Dual income and no kids (or DINKS) couple can have a number of issues as a result of having too few financial obligations. As a DINK couple myself, these points are critical for me to teach other on how to maintain a proper financial lifestyle.
Understanding the Financial Issues of DINKS (And How to Avoid Them)
DINKs have been scrutinized since they have limited expenses and can spend or save freely. Being a DINK family can lead to a number of different financial issues worth considering. I’d like to uncover a number of the different issues that DINKs face and how you can avoid them.
What are DINKs?
DINK is an acronym for “Dual income and No Kids “couple or family. It is a concept that has gained popularity in the recent past. It is characterized by a scenario where a family has two partners who are working and generating income or where one partner has more than one high-income source but they have no kids.
In most instances, DINK couples have high education levels and generate high income. DINK couples are either newly married couples waiting for kids or couples that opt to remain childless for life or couples forced by circumstances to have no kids.
The General Financial Structure of DINKS
Income in DINK households is usually higher owing to the fact that the couple generates income and has less financial commitments compared to households with kids. Majority of DINK couples generate two high incomes.
They can split their expenses between each other and they also get income tax breaks on joint holdings for married couples when they report their combined income and deductions to the revenue authorities.
DINKS don’t have kids and so their financial responsibilities are fewer and they tend to have a lot of disposable income at hand.
Costs for food, clothing, shelter, education or any other costs associated with raising a kid or kids is not present in a DINK household.
Dual income no kids couples do not have to save or secure money for kids’ college or tuition and so they can save more money to spend on other interests.
Other financial considerations for DINKS
They do not require as much living space for accommodation since they don’t require extra bedrooms for children. DINKS can fit in smaller spaces with lower rent costs or alternatively, they can use an extra bedroom for other purposes like guest rooms, recreation or personal home office.
In addition, dual income no kids couple have more time to fulfill their careers objectives, go for business trips, work longer hours, get extra jobs etc. They are also able to explore other investments opportunities because they have more time and money to pursue them.
It is also possible for DINKS to achieve financial freedom earlier in life than couples with parental responsibilities if they have proper financial planning practices in place.
They are also able to afford a luxurious lifestyle, go on vacations and enjoy life since they have more disposable income than Dually Employed With Kids (DEWKS).
Financial Planning for DINKS
Financial planning for DINKS is vital. DINKS need to have a clear and a systematic approach towards their finances. Having more income and time at hand may make a majority of the couples more vulnerable to overspending, acquiring high credit card debts, etc.
This can result in DINKS living beyond their means.
Money Management Tips for DINKS
Money management is a common problem to have for DINKS. They have one less major expense compared to couples with kids. Oftentimes, DINKS live in urban neighborhoods and enjoy living the life that they want to live.
However, this can lead to recklessness and disorganization with financial decisions. To avoid such a scenarios of overspending and debts, it is important for DINKs to follow prudent financial tips that can include the following.
This may seem somewhat rudimentary but in order to look at money management tips. What are the core goals in money management:
- Set goals
- Get organized
- Track spending
- Build a budget
- Save money
Let’s get into our favorite categories and the financial considerations for dual income no kids couples.
Household budgeting is a vital part of managing finances. Without a budget, it’s hard to track how your money is spent. It is possible to overspend if you are not keen on following proper budgeting practices.
The DINKS couples should analyze how much they are earning and saving and then create a budget for their income and savings. First, you should analyze your financial statements. You can then use personal financial ratios, other financial planning tools and apps to analyze your financial position.
Once you know your personal financial ratios, you can focus on improving your personal financial ratios to begin a wealth accumulation machine.
Household expenses should take 20% of your overall budget and they include rent/mortgage, taxes, utilities, insurance, and home repair/improvement. The living expenses should take up another 20% of the overall budget and they include food/groceries, healthcare, clothing/personal items, gifts, dining out, entertainment and subscriptions/internet.
Transportation expenses should take up another 20% and include gas, auto lease/insurance, car maintenance, public transportation, parking costs, and tolls. Savings and debt should take up the other portion.
