It’s a well-documented fact that women around the world are having fewer children. Falling fertility rates mean nearly every country could have shrinking populations by the end of the century. Not surprisingly, this has given rise to more couples we’ve come to know as DINKs – Double Income, No Kids.
Investopedia defines DINK as:
‘a slang phrase for a household in which there are two incomes and no children’.
They also break down DINKs into the following:
- new couples
- empty nesters (couples whose grown children have left home)
- gay married couples
- other childless couples.
Because of their higher disposable incomes, DINKs are often the target of endless marketing from everything from luxury products to investment projects. Having more disposable income can make childless couples vulnerable to over-spending and living beyond their means. A DINK lifestyle with more disposable income has a number of benefits but it still comes with financial challenges.
So, how can you resist the marketing temptations to constantly spend and instead build your wealth, reach financial freedom sooner and still live your desired lifestyle? Below we share our tips for managing your finances as a double-income-no-kids couple.
1. Take the time to talk about money
Money is often still considered a taboo topic. Talking about it can stir up intense emotions and for some it is even considered impolite. However, the more you talk about money and finances, the better your relationship will be.
More than that, it’s essential to have money conversations if you and your partner have joint accounts or joint loans. Your money mistakes could impact things like your partner’s credit rating, and vice versa.
Another advantage of being completely honest with each other about money is that you will each be 100% clear of what accounts and investments exist. We often speak with couples in which one person controls all of their finances. That’s a personal choice and not necessarily an issue as long as you both know where your money is and how to access it.
Developing good money habits by having regular discussions about your shared financial commitments and goals will help keep you motivated and focused. As we always say, happy couples talk about money.
2. Resist the temptation to spend, spend, spend
When you have a higher disposable income it’s easy to fall into the trap of spending more than you save. Nothing should you prevent you from enjoying what you earn but just make sure you aren’t frittering it away at the expense of saving for your future. It’s about making the right decisions today that develop healthy savings and investment habits for the future.
As a DINK, you are part of a group that has the biggest propensity to save and explore more investment opportunities. Perhaps you could even live off one income and save the other. The so-called 50% lifestyle has become popular with those who have the financial flexibility to support it. It isn’t a solution for every couple, but it’s a method of re-organising spending and saving that’s growing in popularity.
Whatever you decide, the most important thing is to have a financial plan. Carefully managing a dual income according to your documented plan can allow you the financial freedom to pursue the lifestyle you choose as a couple.
3. Have a plan and review it regularly as your life together changes
We like to think couples who plan together, stay together. While having a financial plan doesn’t necessarily stop you from having different attitudes to spending, saving and investing, it can help you to make responsible financial decisions and keep you on track to meet your shared goals.
Also, when you are confronted with a life change as a couple, such as a move, promotion or inheritance, you need to talk about the impact of that change on your joint finances. A documented financial plan is meant to reflect the views of all decision-makers in a household. And keep in mind that a financial plan isn’t a static document; you need to review it regularly and together.
4. Plan in rewards so that you enjoy saving
Despite what some people think, it is possible to enjoy life now and still save for later. We can balance satisfying our desire to live well today with the desire to retire comfortably. This is where your financial plan needs to include short and long-term goals. Another way to look at it is to have lifestyle goals and retirement goals. Lifestyle Financial Planning is a useful way of ensuring these goals peacefully coexist.
5. Make sure you are spending enough
If your financial future is secure, you may be in a position to spend more. For example, if you’re an empty nester, perhaps you can travel more often or upgrade your home.
The best way to know how much more you can spend, and to have the confidence to spend it, is via cashflow planning. This entails creating scenarios of your financial future by analysing all of your assets, inflows and expenditure. The more accurate the data, the more realistic the scenarios, and the more confidence you will have to spend knowing you will still reach your desired future lifestyle.
In the example below, Craig and Ana’s current goal is to move to part-time work at age 55 and retire at 62. Cash flow modelling helped them to identify how much more they can spend every month (€427) while maintaining their current lifestyle and still reach their goal.
6. Review your insurances
A lot of double-income couples may be tempted to think that because both partners are financially independent and well off, insurances aren’t necessary. That’s incorrect.
In fact, a lot of DINKs spend more on bigger and more lavish houses, which may mean taking out bigger home loans. If something were to happen to one partner, repaying those bigger loans on one income alone could be challenging.
If you don’t have life insurance, organise it as soon possible. Alternatively, if you do have an insurance policy, when was the last time you checked it? Does it adequately cover all of your needs?
7. Focus on wealth creation
With a double income and no kids, you have an incredible opportunity to create wealth. The key to building wealth is investing and the earlier you start, the more time your money has to grow.
Before committing to any sort of investment plan, you need to understand exactly how much you have available to invest and how much risk you’re willing to take. For example, would you be keen to sell your stocks the minute the market dips or would you be willing to hold on and play the long game? Couples with a higher disposable income can typically afford to take greater risks with their investments.
The most important thing to do is maintain a diversified portfolio. A typical diversified portfolio is a mix of stocks, fixed income and commodities. These different assets react differently to the same economic event, so when the value of one asset decreases, the value of another increases. This is your best defence against a financial crisis.
Once you have in place a long-term savings and investment plan that suits your risk tolerance, look at opportunities for investing any lump sum amounts you both receive, such as bonuses, tax rebates or an inheritance. Also ensure you are making the most of tax-free savings and investments.
To help uncover such opportunities, it’s best to speak with a financial adviser. They can work with you to determine the most tax-advantageous savings and investments plans for your situation and calculate exactly how much you can invest to build your wealth without negatively impacting your DINK lifestyle.
Need help with financial planning?
The DINK lifestyle is an opportunity to reach financial independence earlier. We also know, however, that every couple’s – and every individual’s – situation is different.
Our advice is to always seek financial planning advice from an experienced adviser who can help you to make the most of your situation and build a solid financial future.
We understand the importance of planning for the future as a couple, so get in touch.
