Chatper Seven: The Financial Fire Drill

The final chapter of the book serves as a list of advice to families in danger of falling into the two income trap. They suggest that families should read up on financial planning and begin preparing for possible disasters. They call this list the "Financial Fire Drill" in honor of firefighters who advocate preparing for fire before the fire actually occurs.

The first item on the checklist is to make sure your family can survive without one income. If the family cannot, then they have some work to do.

The second item is to make sure the family can decrease their fixed expenses in case of financial trouble. If your family is forced to cut back on "frivolities" now, then there will be nothing to cut if financial disaster occurs. Families should actually look at cutting their fixed costs (cars, tuition, health insurance, mortgage payments) first. If a family has to scrimp to pay for a home, they cannot afford that home. Of course, this means families are free to spend extra when they aren't in trouble.

The final item is to create an emergency backup plan. Determine what you would do and how you would pay for it if they unthinkable should occur. In particular, they suggest decreasing the amount of time you spend paying off long-term financial commitments and purchasing a disability insurance policy or a long-term care insurance. Finally, they tell families to be very careful not to buy insurance that doesn't actually help, like credit insurance.

The last bit of advice applies to those already in financial trouble. The authors tell families not to blame anyone and to be very careful not to take frustration out on their spouse, lest they destroy their marriage. They reassure families in debt that there are millions out there in the same position they are currently in. They also suggest to these families to look at their expenses and decide which one they want to keep the most. For example, if families decide health insurance is the most important, they should be willing to sell the house. They suggest that if families cannot pay off their debt within two years, they should wait until the financial crisis has for the most part passed and then declare bankruptcy. Finally, they tell families to make SURE that they do not reassume debts the bankruptcy allowed them to eliminate. Companies will try to get you to pay back these debts you no longer owe. They tell families to remember that these companies took a risk loaning money to you and they deserve to pay the consequences; you do not owe them anything.

The authors do not suggest that one spouse quit their job and remain at home. Rather, they suggest that if both parents work, families should use the extra income to prepare for disaster and increase wealth rather than spend both incomes on fixed income. They also suggest that families seriously look at the idea of not having children and make sure to consider the cost of having children before they choose to have them.

The end of the book focuses on the last group the two-income trap harms: children. Children are torn apart by bankruptcy much like they are torn apart by divorce or any other major family disasters. If anything, the children affected by their parents' bankruptcy are even worse off because there is no community to support victims or children of victims of bankruptcy.

The authors end the book by urging readers to follow their suggestions to make a difference and save the families who play by the rules by destroying the two-income trap.