(This is a guest post from our friend Philip Taylor @ PT Money)
What are you doing with your second income?
Unless you are a DINK cliche, thus spending all of your extra income to achieve a certain lifestyle, you probably have plenty of money leftover from your two incomes to throw at financial goals.
At least I know I did back when I was a DINK.
Here are some ideas for what to do with that theoretical “second income.” Believe me, there will likely be no easier time to make financial progress in your life than when you are a DINK, so make 2013 the year you do the most good with your second income.
Pay Off Your Debts
Excessive credit card debts, car loans, and those lingering student loans are probably good places to start. Getting out of debt is hard, but the process is simple. Start with the smallest debt or the debt with the highest interest rate and throw all of that monthly second income at the debt. Move from one debt to another as you pay them off. Crush it all as fast as you can.
As a proponent of completely integrated finances I say who cares who’s debt is who’s, just get them all paid off and commit to being out of debt as a couple for the rest of your lives. The sooner you take care of this the more choices you’ll have with your financial future.
Max Out Your Retirement Accounts
There are two strong reasons to channel all of your second income into your retirement savings:
Odds are you are young and the more you put in now the more money will be exposed to all those years of growth you have until retirement. You likely have many more options available to you now because your income is low (keeping you within IRS limits) and you have access to two work-based retirement plans.
A DINK couple contributing to 401Ks in 2013 will be able to defer up to $17,500 in income each! That’s a $35,000 tax deferral! You’ll never get another chance to defer 2013 income. Do it while you have the chance.
Shore Up That Emergency Fund
I was going to make the assumption that many DINK Finance readers had already tackled the subject of building up an emergency fund (money set aside for financial emergencies, typically 3 to 6 months of expenses), but if you haven’t then you should definitely use your second income to make this happen.
Having an emergency fund should actually be the first thing you do with your second income. Having this in place frees you up to do so much more with your money because you don’t run the risk of getting back into debt when things go bad…and they probably will at some point. Car repairs, excess medical bills, short-term job losses are all a reality these days.
Build Up a Baby Fund and/or Down payment Fund
This is where improving your financial life gets exciting. If you’ve knocked out your bad debts and made some progress with savings, you can begin to tackle those big life dreams, like owning a home or having a child. I know many DINKs choose never to have children, but most will certainly attempt to own property, even if it’s not your primary residence.
To buy real estate these days it takes a sizable down payment (as it should) and so you’ll need to prepare for the moment when you buy your house. A second income can get you there quickly, so if you’ve accomplished your other goals, like debt and savings, then get started on saving up for that new home down payment or that new baby fund.
Finally, having a second income affords you the ability to give more. With your second income you could help a single-parent family who doesn’t have two incomes. You could give more to your favorite charity, school, or church. When you are blessed with much, you have the ability to bless much. Use your second income for more good.
- This is a guest post from Philip Taylor of PT Money: Personal Finance, where you can always find ideas for doing more with your money. Check out the latest ranking of the best travel rewards credit cards.
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