Reply to How much to expect to spend on a new house?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous]
This is about how I view most of these situations as well. My own situation is a little sticky because one of us is in private industry (technology) and makes SO much more than the other (me, the saving the world nonprofit manager), so to buy a home on one salary is tricky in that if I lost my job we would be fine but if he lost his job it would be much more difficult. At the same time it feels far too cautious to buy a home based on my 65K salary when there is a person earning 3 times that nearly in the equation.[/quote]

I'm so with you.  My husband is in a much higher paying career (and we still have a HHI of "only" $140Kish).  If we'd bought based on just my salary...well, honestly we couldn't have.  There is nothing in this area where a family could live comfortably on just MY salary.  My salary allows us to put money in savings, and that's about it.  When my job almost went away last summer, we had to tighten our belts, cut our savings and lived on just his salary for a short time.

This is why we STAYED in this area, though - my husband felt he had a lot more possible employment options here in case of a job loss for him, so that we wouldn't be completely screwed.[/quote]

The point Elizabeth Warren makes in her book is that when one person loses his or her job, you have two people in the family who can try to cobble together enough work to replace the lost income.  (She calls it a reserve wage earner.) So say DH makes 150K and DW makes 65K, they decide to budget for a 150K HHI, then DH loses his job.  They need to replace 150K income, but DW's 65K already fills a big chunk of that gap.  Between the two of them, they are more likely to find enough temp work, odd jobs, second jobs, whatever, to replace the rest until DH finds another "real" job.  They are more financially prepared to weather the crisis than they would be if they already needed DW's 65K just to pay the mortgage and/or other necessary expenses.

Warren opens her book with the statistic that more children in America live in a family that will experience bankruptcy than divorce.  And that was before the recent Great Recession.  It just blew me away when I read that.  The whole book is a fascinating read, but just one more point: She attributes a large part of the phenomenon to families using the second salary to buy homes in areas with better schools, homes they couldn't afford on one salary.  It's not so much that they just want a fancier house-- they are trying to ensure the well being of their family-- but they are actually putting themselves in a more precarious financial situation.[/quote]

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