DINKs: How they manage their financial problems
I guess all of you are aware of the “DINKs”, right? No? Then it’s better to give a small introduction, just to make it clear to every reader of this post!
Definition of DINKs
DINK denotes “Dual income and No Kids“ couple or family. The concept is quite popular for the past 3 decades. The basic character of these people can be portrayed as a family with two working partners, who generate income or one spouse is earning more than the other but they have no kids.
Generally, they are well-educated couples with high-income capacity. DINK couples are having dual-income and can split every major expense. They may even take part in any investment jointly. Practically, they have more disposable income compared to normal couples who have kids.
Dual income and no kids couples may encounter several financial issues due to their high lifestyle.
How DINKs manage their financial issues
It’s a well known fact that these couples can handle their finances better than any other couples. They have low expenses, that’s why they can save more.
But, it’s just a myth. These people can encounter a great number of different financial issues that require great importance. They may face financial issues regarding various wealth planning subjects such as:
These couples need to plan for their healthcare as they don't have kids to depend on if any health crisis arises. Each of the spouses has to pick a person as their nominee, who will be making healthcare decisions and/or provide care if required.
They must also decide who will take care of the existing spouse if the other spouse expires. So, they should opt for long-term care insurance, which is especially important for future care.
b) Estate planning
These couples do not have the second generation to take care of, so they have to put extra consideration while deciding who’s going to take care of their assets after they expire.
They may decide to donate their belongings to a favored charity or a loved one. They might spend every penny they have to live a luxurious life after retirement.
DINKs can be categorized into 2 categories as per their money-saving habits.
1) The rich savers - Couples who belong to this category save a lot and quickly. It is because they don’t have major financial responsibilities of a family to handle.
2) The poor savers - They always have sufficient money resources flowing from time to time. That’s why they do not bother to save for a rainy day. Regardless of which category they are added to, they must always save for retirement.
d) Investments based on tax liabilities
These couples might need to serve high tax implications as their income is greater than other couples and have fewer deductions. For this reason, they have to select investment options based on their tax implications. They also need to opt for a tax deduction that can be obtained by contributing to charities.
Last but not least,
e) Pet planning
As these couples do not have any kids, they might replace children with pets. It may sound funny, but some couples love their pets more than any other human beings. So, they must appoint a person who will care for pets.
These people may set up a fixed money payment every month to the chosen caregiver so that he/she can meet the expenses of the pets. Most couples will set up a legal agreement for their pet’s protection, and create a pet trust who will notice the details about how to take care of the pets in the right way.
How these couples can manage their money
Money management is a big issue for these people. They do not have any big expenses compared to normal couples with kids. That’s why they are prone to overspending. These are the prime money management goals that they should fulfill:
a) Household budgeting
Household budgeting is the most important part of finance management. Without a proper budget, it’ll be difficult to track down your monthly expenses. Without proper tracking, there might be numerous chances to overspend most of the time. So, few tips to budgeting are:
- These people should analysze their income and savings. Then they should create a budget based on their income and savings. They must go through the financial statements. These couples may use some financial planning tools and apps to ease up the analytical process and to find out personal financial ratios. These may include liquidity, savings, asset allocation, inflation protection, tax burden, housing, expenses, and insolvency/credit ratios.
- Once they find out the personal financial ratios, they may set a target to improve the personal financial ratios and start wealth building.
- DINKs must consider household expenses as a part of their budget. They should allocate 20% of their budget for paying off their home oriented expenses. That might include the mortgage payments or rent, house taxes, home utilities, home insurance premiums, and home improvement or repair costs. They might also consider another 20% of the overall budget to meet miscellaneous expenses. Those expenses may include groceries, healthcare costs, clothing, gifts, entertainment costs, personal items and monthly subscriptions for cable and internet.
- These people must also make provision for transportation costs like gas, auto insurance, car repair and maintenance, public transportation fare, parking fee, and tickets, in their budget, approx 20%.
b) Debt management
These couples may incur debts if they opt for loans to make certain investments, or spend money via credit cards. They should manage their debts properly or else it may harm their finances. Here are some tips to manage debts:
- They need to find a proper way to get out of these debts. There are a few options which may help them to pay off their debts and save money. Practically they need to tackle high-interest debts first to increase the savings.
- The couples should determine the debt utilization ratio and maintain a healthy one, probably 30%. They should also find a suitable repayment plan to pay off student loans.
- If these couples are suffering from multiple unsecured debts, they can opt for a trustworthy debt relief service, such as debt consolidation service or debt settlement service. They may consult a non-profit credit counselling company and set up a good debt management plan.
c) Emergency funds
These people are far more capable of saving money compared to the couples with kids. A DINK couple should properly maintain an emergency fund to meet any unexpected financial crisis. Having a solid emergency fund is one of the most important money management options for the couples.
These people should save 3 to 6 months’ worth of their overall monthly expenses to build a proper emergency fund. They may also invest their existing savings to create an emergency fund.
d) Investment and wealth
These couples must prepare a solid wealth creation and investment plan for their future. Practically, they tend to spend much more than normal couples. So, with proper savings they may invest that money to generate income.
How? Check out here:
- Investing the extra part of their income and saving money from living frugally may help them gather enough funds to invest and get financial freedom. DINKs must choose the best investment plan after considering their risk tolerance and possible return on investment.
- If these couples have higher disposable income. So, they can invest more aggressively in different investment plans. They can can diversify their investment portfolio and allocate a great portion of their investments towards higher-risk investments such as stocks, bonds, hedge funds, cryptocurrency, etc. They may also invest in low-risk investments such as dividend stocks, treasury bonds and bills, certificates of deposits, etc.
These couples need to cover their life and health just like other couples do through insurance policies. So, medical and life insurance coverage is quite essential. For example:
- These couples can opt for multiple policies such as first to die insurance policy, permanent life insurance, and term life insurance policy.
- A good medical insurance and disability insurance coverage is required for DINKs. These insurance policies are tailored to one of the partners who are unable to work due to disability or work with a low income due to a any form of major illness.
f) Retirement planning
Building a retirement fund is one of the most important money management options for a long-term purpose. As they have bigger disposable income, it is easier for them to contribute to retirement accounts. Remember, they may have decided not to have kids. But, after retirement, they also won’t get anyone to support them financially.
So, DINKs must save enough for retirement, maybe more than a normal couple.
Also, keep in mind that presently you might have decided not to have kids, but you may change your mind in the future. For that reason, saving enough for your retirement is necessary.
With double income, you may have twice the temptation to live a lavish life. A little restraint and discipline can help you save for the future as well as maintain the standard of living you like.