Dual-income families are expected to prosper at a more incredible pace compared to single-income counterparts. It is simply because they have access to more financial resources and consequently possess greater purchasing power.
Is Financial Planning Different for Dual-Income Families?
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.
How Is Financial Planning for Multiple Income Families Different from Others?
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.
What Are Some Expert Financial Tips for Dual Income Family?
1. Share Common GoalsIt will be helpful if couples sit for open-ended conversations in the long run. Sharing goals will help them reach common ground and make necessary adjustments to create room for individual aspirations whenever possible. Though this practice may sound uncomplicated, couples often need help to reach an organised conclusion. Thus you may even hire a financial planner to ease the process.
2. Embrace Imbalances and Try to Solve ItAlmost 66% of Indian millennial dual-income couples confessed that their relationships had been affected due to financial stress at some point in life. Hence, it will help if you address a financial imbalance quickly; consequently, both of you must put in considerable effort to cover it. The most effective way to eradicate problems arising from financial imbalance is to share monthly expenses and maintain separate savings instruments.
3. Aim to Make the Most Out of Your Collective IncomeIt will be ideal if each earning member builds the potential to support monthly utility expenses. Though ensuring this can be difficult in countries like India, where we witness a spiral appreciation of inflation, financial experts still recommend that dual-income families strive towards this goal. This will ensure that no one has to stay dependent on their partner and significantly reduce the primary breadwinner's financial stress.
4. Purchase Joint Insurance PoliciesAvailing these policies will help you generate an income alternative at affordable premium rates. Both of you will benefit from your savings in the post-retirement period. Even in emergencies like critical illnesses, you will not need to disorient the budget settled for other aspects of your lifestyle.
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.
FAQs About Financial Planning for Dual-Income Families:
Married couples where both members will be earning need help with geographic moves. Sometimes, either of them or both individuals must travel and live separately to pursue a better job or career opportunity.
As common issues like unfair division of domestic tasks, long distance, spousal competition, etc., tend to exist among dual-career couples, it is necessary to embrace frequent open-ended communications. Moreover, issuing a physiological couple contract to set limitations and specify a host of shared interests can be a great measure to tackle unwanted situations. Finally, it is vital to ignore outside influences and trust each other.
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- This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
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