Double Income Double Dhamaka

For a hassle free retirement life, DINKs must start financial planning at an early stage of their relationship

SU P R IYA VER MA M I SH R A ET INTELLIGENCE GROU P

A STITCH in time, it is said, saves nine. For the serious business of managing one's finances — whether it is for individuals, married couples with dependent parents and kids or couples with two incomes and no kids — there can be no better motto than this English proverb.
    Last week, the ET Intelligence Group had advice on the intricacies of financial planning for singles. In this week's issue of the Investor's Guide, we suggest savings tips for those referred to as DINK (double income no kids) couples. Being prudent planners ourselves, we'll include suggestions for double income single kid (DISK) couples.
    A typical DINK couple would be over the age of 35 years and childless by choice. They'll be well-educated and have jobs in the service sector in middle- or -highincome categories. Even where one spouse is not working and the other has two sources of income, the couple would qualify as DINKs.
    The starting point of financial planning for DINKs will be identifying the purposes for which money would be needed. Accordingly, an investment plan needs to be formulated so that there is enough liquidity during an hour of need. DINKs need not worry about saving for children and this often leads to reckless spending and eventually finances are in a sorry state when money is needed the most. A survey by the Associated Chamber of Commerce & Industry of India on changing consumption patterns in a city such as Delhi found that nearly 75% of DINK couples with an annual family income of about Rs 6 lakh-8 lakh of per annum spend some Rs 15,000-20,000 every month on entertainment, shopping, fitness centres, eating out and branded wear. In contrast married couples with kids exercise restraint while spending money. For DINKs, however, time rather than money is a constraint when it comes to planning for a long holiday. More often such couples look for immediate gratification and tend to ignore the importance of a wellplanned personal financial strategy, says Mumbai-based financial advisor Kartik Jhaveri. Even if they invest money, it is random rather than planned. Travelling, maintaining the current lifestyle and security cover for future are the basic essentials for which DINKs need to plan. It is also true that DINKs can be dependent only on their own earnings, unlike couples with kids to take care of them during old age. Furthermore, they will be tested during times of adversity when either spouse may have quit the job or take a sabbatical. "They need to take care of their income support planning and managing expenses as the foremost part of their financial planning," Mr Jhaveri observes. Some of the financial planning for DINKs would include the following.
CONTINGENCY RESERVE
To begin with, financial planners insist that DINKs should put away enough money to take care of at least three months of expenses which will include phone and electricity bills, home rent or maintenance costs if it is owned property, monthly instalments for loans, food and travel expenses and other sundry costs. A contingency fund keeps life on course if there is a temporary loss of income.
HEALTH INSURANCE
While many companies provide health cover to employees, financial planners insist that DINKs should also invest in health policies other than group insurance schemes. "It is a good strategy given that one of the partners may want to retire early in life," explains financial planner Gaurav Mashruwala. DINKs are also advised to take policy riders that cover physical disability and critical illness even though it may increase the premium.
LIFE INSURANCE
This is not necessary in case of DINKs as both the partners are financially independent. However, if there is a possibility of a DINK becoming DISK, they need to take life insurance cover. The amount of insurance cover depends upon the future needs of dependents. Mr Mashruwala advises a simple term insurance plan without any financial returns. This keeps the overall premium cost low while providing financial shelter to dependents.
PORTFOLIO CREATION
DINKs may look at investing in gold, RBI bonds, post office monthly investment schemes, mutual funds and property. Depending on their risk profile they could also opt for a mix of debt and equity instruments. DINKs should refrain from high leverage and ideally build assets (home or car) through their own funds, thus keeping the borrowings to a minimum.
WRITING A WILL
Leaving a financial legacy is perhaps the toughest part of being married and not having kids. DINKs may create a pool of wealth but they do not have a natural heir unlike a married person whose wealth is automatically transferred to the spouse or kids. Both partners need to write a will to transfer their wealth to either the spouse or a nominee. They must write a Power of Attorney in favour of each other to avoid any legal problems.
    To sum up, under no circumstance should financial planning be ignored. A penny saved, like Benjamin Franklin said, is a penny earned.
    supriya.verma@timesgroup.com
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