Financial Considerations Before Adding a Second Income

When couples have become accustomed to living on one income they are used to certain things. There may come a time when they decide that they have a need for two incomes. While the idea of double the income might seem nice there are some things that should be taken into consideration before this step is taken. Anytime you change your financial standing you consider what the consequences could be.

When you add a second income you will likely add increased expenses, especially if you have small children. Children that are below school age will require care while you work, it's very unlikely that you will be lucky enough to find a job that allows at least one of you to be home at all times. This means that you will have to pay for daycare which can easily give you an additional $300 a month in bills. At a cost of $50 to $75 per week per child you are looking at a serious cost. This expense will reduce the amount that you have coming in with the second income.

What about holidays and weekends when most daycare facilities are closed? When you find that you and your spouse both have to work these days you will need to pay someone to come stay with your kids. This is an expense that some over look as they begin to think about adding an additional income.

A second income also means that the amount you spend on transportation and insurance will increase. Unless you are in an area with ample affordable public transportation you will need a second car. Again it's not likely that you'll be able to work it out so that you can both get to work, run errands and get the kids with one vehicle and no scheduling conflicts. Then there is the cost of maintenance that increases with the increased wear and tear on your vehicle.

Is it going to be more financially beneficial for you to work at home? The amount that you have to spend on child care, transportation and other expenses associated with working are reduced. There is just one thing, taxes. Can you do them yourself or do you need someone to complete them for you?

What about tax time? When you add a second income you change your tax bracket no matter how slightly. How will a second income affect your taxes? Are you going to reduce your refund or have to pay in at the end of the year?

While having two incomes sounds good to couples you also have to consider the cost. If your expenses are going to increase so much that all of the additional income is spent before it's earned it might not be the best idea for you.