October 17, 2018

Saving tips when you’re young and earning a double income

The best time to save and invest is when you are young and have a high disposable income, especially if it’s a double income. You generally have a lower cost of living and need less to survive, but more importantly you will start the magical motion of compounding. Compound interest is the easiest way to grow wealth over your life time, but it needs a relatively long period to work so the sooner you start the better.

By using these tips to save more when you’re young and earning a double income you will be setting yourself up for a wealthy life.

Be open and have a mutually agreed strategy

Not everyone values money the same, nor do people share the same risk tolerance, earning potential, or taste for fine shoes/dirt bikes. It is important that couples talk about their expectations and aspirations to develop some share understanding. You don’t need to start writing contracts but everyone should feel comfortable with how money is used in the partnership. Without an initial understanding, and on going communication, you could find yourself in a nasty, and costly, situation.

Make a plan

Having a financial plan is the first step towards achieving financial security. Without thinking about what it is you would like to do long term, and planning some steps to achieve this you have a much harder task ahead of you. By knowing what you want you should be able to calculate how much you need to save to achieve your goal. The earlier you commence planning and saving the easier it will be to achieve your goals.

Live on one income

You might be earning a double income now, but it’s unlikely you will forever. If you intend to have children, you will either go back to single income or use the better part of one wage to pay the costs associated with raising children. By living off one income now you will be in a much better position to handle this when you don’t have the choice. The other big benefit is that you should be saving and investing a large amount each year which will put you in a great financial position later in life.

Start investing

The sooner you start investing; the greater the benefit will be. By making consistent investments over a long period of time and reinvesting your earning, you will utilise compounding to do the heavy ‘growing’ and help reduce the risks associated with investing.

By saving a large portion of the combined income and starting an investment portfolio, young couples with a double income are giving themselves the best shot at financial security later in life. Just try to ensure there are clear boundaries and expectations, and a shared long term vision.

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