Financial Planning for DINKs

iFast Financial, Editorial Team

Some may describe Johnny Wong and Jenny Cheah as DINKs - an acronym for double income, no kids - a high earning childless couple and therefore able to afford a more expensive consumer lifestyle. The Wongs enjoy the best of having dual pay checks and greater disposable income.

However, in this period, growth in income and expenses can play a continuous game of catch and often results in couples struggling to meet the balance between expenditures and savings. It is often difficult for many to think of retirement savings but it is important to do so, as one can reap the most from this prime earning period.

"To achieve your retirement goals, you must start planning as early as possible or you will need to save more at a later stage. Have regular investments into a portfolio of funds that suit your risk appetite as this will help curb rising inflation," says Koe.

This is also the stage where most are reaching the peak of their careers and looking at buying property. "For many new home buyers, choosing the right piece of real estate would be the most difficult choice to make as it would involve committing the biggest portion of both your incomes. Determine your financial standing in order not to over commit. Always bear in mind that there may be other commitments in the future, such as having a child or illnesses in the family," adds Koe. After investing in a property, take a mortgage reducing insurance or an equivalent type of insurance policy to pay for the house, should a premature death of a spouse occur.

Couples at this stage should also consider having a combination of joint and individual accounts. The joint account is ideal for payment of living expenses as this is a good way to keep tabs on spending and some couples may find it easier to save, using individual accounts.

At this life stage, you should:

• Start saving and investing for retirement
• Use a joint account for shared expenses
• Budget together
• Add your spouse as your insurance beneficial

New couples should come up with a combined budget and work together to identify and realise their financial goals. It is also advisable to pay off one's individual debts earlier on as it makes it easier for both parties to contribute towards the set financial goals. Newlyweds should also remember to update their insurance options and add in their spouses to the relevant policies. Also, it is not too soon to establish an estate plan, by making sure that a Will and written medical directives are vital in times of emergencies.

"Investing into a life insurance plan is also important as it protects both you and your dependents against financial losses due to unforeseen events such as death, total and permanent disability or critical illness. Plus, we still need protection when we are old and retired. However, if you do not want to continue paying for life insurance premiums, go for limited payment plans where you will only need to pay premiums for a limited time, but lifetime coverage is provided," says Koe.

Chart 3: A Typical investment portfolio for DINKS

Investment for DINKs

Couples in this "honeymoon" stage of life must be aware and conscious of possible added financial responsibilities, such as providing for dependant parents, mortgages, car loans and other financial loans.

"I advise couples to keep a close tab on their income and expenses and not to take on too many financial liabilities at this time. They should also use this time to accumulate their cash savings and CPF monies. This is a good time to start investing into alternative investments, that are not market-dependent, such as fine wine or land to diversify their investment portfolio risks," says Yong.

If there is a great disparity between the risk profiles and investment styles of the couple, then each should continue with their individual regular savings plan portfolios. Otherwise, they can opt to combine their portfolios into a joint portfolio. Any changes made to this joint portfolio will require both parties to come to a consensus.

"If they plan to have children soon, they may need to start earlier, with probably a medium-risk investment portfolio. Otherwise, they can start with a higher-risk portfolio and let time smooth out the markets' volatility risks. They can also include some single-country, single-sector or thematic funds to enhance returns on their unit trusts portfolio," says Yong.

Chart 4: A Diversified Unit trust investment portfolio