But if there is a high-interest debt that needs to be cleared faster, then you can reduce some ratio from another category. DINKS households are more likely to save more because their expenses are lower than for Dually Employed with Kids (DEWKS).
See Related: Important Financial Emergencies to Prepare For
Budgeting comparison to Dually Employed with Kids (DEWKS)
DEWKS have to budget for their kids in terms of food, shelter, and costs for all their needs while DINKS only budget for two. In case they want to go for a family vacation, the DEWKS will need to factor in the cost of their kid whereas the
DINKS will only budget for two. While there are plenty of ways that DEWKS can do to save money, kids take an insurmountable portion of their money and they have to budget for it.
On the other hand, DINKS couples’ budget is smaller and can, therefore, save a lot of cash that would have otherwise been consumed by kids if they had any.
A budget will help you to plan and allocate your finances. It will also allow you to align your actions with your financial goals and thus you will be able to achieve your financial goals and eventually achieve financial freedom.
DINKS are in a better position to save more money than couples with kids. This is because they have less financial burdens compared to their counterparts. A DINKS couple should create an emergency fund to meet any unexpected financial requirements and needs.
It should at least be equal to three to six, month’s worth of their overall monthly income or expenses. They also need to use their savings to fulfill their financial goals such as build a house, save for retirement, among others.
Wealth Creation & Investments
DINKS couples should have wealth creation and investments plans in place. DINKS have more time and resources and can consider increasing their income by making investments and working more.
Investing the extra income and savings can help them accumulate income and achieve financial freedom. It is important to consider the best investments that you can try based on your risk tolerance and possible returns.
Dual income no kids accumulated wealth strategies
DINKS have a higher disposable income and thus are more likely to engage in more aggressive investment strategies than DEWKS. DINKS can diversify their portfolio and allocate a higher portion of their investments in higher-risk investments like stocks and alternative investments such as hedge funds, cryptocurrency, crowd-funded real estate among others even as they allocate a portion in low-risk investments like dividend stocks, Treasury bonds and bills, certificates of deposits, etc.
Consider these investing apps to start building wealth.
High-risk investments have a potential for a higher return. DINKS can invest for the long-term which is a good strategy as most investments tend to perform well in the long-run than in the short-run.
It is okay for DINKS to take some additional risk, but only in moderation. Dual income no kids couples should try to find ways to build a business on their own and create multiples sources of income. Try learning from our passive income ideas to build secondary sources of income.
Most DINKS are crunched for time due to a time consuming career. This is why I love Wealthsimple. Their algorithm automatically balances your portfolio for you. You can literally just transfer significant sums of money and it will automatically invests hassle free. Try out Wealthsimple to see how you can build wealth automatically. Worry-free.
DINKS can also incorporate other wealth creation ideas and investments such as passive investing and online jobs without investments to help them achieve financial freedom.
To motivate you in the financial freedom journey, you can read our favorite quotes about financial freedom.
DINKS couples can get into debt when they take out a loan to make certain investments or it could be in terms of credit cards. If not properly managed, debt can ruin your financial status. It is important for the couples to have proper measures in place before and after acquiring a debt. There is need to find out how you will repay the debts. They also need to find ways to reduce the debt burden by getting rid of the high-interest debts and consider debt-refinancing to be able to manage their debts.
Credit in DINKS households is mostly acquired to cater for lucrative opportunities like investments, starting a business, to further education, among others. This also increases the risk exposure.
Thus, It is important to keep track of your debt utilization financial ratio which involves making sure that you do not leverage credit cards or other forms of loan for more than 30 percent of all the spending which is the recommended percentage. In addition, if you have student loans try to find a repayment plan in advance of the maturity date. Here are 10 creative ways to repay student loans.
Make sure you obtain the best financing option for a used car.
