We are DINKS (Dual Income, No Kids). Because of this, we have our greatest savings ability right now. This also means we have great spending power if we so choose (DINKS are advertised to more than any other demographic of people, children being a close second). We may not have another time in our lives when we’ll have this level of spending or savings leverage.
Sometimes, we really want things. Because of this, we have felt the pull to use our DINK status to purchase a lot of toys: new cars, bigger house, nicer clothes, and the best in technology. However, frivolously spending our money on these things would do a massive disservice to our future selves. Children, career changes, and other life circumstances are unpredictable and they strongly influence income level and savings rate.
So, what do we do with our money instead of buying these things?
We make hay while the sun shines. After we’ve paid out our monthly expenses and charitable contributions, we invest everything that remains.*
*Note: We paid off all of our non-mortgage debt before doing this.
The Decision to Act
We were discussing our finances on our back patio one day, the setting summer sun as our canvas. I had been running the numbers again and again and realized just how much we we would be netting every month.
As we soaked in the waning sun, I asked Keli:
J: When it’s all said and done, how much are you going to put into your retirement fund at work this year?
K: About $12K.
J: And what’s the max you can put in?
K: This year? It’s $18,000 per person for 401(k) or 403(b).
And then I wondered: what are we doing with all the extra money we have lying around?
The Results Were In
Our savings and checking accounts were bloated. I had an OCD-like yearning for our accounts to have a certain number in them. It made me feel safe. Secure. Our emergency fund was well beyond the goal that we had set for it, and I wanted it to be higher.
The reality is that we could have used that excess cash in other ways–much more productive ways. This discussion sent us on a path to maximizing every extra dollar we had thereafter.
How We Did It
Maxing out the 401(k)
We let our conversation on the patio marinate for a few weeks before finally deciding that Keli would adjust her contributions to max out her account by the year’s end. This meant much more of her check would be siphoned off each month in order to “catch up” and get it into the market. This was a great first step, except we soon realized we would still have a surplus after all our monthly expenses were paid out.
Our current investment for 2017: $18,000
Maxing Out Roth IRA’s
Roth IRA’s were the second move we made in the investment playbook. Most individuals are allowed to max out their own IRA every year. Last year, the max was $5,500 per individual. If you’re keeping up with our trend here, we set up our IRA’s online through Vanguard and maxed them out immediately for 2017. Another 11K in the books.
What is a Roth IRA? It’s an account you invest into with post-tax money. The benefit of a Roth is that it grows tax free and you can withdrawal your money at age 59.5 without having to pay taxes on it. Many of the same funds you invest into in the stock market in your 401(k) or 403(b) are available in IRAs.
Current investment for 2017: $29,000
Keli’s Work Contribution
Keli’s old job contributed a percentage of her salary to her 401(k) each year. This was a great benefit and at the time was just north of $5,000. Her new job won’t offer this same benefit, but it will offer up to a 4% match on anything she puts into her retirement.
Current investment 2017: $34,000
6% of each of my paychecks is used to fund my pension. Although pensions aren’t a perfect system, I will receive one when I retire someday, and each year my pension has produced roughly $3k. Believe me, I would much rather have the option of taking my 6% and investing it elsewhere, but it’s a mandatory contribution. When I retire I’ll have the option of taking monthly payouts of my pension, or I’ll be able to take it in a lump sum form.
Total invested for year 2017: $37,000~
No Better Time Than the Present
The importance of investing now, right now, cannot be ignored. It doesn’t matter if you can’t spell IRA, you need to be investing in your future in some capacity. Start small. See what your employer offers you in terms of 401 (k), 403(b), 457, and the like. Consider opening a Roth IRA through Vanguard.com. Anything will help get your momentum going in the right direction.
It doesn’t matter if you’re a DINK or not. You have to find ways to reduce your spending, increase your savings, and maximize your investing for the future.
We were only able to do this because we worked our tails off to eliminate our student loans, didn’t overpay for our house, and have no other outstanding consumer debt.
This is just the beginning
We are going to take it to another level in 2018–planning to invest about 50% more than we did this past year. We learned so much at the end of 2017 from others who maximize their investing and saving that we’re going to apply this knowledge to our situation this year. Financially speaking, this will be our biggest undertaking yet. We might have to make adjustments as 2018 unfolds, and we expect that. But one thing is for sure–we are well on our way to a more hopeful future. One paved with bricks of freedom, and ultimately, peace of mind.