The dual income years are one of the most opportune times to save and invest money. When you have two full time wages coming in and do not have the high costs associated with raising children you have the opportunity to save heavily. It is also one of the most important times to save, because compounding investments work best when left for long periods of time. Any money saved and invested wisely when you’re young will grow in to significant amounts by the time you retire. Here are some ways to save when you’re earning a dual income.
Make a plan
If you one day want to buy a house, have a family or retire young you should plan for it early while you have lots of disposable income. By planning for the future you are better able to put yourself in a position to manage future periods of reduced income or increased expenses. Set your long term goals, then a series of short term spending and saving goals to achieve the long term ones.
Spend half, save half
Try living off only one person’s wage. Not only will this ensure you are saving a lot of money for the future it will help establish important spending habits for the future. If you plan to have children it is most likely that you will need to live off only one wage at some point in time. By developing the discipline to do it when you don’t need to, you will be better able to when you do need to.
Pay off bad debt and stay debt free
Debts for things that are depreciating, like car and holiday loans, should be paid off as a priority. With these loans you are paying interest for something that is decreasing in value. The amount you pay in interest and fees for these loans is more than you can sustainably earn investing. By having them your overall ‘net’ financial returns will be highly reduced. However, Government study loans, that are only increasing at the inflation rate, should be paid off at the minimum rate. These loans aren’t theoretically increasing, and you should be able to get better returns in even low risk investments.
Utilise compound interest
By investing while you are young and reinvesting your earnings you are letting compound interest make you rich slowly. Compound interest works best when it is left for long periods of time, the longer the better, so starting early is the best way to get it to work for you.
By using these tips on how to save when you’re earning a dual income you will be setting yourself up for a financial secure future, which is one of the best things you can do for yourself.