How dual-income families can stre-e-e-etch that extra paycheck
By Laura Bruce • Bankrate.com

How would you like to work 40 hours a week and pocket just $100 after expenses? Why bother, right? A lot of dual-income couples who have children are caught in that scenario.

Certified financial planner Barry Vosler of DeWitt, Iowa, uses the hypothetical example of a spouse earning $40,000.

"Take out the obvious -- taxes. Federal, state, local and FICA, that takes 40 percent out. Deduct child care, clothing expenses and travel -- now you're down to 24 percent. Then, extra meals -- either eating lunch out or you're too tired to fix a meal at home so you go out for dinner or get takeout. Then you have 'guilt expenses.' You buy extra things for the kids that you wouldn't have if you were spending more time with them. Then you have house cleaning and lawn service because you want to spend the time you have with your children. Now you're down to 13 percent take-home pay."

The 13 percent solution
Discouraging, isn't it? But this isn't to keep anyone from working. There are plenty of personal and financial reasons why someone in this situation wants to be in the work force.

Maybe you're doing it for your satisfaction, trying to maintain professional skills or a knowledge base -- or maybe you want to sock away that $5,200 each year in a retirement account or a vacation cabin in the mountains. What's important is taking advantage of your employer's benefits package so you make both paychecks stretch.

Vosler's clients Norma and Scott Bickel have been married for 20 years. They have two children and Norma has worked continuously throughout the marriage.

"When they were younger and at child care, we'd spend $3,000 to $4,000 a year on child care," says Norma. "Once the kids are in school you think you'll have more money left over but you have their education expenses. The second income afforded us the ability to invest the money for our kids."

Use benefits to the max
Norma's company offered a cafeteria benefits plan. Like a flexible spending account, pretax money would be deducted from her paycheck and put in an account to pay for unreimbursed expenses. Norma says she didn't think it was worth the hassle to enroll until her boss walked up to her and demanded $40. She gave him a "What are you talking about?" look until he explained he had worked through the numbers and that's what she would save in taxes that year if she signed up for the plan. Not one to sniff at $40, she signed.

Barry Vosler has two words of advice if your company offers a flexible spending account or a cafeteria plan: Take it. You'll cut taxes by using pretax dollars for the plan. Benefits offered by the plans may include health, life insurance and care for dependents.

Another way to stretch paychecks is by comparing the health-care plans offered to each spouse.

"Health care benefits make the biggest difference," according to Vosler. "Which plan offers the smallest co-pay or the smallest deductible? See what your out-of-pocket expenses for the household would be."

But, Vosler advises, that's just a start. A cheaper medical plan might hurt you in the long run if it's paired with a dental plan that doesn't have very good coverage.

"If you have children, you may want to select a plan that has orthodontia in the dental plan. So, if the medical portion looks a little cheaper under one program, be sure to factor in the orthodontia. Optical would come under the same realm."

The mix-and-match plan
Norma and Scott Bickel mixed and matched their benefits plans to save the most money and get the best coverage.

"My husband's health care plan is better -- 90/10, but his company picks up the 10 percent once the deductible is met. He doesn't have optical or dental so we use my company's cafeteria plan for that."

You can further maximize health care benefits by taking advantage of wellness options -- free screenings for cholesterol, blood pressure, hearing, skin cancer, flu shots, etc.

There are some areas where you shouldn't cut corners. Don't shortchange your life insurance. If your company's basic coverage isn't enough, buy what's needed.

Last but not least, the old standby -- max out on your 401(k) contributions. The tax break and the company match do wonders for your paycheck and your future security.

Jerry Mattern, chairman of the compensation and benefits committee at the Society for Human Resource Management in Alexandria, Va., says the best way to get the most out of your benefits is by really understanding them.

"Look at your summary plan description. Get a copy of your plan document. It's really about being informed."

-- Posted: Sep. 13, 2000