Friday, June 5, 2015

You Didn't Hear This From Dave Ramsey

A critical perspective is missing from the script of almost every popular finance show you'll hear. The missing perspective is critical to families, current or prospective. Know this: families with a stay-at-home-mom will face intense financial oppression. Every family that operates on a single paycheck—which is what most SAHM families do—falls under the gun. This warning is not meant to discourage families, but to strengthen their resolve. It is for this very reason, Christ instructed us to "count the costs" before jumping into any endeavor.

The single-income family has been—and currently is—under economic sanctions. The sanctions generally started in the early 1970s, reaching the greatest severity in our day. They are caused, inadvertently, by the overwhelming popularity of the dual-income family. The early 1970s is when married women began in earnest a new trend. They began leaving work at home, to work outside the home, and in return get a paycheck. They began leaving in huge numbers. From the 70s on, the numbers snowballed (see chart below).


Another significant event happened in 1974. Congress enacted the Equal Credit Opportunity Act (ECOA). The act was designed to end discrimination in lending. What it did was radically change the way banks extended credit. The ECOA effectively mandated dual-income based lending to married couples, a significant change from the general single-income policy that existed up until that time. The net effect was to increase the amount of available money chasing houses, autos, etc. Prices would begin to rise as a result.  Eventually, the economy adjusted to the new dual-income norm. The minority single-income family was left underwater. A look at discretionary incomes over time is revealing.

By early 2000, the dual-income family sported a much higher household income than their single-income counterpart of the early 1970s (see chart below). Two-pay checks are greater than one. Notice, however, that from early 1970 to 2000, discretionary income dropped! I believe this is due to the increasing costs associated with the drastic change in lifestyle. Childcare expenses are minimal with a stay at home mom. Also, no need for multiple cars. Consider now, how a single-income family stacks up in the new pricing environment. Any single-income that can match the median dual-income level can tread water. The majority of single-incomes which can’t, will eventually drown. Drown, that is, without Divine intervention.

If we are to see the Kingdom of Christ prosper—not just a privileged class—the Church must heed the admonition of James, Cephas, and John to Paul and Barnabas: “remember the poor”. Those with a financial surplus must be exhorted to help the families that lack so as Paul said, “that there may be equality”. In the future, once single-income families again become the norm, this practice will no longer be necessary.

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