Dual Income No Kids? Do These Things First

Are you a dual income couple without kids?

Are you one of the approximately two-thirds of American households where both spouses earn an income outside the house?

If you do not have children, the second paycheck can be a financial boon to accomplish financial goals quicker than households with children, as you both have the opportunity to work and earn an unlimited amount of income without having to set time aside to also be a parent. With this relative amount of freedom, here are three things you should be doing if you are a dual income no kids couple.

1) Become Debt-Free

Dual income no children households earn noticeably more money than a single income household. If you have low monthly expenses that can be covered by the first paycheck, then the second paycheck is pure disposable income. While you can use it to take a swanky 5-star vacation to Hawaii each year, you might also want to use that extra income to bolster your existing financial situation.

Namely by becoming debt free.

If someone said they intentionally continue to borrow money to repay it with monthly interest charges on top, they would most likely be considered crazy.

Monthly payments are not fun and nobody likes being in debt. But, sometimes debt is a necessity if you want to earn a college degree, buy a house to build equity, or purchase a car to have reliable transportation to work.

Unfortunately, monthly payments detract from using your money for more productive expenditures such as saving for the future or being able to afford a large purchase without having to borrow money.

How To Do It

Many dual income couples are millennials who are working to repay a large student loan balance. If you have any type of debt, whether it is student loans or credit card debt, repaying the loan balance should be one of your primary priorities.

Refinance Student Loans

For student loans, if you have good credit and income, you could consider refinancing your student loans. In short, refinancing allows you to reduce your interest rate, saving you money in interest over the life of your loan.

Consolidate & Refinance Credit Card Debt

If you have credit card debt, you may want to consider consolidating it and refinancing it via a personal loan. Like student loan refinancing, this can save you a considerable amount of money in interest.

While credit cards typically have interest rates between 15% and 30%, personal loans typically range from 5% – 15%. 

If you have a good credit score, you may be eligible for a personal loan with an interest rate that is much less than your credit cards. You can use the personal loan to pay off your credit card debt then start repaying the “cheaper” personal loan. 

Benefits

There are multiple benefits of being debt-free including lower stress levels by not having to live paycheck-to-paycheck and the freedom to spend the additional money, which previously went to a monthly loan payment, on whatever you desire. Plus, if you have the ability to prepay any of your loans, you can save hundreds or thousands of dollars even if you only pay a loan off one year early.

Becoming debt-free is a two-fold challenge. Repaying your current loan balance is the first step, but, you must also remain debt-free to maximize the potential spending power of your second income. By keeping your expenses as low as possible, you have the opportunity to accumulate a small financial fortune and be like “The Millionaire Next Door” because you can save so much and possibly even reach financial independence.

Once you are debt-free, you should strive to save for large purchases as much as possible and even consider making a rule that you will only buy something once you can purchase it with cash and not have to take out a loan. This concept seems foreign to the Americans, but it is respected in many other cultures. It’s acceptable to splurge and have some luxuries, but doing so with financial responsibility will make each purchase more valuable. After all, now you have no debt, a dual income, and no kids!

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2) Save for Retirement

Another large expense that many young adults do not think much about is saving for retirement.

For a 22-year old college graduate, they might have 40 years before they can even consider collecting Social Security benefits and any 401(k) or IRA retirement contributions. But, many dual income no children households are defying the status quo regarding retirement and can financially afford to retire from the full-time workforce in their 30s.

There’s even a small online “Financially Independent Retire Early“ (FIRE) community where different couples share their experiences on how they are able to retire in their 30s, 40s, or 50s. They enjoy traveling the world or fulfilling their passions instead of working at a begrudging job they only keep because it pays a high salary to afford their expensive monthly lifestyle.

How To Do It

Even if you might not be able to retire 20 years before your current co-workers, dual income couples should be saving for retirement as often as possible. Scheduling automatic contributions and maximizing employer matches for retirement accounts are good starting points, but, using a retirement calculator will give you a more accurate picture of how much you need to save each month to not outlive your savings.

By starting to save for retirement early, you can take advantage of compound interest and not be required to save an even larger amount in your later decades. And, if your start saving for retirement too late in your working career, you will not be able to retire on time because you cannot afford to.

One great, easy way to save for retirement​ is to invest your money via a robo-advisor. Since these companies use algorithms (often along with a human advisor), they require little work on your end. At LendEDU, we have done the legwork for you and have reviewed the best robo-advisors in the industry.

To help ensure you have enough money in your retirement years, dual income couples should strive to save 10%-15% of each paycheck during your 20s and increase the contribution amount by 10% for each decade of your life. This means increasing your contribution amount to 20% in your 30s and at least 30% in your 40s. Assuming you follow the first step and are debt-free, the money that used to go towards student loans or a home mortgage payment will go into your 401k or IRA instead.

​If you have a 401k, you might want to consider using a service to ensure that your money is continuously in the right place. One company that does this is Blooom. For only $10/year, Blooom will manage your account and ensure that your 401k money is invested in the best places based on the current market.

In addition to saving for retirement, dual income couples will also want to save for other large expenses. This might mean setting aside money to pay for a master’s degree or professional training, building an emergency fund, and saving for a baby. Just because you might earn $4,000 a month doesn’t mean that every dollar needs to be spent during the same month.

3) Make a “Bucket List”

It can be real easy to only look at the financial benefits of having a dual income household, but free time can also be just as valuable. The concept of a “Bucket List” became mainstream with the 2007 movie of the same name where two retired men tried completing as many activities on their wish list as possible while they still had the physical ability to do so.

If you plan on having children in the future, your carefree days as a couple without being responsible for a tiny human are limited. While parenthood is one of the most rewarding experiences on earth, it is also very time-intensive and sacrificial. Priorities shift as you now participate in family-friendly activities and schedules revolve around meals and naps.

Reasons to delay becoming parents might include getting a handle on your finances and debt payments. You might also want to establish a career and earn a graduate degree, two commitments that are time-intensive and things you might not desire to undergo as a new parent.

Sacrificing your evenings and weekends before having children can give you the opportunity to enjoy a career that will be family-friendly in the future. Or, you might be able to work fewer hours to pursue further education or an improved quality of life because your spouse can still earn enough to pay the monthly bills as you both share the burden of making ends meet.

In addition to accomplishing personal career goals, you should also use your money to have fun together as a dual income couple. Bucket list items might include traveling the globe, overnight hiking, whitewater rafting, etc.

Talk to any parent and they will be more than happy to tell you what they used to do before children and what they have planned once their children leave the house. You can still have fun as parents, but it gets more complicated (and expensive) when you add a small child into the mix to continue doing the hobbies you once enjoyed. Kids are incredible but make managing time and money more difficult.

If you enjoy hiking, for example, your backpack might be an infant carrier instead of where you previously stored your supplies and rations to camp and hike in the wilderness for a long weekend, meaning you only go on day hikes. And that sports car might be traded in for a minivan that is car-seat friendly and fits kids. 

Summary

The two important things for any dual income no kids household to focus on is today and tomorrow.

The ability to earn a second income is a blessing that plenty of households do not have for varying reasons. The second income can be a temptation for some to spend more, but it can also yield large financial fruits when utilized to repay debts and save for the future.

Of course, life isn’t solely about making large sums of money, you also need to spend time enjoying the fruits of your labor. The extra income can help afford a lifestyle of reasonable luxury without having to live paycheck-to-paycheck.