It is often assumed that a family with double income but no kids, popularly known as DINKs, is flush with funds, given the lack of liabilities and expenses related to children. To some extent, that’s even true—they have two incomes, they can split expenses and bills, and invest jointly, among others—and still have more disposable income compared to other families. But there lies the danger of becoming complacent about money matters and spending too much on lifestyle. “The biggest pitfall for DINKs is that they end up spending more, and that may jeopardise their financial future," said Anuj Shah, chief financial planner, Wealth 360, a Mumbai-based financial planning firm.
So, if you are a DINK family, it’s important to keep a check on your lifestyle expenses since you have the opportunity to create wealth in the long term. “When it comes to wealth, there are three aspects—income, expenses and assets and liabilities. DINKs have a higher income, which gives them the opportunity to build assets and create wealth," said Shah.
That is why having a financial plan is as important for you as for any other family. While financial experts can help you do that, we tell you how to put the basics in place.
Have an emergency fund: With the economy on a slowdown, the threat of layoffs has become real. If you are used to a lifestyle catered by two incomes, even the loss of one can be a big blow. So what’s true for any household is true even for the DINK household: you need to have an emergency corpus in place to tide over unforeseen situations. An emergency fund can come in handy in such situations.
Start with making a monthly budget, and find out your monthly expenses. Swapnil Kendhe, a Sebi-registered investment adviser, said, “Keep 12 months of monthly expenses aside as emergency funds. In this, include all expenses along with EMIs, monthly SIPs and investments. A liquid fund is a good choice to park emergency money."
The thumb rule is a minimum of six months of expenses, he added. “Where there aren’t enough finances, or liquidity, we say at least three to six months," said Kendhe. According to Kendhe, DINKs should try and keep a higher emergency corpus as it’s easier for them to do so given the higher disposable income. This would ensure that a financial situation doesn’t disrupt their lifestyle. After all, they have higher income, and maybe higher expenses, and if both belong to the same sector, there’s a possibility that layoffs can happen at the same time.
Medical and life insurance: Apart from being covered by individual employers, you need to buy personal health insurance. It can be a ₹10 lakh cover for those staying in metros and ₹5 lakh for those in smaller towns.
While a health insurance is a must, because medical illness can completely throw your financial life out of whack, you will need some more thought when buying a life insurance policy. A life insurance policy is meant to provide a financial cover for dependants in case of untimely death of the breadwinner of the house. Usually, in a household, when one spouse is a homemaker or the household has children, the need for life insurance is very straightforward. As DINKs, you will need to evaluate your situation and the financial dependency of your household on you. A term plan that’s at least 10 times your annual income is a broad thumb rule to keep in mind. In any case, make sure that big-ticket debts such as a home loan is insured.
Short-term or recurring: In the case of DINKs, short-term financial goals such as taking international trips are pretty much a given, given the cash flow. “Anticipate how much you will need for short-term goals. Then earmark funds towards such goals via a liquid fund or a fixed deposit," said Kendhe.
Retirement: Building a retirement fund is one of the most important long-term goals for DINKs. Though whether you are a DINK or not, falling back on children for your retirement is never a good idea, but they can be the last resort for some. “With no family support, if they haven’t saved enough for retirement, it can be very painful," said Shah.
Also, keep in mind that though you may have chosen not to have children at present, there’s always the possibility that you may change your mind in the future. “It is important to factor in that possibility and focus on wealth creation early on," said Kendhe.
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.