Dual Income, No Kids? What DINKs Can Do With Extra Money
What could you do with extra money each month? How about an extra salary?
No, I’m not talking about getting a side gig, part-time work, or a second full-time job — although you could do any of those! I recently read an article about DINKs living on one partner’s salary while saving what the other earns or using that second income for non-essentials. That got me thinking about how and why a childfree couple might do so.
Sure, folks with children can do this, too. Many couples with children already live on one partner’s salary. They often do this so that the other can be an at-home caregiver, which can be prompted by high childcare costs. Still, living on one salary for a family with children might be tough, given that the Brookings Institution estimates the average cost of raising a child to age 17 to be just over $300,000 for a middle-income couple with two children.
That’s not to say that the average middle-class childbearing-age DINK couple is going to save $600,000 by not having children. (Of course, DINKs come in all ages and span the socioeconomic spectrum.) But what if they could? Today, I’ll be focusing on why a childfree family might want to live on one salary — and what they may want to do with the other income.
Whether you reside with a person or people with whom you share romance, friendship, or living space (or all three!) it’s clear that residing with another person or persons can help cut costs. You can split the rent, share the cost of meals, as well as divide up utility bills and even household chores. Other than that last unpaid labor bit, all of these tend to reduce costs as opposed to each member of a household managing them on their own.
You might’ve heard the phrase “What was good for two is great for one.” I’ve heard it before to describe retirement prospects for a surviving partner when their significant other passes away. If the couple had planned well, it’s often true for a survivor wondering if they’ll have enough to live on after losing such a loved one.
For DINKs, what if you flipped and shifted the script? When it comes to income, could what’s great for one be good for two? In other words, could two working people live on just one’s salary?
Don’t get me wrong, you’d have to be in a financially committed partnership to do this. Even if it’s not for you, humor me for a moment. What if you could live off of just one salary? Whether you decide to spend or save the other, having an “extra” income sounds pretty great to me!
… but how would you actually go about doing it … and then what would you do with it?
Living off of one income
The first step to committing to another person financially probably isn’t diving into living on a single salary. If you’re thinking about merging finances with your partner, you can check out a couple of other blogs I’ve written on the topic below.
And if you’re ready to swim toward single-salary living, here are some things to consider.
How you’ll budget — Open communication with your partner will be key if you decide to live off of one income. Whose income is paying for what? You’ll likely have to discuss large purchases with each other before making them — and that might also be true of smaller buys, too. Creating a family budget and understanding your income and spending expectations for one another is a great starting point.
How you’ll save — The answer to this question can come in many different forms. Maybe it’s as simple as direct depositing the full salary you’re saving into a specific account. Perhaps it’ll mean each of you saving half or another amount of your respective salary. However you break it down, make sure you’re on the same page.
What taxes will look like — This one might be simpler if you’re married and file taxes jointly. If you’re not and a large portion of your family savings is going into one partner’s 401(k), for example, they’ll get the tax benefits. How do each of you feel about this? Are there ways you can compensate for the difference if it’s meaningful to you? Be sure to sit down with your financial planner/tax preparer on this one.
What your legal rights are — If you’re not wed, getting your attorneys involved to go over your financial rights as a cohabitating partner can be helpful. The same can be true if you’re a married couple with a prenup. Of course, the potential end of a relationship is not something most couples want to think about. But with the right binding legal documents in place, if your partnership or marriage were to end, you’d both leave it whole — legally and financially, at least. While you’re figuring out those legal details, married or not, you might also want to work on creating or reviewing your estate plans.
Where the dollars are going — From separate accounts to a joint account and savings to brokerage and more, you’ve got some decisions to make. Create a plan for where saved dollars will go, when it’s ok to spend them, what you’ll spend them on, and what’ll happen if you don’t hit your savings targets. Being on top of these early on can help you adjust your plan if what looks great on paper doesn’t actually happen. It can also add accountability to help you stay or get back on track.
How you’ll invest — Planning to invest that extra salary? Beyond budgeting, be sure to make a plan for how to put dollars to work for you as a couple. For those with different risk tolerance levels, a professional can help you find a blend of investments that works for you.
Once you get the basics down, I don’t recommend that you do this just to do it. What would be the point? Your goals. That’s what!
What to do with an extra income
For a couple comprised of two working partners, making the shift to living off of just one salary is a BIG move. If you can do it, here’s what you might do with it.
Save for a goal, like a big vacation or home down payment.
With expenses reduced, plan to retire early or shorten the timeline between now and financial independence.
Stash retirement savings for later — and take advantage of tax savings today while you’re at it. (Compound interest, anyone?)
Savings already in check? Live luxuriously by spending your extra income to thoroughly enjoy life.
Or whatever else fits into your financial plan. It’s your money, after all!
Are you and your partner living off of one salary? Share your story! I’d love to hear what you’re doing with your extra income — no matter how average or unconventional you might think it is. Reach out to email@example.com to let me know and to share your tips and tricks for making it work for you and your partner.
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