Dual Income No Kids (or DINK) families are likely to have higher disposable incomes. Not a bad situation to find yourself in. If yours is also a DINK family, you are likely to be in a comfortable financial position, at least as of now.
Does that mean you can afford to go slow on your investments? Does that mean you do not need any kind of financial planning?
Financial planning does not begin with the birth of a child. You must start managing your finances properly much before that.
In this post, let’s look some of the financial planning tips for DINK (Dual Income No Kids) households or families.
1. Invest more when you can
Since there are lesser financial responsibilities, you can afford to spend more.
Many DINK households I have interacted with tend to spend a lot on dining-out, gadgets, accessories, entertainment, vacation etc. Nothing wrong with that.
However, do not let your investments take a backseat.
Remember, just as you can afford to spend more, you can afford to invest more too.
You must understand when you start a family, your expenses will increase. Your cash flows may get stretched and your ability to invest may go down.
Take this opportunity to invest more.
2. Opt for a Goal based Planning approach
Under Goal Based planning, you set up financial goals and start investing for them. For instance, purchase of a house after 5 years could be a goal. Building up a corpus for your retirement is another important goal.
When you have investments linked to specific goals, then it is easier to maintain investment discipline. Additionally, since there is clear target, you think twice before liquidating investment for something else.
It is also easier to contain your expenses when you know how much you need to invest to reach your goals.
Pick up an equity heavy portfolio for long term goals and a debt heavy portfolio for short term goals.
Automate your investments through mutual fund SIPs and auto-debit mandates.
3. Don’t be too conservative
You are young. Your risk-taking ability is much higher.
Use this opportunity to invest aggressively. Do not limit yourself to just fixed deposits or useless life insurance plans. My limited experience tells me that this is quite common with DINK households.
Consider taking exposure to equity mutual funds.
Delve into direct equities only if you can research stocks on your own. Relying on stock tips is not prudent.
And yes, do not mix investment and insurance.
4. Plan for break in work
Though most employers offer prolonged maternity leaves, many mothers take break from work for a few years when they have kids. It is a personal choice.
If the two of you think the same way, a break in work will lead to loss of income. And the loss of income is at a time when you have just added to your family.
Financial responsibilities go up while the income goes down.
You must plan for such a break in work. You can do that by building up a sufficient buffer when both of you are still working. You can draw from the buffer while one of you takes break from work.
If the two of you have taken a joint loan to purchase a house, it may not be easy to repay EMIs on a single salary. Consider such loans too at the time of financial planning.
5. Purchase adequate health and disability cover
This is a no-brainer. Just that you have not planned for kids as yet does not mean that you cannot fall ill or get seriously injured in an accident.
Do not wait to have kids before you purchase adequate health and personal accident cover.
Most employers provide group health covers to their employees. It is quite likely that you are also covered under one of such plans. However, it still makes sense to purchase a personal health cover.
Through my clients, I have been witness to many whims and fancies of the insurance companies. They seem to decline insurance for seemingly most innocuous of the health conditions.
As you grow older, you are likely to contract minor (or major) ailments. If you get diagnosed with those illnesses before purchase of health cover, the insurance company may load (increase) the premium or may even decline to issue health cover altogether.
6. Purchase adequate term life cover
It may not be as important if you do not have any dependents and neither of you depends on each other financially.
However, if the two of you have taken a loan which is not easy to repay on a single salary, you must purchase life insurance.
There is an additional aspect to consider. If you purchase life cover at young age, the premium is low. Life insurance premium, among other things, depends on the age of the policy holder.
Hence, if you purchase life cover now, you may be able to lock-in a lower premium. In my opinion, this is not so important. You pay lower premium for more number of years or higher premium for lesser number of years. Does not matter much.
The bigger issue, just like in case of health cover, is if something happens to you in the coming years that affect your chances of purchasing life insurance.