Those of us who get married and have working spouses can leverage dual income in great ways for future safety. You should have short-term, medium-term, and long-term blueprints in place if you have dual income in the household. It is imperative to manage finances and plan wisely for the future in order to meet life goals at every stage and also ensure the security of the family in any untoward situation.
Here are five ways in which you can maximize dual income:
Living a debt-free life- Many couples have to grapple with high debt in the form of personal loans, credit cards, car loans, home loans, and the like. You should prioritize debt repayments and clear them off earlier than the scheduled timeline. It will help you save hugely on interest costs while freeing up more money to invest for the future. Create a budget and have a surplus that can be saved/invested for achieving goals in the future. Save up money for repaying loans and prioritize paying off loans which have higher rates of interest. You should leverage dual income to prepay something each month in order to clear off debt as swiftly as possible.
Buying/investing in real estate- You should look at leveraging dual income to buy/invest in real estate. If you are living on rent, then owning a home will help you build a lifetime asset for your family while saving on the rental costs in the long run. Couples can easily get joint home loans for sharing the debt burden, while also enjoying higher home loan eligibility. If you already own a house, then you may invest in a second property together for earning rental income. This may help you cover a large part of the EMI and eventually create a passive income stream for the future.
Future Goals- The biggest way to leverage dual income is to invest for achieving future goals and dreams, like buying a car, taking a vacation to a foreign destination, purchasing luxury gadgets and jewellery, and so on. However, you should ensure that you manage finances collaboratively while syncing common financial goals and achieving them with disciplined plans. Dual income will help you achieve many of these dreams relatively easily. However, you should both be on the same page and should not compromise with the basics in order to achieve the same.
Building a short-term contingency fund- A contingency/emergency fund is useful for taking care of expenditure whenever there is a loss of income or any other financial emergency without warning. A household should have a minimum of 3-6 months of expenses available as contingency funds in case of any emergencies. Hence, you should leverage dual income to first build this contingency fund for greater peace of mind. Make sure that the funds come with adequate liquidity for quick withdrawals.
Getting adequate insurance- You should not skimp on insurance if you have dual income. You should financially safeguard your family with sufficient life insurance coverage. Make sure that you both have a life insurance policy that will help the household maintain the same standard of living in the absence of any one/both earning partners. You can use a life insurance calculator to work out the amount payable each month for your chosen coverage. Term insurance is usually the best bet, while you can also go for ULIPs and retirement plans. Child plans also make for good options if you are seeking a combination of insurance and investments. You should also get adequate health insurance which will financially safeguard your family from the financial impact of any medical emergencies or hospitalization.
These are the ways in which you should leverage dual income of the household.