Financial Life Strategies for Dual-Income Families
7 tips for building and managing wealth and life.
If you’re part of a dual-income family, you know there are both advantages and disadvantages. The two incomes can provide you opportunities to create wealth and establish financial freedom beyond what most single-earner families are able. However, with both of you working and sometimes both traveling, life can feel like a constant time crunch marked by an overwhelming load of responsibilities, especially if you have little kids.
You don’t want to forego your chance to make money, build and manage your wealth, but you also don’t want to miss out on family time, fun and the chance to enjoy life.
Here are 7 strategies every dual-income couple should consider.
1. Max out your 401k: You can contribute up to $18,000 per year if you are under age 50 and up to $24,000 if you are over 50. Additionally, many companies offer a company match. It’s a triple win – you can save for retirement, get matching contributions from your employer, and enjoy the tax savings. If you don’t have access to your 401k, you may be able to contribute to an IRA and deduct the contribution on your taxes.
2. Consider deferred compensation: The majority of people are in the highest tax bracket during their working years, and then their tax bracket lowers considerably in retirement. If your company has a deferred compensation program, it’s a great way to manage your income while you are working and delay taxes until you are in a lower tax bracket. This strategy typically allows higher limits for putting money aside than a 401k, and you don’t need to wait until age 59-½ to access your monies.
3. Understand how your benefits work: Many large companies offer robust employee benefits that employees simply don’t understand or don’t take time to learn about and access. Make sure you are contributing to your Health Savings Account, Flexible Savings Accounts or other flexible benefits program. Doing so can provide you access to certain benefits at a pre-tax rate, which can save you anywhere from 15%-50%, depending on your tax rate.
4. Put a safety net in place: In today’s economy, it’s likely you will change job 10 to 20 times during your lifetime. Make sure you have an emergency cash fund in place (6 to 12 months of after-tax expenses) to give you a cushion for when you need to make a change. Also, make sure you have disability and life insurance in place for the unexpected.
5. Save for college. College expenses have increased on average twelve-fold over the last 30 years. A great way to save for college and have the savings grow tax-free is a 529 Plan. Parents and grandparents can, individually or as a couple, open and contribute to a 529 Plan for each child. Depending on where you live, you may also get a deduction on your state taxes. In Ohio, contributing to a 529 can get you a tax deduction of $2,000 per child.
6. Outsource what you can:Cleaning help? Grass cutter? Chauffeur for the kids? Meals delivered to your door? Yes, please. When you look at how much you earn, it’s often less expensive to outsource the work you don’t love to do (both financially and emotionally) than to use your time to try to do it all yourself.
7. Treat yourself: It’s easy to get stressed out day-to-day with the endless things to do, both at home and in your career. Block a day at least once a quarter to take a day trip, get a massage, have a date with your spouse, meet friends for lunch, or read a book, relax and not worry about what else gets done.
REMEMBER –– The earlier in your careers that you put these and other wealth management strategies in place, the even greater your potential for building wealth as you allow the time-value of money to work to your advantage. We’d love to tell you more.
At Lenox, we assist our clients in all aspects of their financial life –– career years through retirement years –– wealth creation, wealth management and wealth impact. Have a question? Need some specific guidance or information? Please let us know. It would be our pleasure to help you Fund A Life You Love™.
If you’re ready to discuss financial planning that will allow you to Fund a Life You Love®, we’d love to tell you more. Let’s talk. It’s your tomorrow.
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