So, you and your partner have made the choice to be a Dink (double income, no kids) household. Now that you have more disposable income together, what’s next? Coming up with a solid strategy to maximise your wealth together, of course. Don’t let the power of combining your finances go to waste.
By setting goals, prioritising your finances, and working together as a team, you can set yourselves up for a lifetime of financial success. With these tips, you and your partner can navigate life with confidence – even if children happen to come into the plan later on.
1. Discuss goals to prioritise as a couple
Ideally, you should be kickstarting this conversation with your partner even before tying the knot. Talk about what matters most to both of you. Sit down and hash out your financial goals, even if it can get uncomfortable. Be sure to have a clear idea of each other’s views on the following aspects:
Emergency savings: Say the A/C at home breaks down, the car needs a major repair, or worse, one of you loses his/her job. Life happens – having a safety net can save you from financial distress.
You’d want to stash away three to six months’ worth of living expenses to cover fixed commitments such as rent or mortgage, utility bills, groceries, and other essential expenses. It can be a joint account and tracked together so that the two of you know where the money goes.
Retirement contributions: Retiring may be the last thing on both of your minds, but you should be thinking about your golden years and how much you’ll need to maintain your desired lifestyle during retirement. CPF will only provide monthly pay-outs in retirement from 65 years old. What if before you turn 65, you were forced to retire earlier than planned?
Building your nest egg now means you’ll benefit from the power of compounding interest and have more time to grow your retirement savings.
Insurance: Protect the life you’ve built together and get insurance coverage. Make sure you’re both adequately covered for any curveballs life might throw your way. Review each other’s insurance coverage as you may have made the initial purchase with a single person’s needs in mind.
Health insurance can help cover medical expenses, while life insurance provides financial security for your loved ones in the event of your passing. Disability insurance can replace a portion of your income if you’re unable to work due to illness or injury. Also, do evaluate your insurance coverage regularly to ensure they meet your needs and adjust as necessary, such as if you get a nice pay rise in the future.
2. Get ahead on your savings together
Saving money doesn’t have to be a drag! Make it a fun challenge by setting goals and rewarding yourselves when you hit milestones. Here’s how to get started:
Creating a habit of saving money: You’ll be surprised how a little really goes a long way. Consider setting specific joint savings goals, such as saving for a vacation, a down payment on a HDB flat, or a new car. Having a clear purpose for your savings can help motivate both of you to stick to your plan and avoid unnecessary spending.
Automating your savings: Most banks now offer tools that allow you to set up recurring transfers so that you can minimise the time spent on financial tasks. This includes paying the bills, allocating your salary to your savings account and emergency fund, or even transferring allowance to parents.
Tools to help save: There are tons of apps on iOS and Google Play designed to help you budget and track your savings effortlessly. Download local apps like PlannerBee or Dobin, which can link directly to your bank account with similar encryption standards as banks to safeguard your privacy. With Dobin, you can also manage multiple credit cards and track your total expenses, the amount you owe, and your bill payment due dates.
3. Get into the habit of investing both incomes
Now that you and your partner-in-crime have built up your emergency fund and have a solid savings plan in place, it’s time to think about letting that money grow. Instead of letting your cash sit idle in the bank, let the money work for you. Here’s how to dip your toes into the world of investing together:
Investing options: Do your research together to explore different investment options and decide what’s best for your financial goals and risk tolerance. You may want to work with a financial advisor, who knows best about creating a personalised investment strategy based on your risk appetite.
Speaking of risk, keep in mind that investing is risky, so it’s essential to diversify your portfolio and stay informed on market trends and economic developments.
Robo-advisor: If just the thought of managing your investments feels like an overwhelming task, consider using a robo-investor. These automated investment platforms create and manage a diversified portfolio for you based on your goals and risk tolerance, making investing simple and stress-free.
Robo-advisors typically use algorithms to allocate your investments across a mix of asset classes, such as stocks, bonds, and cash equivalents, to help you achieve your desired level of return while minimizing risk. You can read more about robo-advisors here.
4. The Big IF: What if you decide to have kids in the future?
Somehow along the way of living life together, you might consider adding another member to your family. It’s never too early to start planning about how a growing family may impact your finances.
Anticipate new additions to your budget: While our Singapore government does provide financial aid for new parents, including the enhanced Baby Bonus Scheme, the Child Development Account (CDA) First Step Grant, and other education subsidies, you still have to factor in other expenses. Think childcare, diapers, medical costs – and in the long run, education fees.
Consider opening a separate savings account (you can call it the education fund) specifically for your future child’s expenses and contribute to it regularly to build a financial cushion. Some banks and insurance companies also offer endowment plans for saving towards future education expenses.
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This article was first published in Wonderwall.sg.
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