Is Financial Planning Different for Dual-Income Families?

source: monthly

Nowadays, most families do not depend on a single breadwinner. In the end, collective income from both partners ensures a happily married life with ample opportunities to explore different aspirations after fulfilling the basic lifestyle expenses.

One may wonder, then, what can be the reason for chalking out financial planning for a dual-income family, where the disposable income is already significantly high. But in reality, some problems are specifically experienced by such couples only. So moving on with this topic, we have shared some tips to overcome these issues.

1. Advantageous To File Taxes Jointly

Dual income families earn more than families with only one jobholder. So, naturally, they are liable to pay more tax. To overcome this issue, couples can opt to file unified tax returns, which provide exemptions based on the collective revenue.

Although, if there is a lack of confidence between couples, financial advisors also suggest not filing IT returns jointly. Again, if one of the partners has tried to understate the taxable income, the law will hold both liable to pay the penalty.

Despite such pronounced disadvantages, we include this consideration as an integral part of financial planning for dual income family because they provide the following advantages:

• Saves time and money while reducing the effort
• The Government, at times, announces customised tax-saving options for dual income couples

2. Dual Opportunities Must be Located Before Moving to a New Place

Limited flexibility is a significant issue faced by multiple-income families. Families often need to move to a new city for better education opportunities for their children. Sometimes, one of the partners has to shift to a different nation to chase their aspirations. If such decisions have to be taken in dual-income families, one of the partners may have to sacrifice their job prospects. 

Otherwise, to maintain the financial stability of the family, first, you have to ensure both of you get a job contract.

3. Beneficial in Maintaining a Healthy Joint Debt Status

Individual credit scores of both partners will play a defining role when dual-income families approach an insurer for availing joint policies. Also, insurance companies will ask for higher premiums if you and your partner have a poor credit score.

Hence it is vital to keep a high credit score above 750 to ensure the family does not suffer from severe repercussions while trying to avail various financing products.

1. Share Common Goals

2. Embrace Imbalances and Try to Solve It

3. Aim to Make the Most Out of Your Collective Income

4. Purchase Joint Insurance Policies

5. Maintain an Emergency Savings Account

An emergency or contingency fund will help you and your family members to fall back on the accrued funds in times of financial distress. Dual-income families can easily maintain these accounts by keeping aside a small portion of their monthly income (roughly 5-10%). In addition, these initiatives will enhance the sense of trust and mutual support in dual-income families.

It may only be possible to strictly follow some of the above practices to achieve financial planning for dual-income families. However, it will generate optimal results if you can figure out the primary essence: it is essential to strategise together to ensure the healthy financial status of a family. Managing and prioritising expenses and investing wisely will gradually eliminate typical troubles experienced by dual-income families.