your lost income by staying at home. Good luck.

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Chris Farrell is economics editor for American Public Media's weekly "Marketplace Money" show on public radio. He lives in St. Paul. Send questions to cfarrell@mpr.org and put "Your Money" in the subject line.

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