Planning for retirement for DINKS is crucial. Being in the high-income brackets and with few financial commitments, it is easy to ignore the need to plan for the sunset years. But, this should not be the case because you will also need finances to cater to your needs. It is even direr when you don’t have kids and don’t plan to have any because you will have fewer people around you who can take care of you when you grow old. It is thus important to have good retirement plans in place when vibrant and working.
Should DINKS retire early?
In most instances, DINKS couples tend to work for longer because they have more time at hand and fewer responsibilities. It is vital for DINKS to put in place good financial plans that can enable them to retire early. They can venture into businesses or consider other income generating opportunities such as real estates, dividend stocks, passive investments, online jobs without investments, start a side job among others.
This will help to increase their income and retire early. It can also give them an opportunity to live a life of freedom, travel and enjoy life experiences. DINKS can also consider investments such as the 401(k), Roth IRAs, fixed annuities and the 403(b) which are ideal investment policies that will come in handy in the old age. Long-term care insurance is another suitable plan for DINKS.
DINKS couples can build a retiree portfolio when they receive their old age funds by investing in retirement options such as immediate annuities, mutual funds, Banks fixed deposits, senior citizens’ saving scheme, post office monthly income scheme and tax-free bonds among others which will help to cater for their monthly household expenses. Our dividend growth investing section can help you find the appropriate individual stocks to invest in to generate income and capital appreciation.
Insurance policies like medical and life insurance are important. DINKS should consider getting a life insurance to reduce any risks that can be associated with losing either of them. If a member of the relationship dies, this could have a significant impact on the finances and could reduce their income substantially. It is therefore vital to buy a good term life insurance policy based on the overall insurance requirements and analysis.
The DINKS couples can have various policies in place such as first to die insurance policy, permanent life insurance, and term life insurance policy. For couples with kids, they will need to have a second to die life insurance policy which is not necessary for DINKS unless they have other people or charities they want to support.
A good medical insurance and disability insurance cover are also important to cover for a partner if he or she is unable to work or work with minimal income due to a disease, a serious injury or has become partially or permanently disabled.
How to avoid financial issues for DINKS
DINKs should put in place good financial planning practices to help them achieve financial goals and ultimately attain financial freedom. Usually, the problems faced by DINKs are good ones to have but plan wisely to optimize your financial goals.
I like to optimize my financial goals by following several early retirement blogs to keep me motivated. In addition, continue to be organized with your finances. There are SOOOOOOO many tools out there that can help you plan your financial future and ensure you are in the correct financial position to secure financial freedom.
I am Personal Capital addict. I check this daily to ensure I understand my daily inflows and outflows of cash. Their retirement planner ensures that I am tracking towards the retirement date and age of my choice. By monitoring my investments and retirement date, I know how I can allocate risk across asset classes. By using Personal Capital, I know this will pay off big in the long-term.
Ways to avoid money management problems as a DINK
How can you avoid the financial issues as a DINK? Let’s get back to the main points of money management and how to build your personal financial statements.
- Set goals: Anyone setting up their financial plan should have a goal in mind including how much money should I save each month, how much can I retire on, how can I increase my income, etc. You can download BalanceTrack’s downloadable financial goals worksheet here.
- Get organized: Use tools like Credit Sesame and Wealthsimple to set out a plan of your debt and investment.
- Track spending: Know where your money is going. Use a tool like Personal Capital to understand how much money is going to dining, entertainment, housing, etc. Do not let yourself exceed your income ever or try to keep a running 6-month average to maintain on a monthly basis.
- Build a budget: Once you know your spending, see how you can keep that average spending on a go-forward basis to improve your personal financial ratios and personal financial statements.
- Save money: Congrats! You now know how much money is left over. Pour your money into an investment account that is commission-free like Robinhood or participate in automated investing through Wealthsimple. I have been doing a combination of both of these. I like to invest in automated index investing, but building a Robinhood dividend portfolio to earn income and capital appreciation from individual dividend stock investments.
- Rinse and repeat
Are you a dual income no kids couple ready to save and secure your financial future? What works best for you? I’d love to hear in the comments below.
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