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Select a group of individuals who earn a lot of money but are not yet rich (called HENRY). In short, the HENRYs have above-average salaries, but often don’t think they’ll get rich due to factors like high tax rates, high cost of living, and student debt, or they could build up their assets but do not. have enough savings to be considered wealthy.
If you are part of a couple with two incomes and no children, do not worry, there is also a name for you. You are what is called a DINK – otherwise an acronym for Dual Income, No Kids.
DINKs often divide household and lifestyle expenses and work together to achieve financial goals. It can often be easier to achieve a goal with two incomes rather than one. And when you don’t have kids yet, you have more flexibility, and probably more disposable income, to be more aggressive with certain goals.
But no matter how much your combined income is, what you do with the money is more important. We asked Brian Walsh, CFP at SoFi, for some advice for dual-income, childless couples who feel ready to take the next financial steps. Here’s what he shared.
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1. Discuss the goals you would like to prioritize as a couple
It is important to note that just because you are part of a two-income household does not automatically mean that you are financially well off. Factors such as salary, cost of living, debt, and necessary personal expenses can all play a big role in a couple’s financial health. So, first thing is first: you need to cover some financial groundwork as a couple. This can include fully funded funding an emergency savings account for both of you, making sure you each contribute enough to receive matching on both of your company’s 401(k) accounts (if applicable), and paying off high-interest debt.
According to Walsh, once a couple has checked off these financial boxes, they should start talking about how to prioritize their other major financial goals.
“From there, you can focus on what’s most important to you,” he says. “For some it may be early retirement, so you’ll want to focus any additional savings on increasing your retirement contributions. For others, it may be buying a home, so you’ll want to focus on savings for that down payment.”
It’s hard to know what action to take when you don’t even know what goal you’re trying to achieve. You also don’t want to take pictures in the dark only to realize that by doing things a little differently, you could have bought that house or made significant progress toward saving for retirement. That’s why it’s important to discuss what you would like to be able to afford and if there are any milestones that would be meaningful to you.
“There’s no one size fits all, but the most important thing to do is make sure you’re on the same page as your partner,” says Walsh.
2. Get ahead of your savings together
Stacking your savings with as much money as possible (and as soon as possible) can help you feel like you have more choice when faced with big expenses in the future. And when you have a partner to reach your savings goals together, you can get there even faster. It is therefore important to do your best to save as much money as possible, especially if you hope to have children in the future.
“Before [having] kids, everyone warned me that everything changes once the kids are in the picture,” says Walsh. “As a parent, I appreciate that this also applies to finances. Children are expensive and are only increasing given the rate of inflation, especially for things like childcare. Saving for retirement or other goals becomes all the more difficult when you have the extra expenses associated with children.”
Walsh also warns that if you didn’t get into the habit of saving money before you had kids, saving money will be even harder once the kids are around. Automating your savings is an easy way to build that muscle to set aside money for the future. You can usually log into your online banking account and schedule recurring transfers from your checking to your savings for a specific day each week or month.
Where to build savings
Congratulations to you and your partner if your money is already automatically transferred to a high-yield online savings account. With high-yield savings, you’ll be able to earn a higher interest rate on your balance compared to just keeping your money in a traditional savings account.
There are many solid high-yield savings accounts out there, but Select’s top pick for the best overall is the Marcus by Goldman Sachs High Yield Online Savings, as it offers an annual percentage yield (APY) higher than average, charges no fees, and provides users with easy mobile access. It’s the easiest savings account to use when all you want to do is grow your money with no strings attached.
Tools to help you save
If you and your partner want to get into the habit of saving for a variety of specific goals simultaneously, consider trying the Digit app. The app connects to your checking account and lets you create different “buckets” of savings for things like a vacation, a house purchase, or just a really expensive item you’ve been eyeing. The app then automatically saves a small random amount of money for each of these goals each day, so you’re essentially saving on autopilot.
3. Make a habit of investing both incomes
Once you and your partner have developed that saving muscle and feel confident, repeat the process with the investment. Although it may seem daunting at first, investing is the best way to grow your wealth and it can be the backbone of your retirement.
The earlier you start investing and the longer you stay in the market, the more you allow your money to maximize the amount of compound interest it can earn. (Compound interest is roughly where your interest and earnings overlap.) However, keep in mind that putting your money in the market means you’re taking on substantial risk. There are three main elements to making your money grow by investing: the amount you contribute monthly, your rate of return and the length of time you have to save.
Investing both your income and that of your partner can allow your household to build considerable wealth much faster, especially if you start as early as possible and let your money grow over 30 or 40 years.
“With investing, time can be either your best friend or your worst enemy,” says Walsh. “Starting early makes time your best friend because you reap the benefits of compound growth. Delaying makes time your worst enemy because you’re forced to save a lot more to reach your goals.”
Where to invest
A good app for couples investing together is Twine. With Twine, couples can choose a common goal (home, big purchase, or vacation) and identify a monetary goal. Each partner then links their Twine investment and savings accounts to a current account and sets up recurring transfers. As their balances grow, couples can see a combined account interface that includes each partner’s accounts and shows them their joint progress towards their goals.
Another hands-off approach is to use a robo-advisor like Wealthfront or Betterment to help you determine which investments are right for you based on your risk tolerance, goals, and time horizon. The robo-advisors also take care of automatically rebalancing your portfolio as you get closer to the target date of your goals (whether it’s retirement or buying a house). This way you don’t have to worry about adjusting the allowance yourself.
What if you hope to have children in the future?
For those who don’t currently have children but hope to start a family in the future, Walsh recommends starting to plan ahead for any financial changes you may encounter in your income and expenses.
“Couples will have to ask themselves, ‘Are we going to continue to be a two-earner family or are we going to become a single-earner family?'” he explains. “You will have to anticipate new additions to your budget, such as childcare. Couples should also review their insurance benefits, parental leave and disability policies through work and make sure they understand what this means for them.”
If you think there’s a good chance you won’t continue to be a two-income family and instead rely on one partner’s income, consider some benefits you could use to cover some costs, as an HSA or dependent. FSA.
At the end of the line
People in two-income households without children may find themselves in a situation where not only do they have a partner to share the costs of their lifestyle with, but they may also begin to take powerful financial steps, such as taking advance on their savings, investments and retirement funds since they lack the expenses to raise a family.
It can be easier to make progress toward certain financial goals when you’re able to work alongside someone. But if you plan to have children, Walsh recommends preparing financially for the additional expenses and potential loss of income if you move from a two-earner household to a single-earner household once you have the child.
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Editorial note: Any opinions, analyses, criticisms or recommendations expressed in this article are those of Select’s editorial staff only and have not been reviewed, endorsed or otherwise endorsed by any third party.