A very subtle yet very important part of financial planning is the client’s lifestyle choice. You, the client, at different stages of your life, need to choose what kind of life and therefore lifestyle you would like to have.

For example, if you have just gotten married, would you like to have one child or two? Would you like to not have children at all? Post children, would you and your spouse both like to continue your careers?
Would you or your spouse rather not work beyond a certain early age?

Depending on these choices and many more, your lifestyle and list of life goals will change.
And each change gives you different pros and cons that you have to deal with.

Let’s see what the different types of couple lifestyles are and you can see where you stand today.

1. Double Income, No Children (D-I-N-C)
   
   Features of DINC Families:
    
   1. This represents a married couple that has unanimously decided to not have children. While this might have been way off the beaten track in our parents and grand-parent’s generation, more and more young families today are choosing to not have children.
   2. Both husband and wife are working. This is an excellent wealth generating mechanism because not only are there 2 individual income streams thereby reducing family income risk and increasing wealth building potential, there are also no child-related expenses such as school fees, college fees, marriage expenses and so on.
   3. Additionally, in these situations, often couples will share household expenses, sometimes contributing proportionately to all expenses, other times contributing equally. If the share of expenses is proportionate, it usually depends on how much each person is earning. If one member earns twice what the other earns, that member will also bear twice the level of expenses. This is usually done when the incomes are not in the same broad bracket.
   4. These couples are usually young, often under 35 years of age. As age progresses, DINCs can sometimes become DINCYs and then SITCOMs. We’ll see what these mean ahead.
   
   Pros of being a DINC couple:
    
   1. This is an excellent life stage to build a strong financial base. Also, with dual incomes, the couple can live a lifestyle of their preference, including holidays and hobbies.
   2. Investments can be channelized for the long term. With no immediate short term children related expenses and goals, investments can be channelized into long term, high risk-reward assets such as equity and real estate, with a contingency fund to handle emergencies and debt investments to balance the portfolio.
   What DINCs should watch out for:
    
   1. One thing that DINC families must prepare for is a life changing situation. One member might decide to stop working, or the couple might decide to have a child. In this case, goals will drastically change, incomes and savings will drastically change and all goal-based investments will need to be re-assessed.
   2. There is also sometimes a tendency of DINC families to be careless with expenses. This can be harmful when this couple is nearing retirement and finds that due to lack of planning, the retirement corpus is not sufficient for them to maintain their lifestyle. Changing your lifestyle at retirement age can be very difficult to do.
   3. DINCs must learn to limit spending to all necessities, some comforts and luxuries (Read our article on Financial Planning for Salaried Individuals)
   In a lighter vein, there are also subsets of DINC families, such as DINCWADs (Double Income, No Children, With A Dog) and DINCYs (Double Income, No Children Yet).
   Also in a similar fashion a couple can be a SINC (Single Income, No Children), a SINCY (Single Income, No Children Yet) or a SITCOM (which we will deal with ahead.)
    
2. Nuclear Family: Husband, Wife, one or two children
   
   Features of Nuclear Families:
    
   1. Traditional definitions here include husband and wife living with their children. This is different from the Joint Family system that was largely prevalent in India and is still a method widely followed.
   2. Here one or both parents might be working, one might not be working, or both could be working.
   
   Pros of being a Nuclear Family:
    
   1. One of the often unstated pros of having children is that as you grow older and retire, your children can contribute to managing the household.
   2. There are a number of tax benefits, for example school tuition fees are deductible under Section 80C to the extent of Rs. 1 lakh per annum.
   3. You can make financial gifts to your children and optimize your own taxes at the same time
   4. On a non financial note, studies show that families feel like life is much fuller and more rewarding after they have children.
   
   What a Nuclear Family should watch out for:
    
   1. You must have a Plan to achieve all your life goals. First you need to know what your life goals are, quantify them, and start investing towards them under the guidance of an unbiased financial planner.
   2. Be sure to have at least 6 to 24 months of contingency money set aside and make sure it includes loan EMIs if any.
3. Single Income, Two Children (SITCs)
   
   Features of SITC families:
    
   1. In SITC families, the husband and wife are typically between 35 and 45 years of age.
   2. There are two children and therefore the couple needs to plan for life goals of both children including regular expenses such as school fees, school uniforms and textbooks, day to day expenses, but also including college and university fees and planning for each child’s marriage expenses.
   Pros of being a SITC family:
    
   1. These families tend to be quite careful about expenses. If a financial emergency arises, more often than not a SITC family will be able to use their savings to take them safely through the rough patch.
   2. With one parent working, the other parent gets to stay home and raise the kids. Being a home-maker can be a full time job in itself and in SITC families, this can get the time it needs.
   What SITC families should watch out for:
    
   1. A SITC family should watch out for the same things a nuclear family should watch out for, as it is basically a subset of the nuclear family. But in addition to these there are also the following points:
   2. While insurance is important for all nuclear families, for SITCs it is absolutely vital. The breadwinner must be insured to the correct amount (to know how much insurance you need check out our HLV calculator. You can also read our article to know why insurance is important to your financial health). Along with life insurance for the breadwinners, the other members must also have adequate health insurance.
   3. Investment discipline is key here. The earlier you start investing towards your life goals, the less stressful it will be when they come around.
   
   A subset of the SITC family is the SITCOM family - Single Income, Two Children, Oppressive Mortgage. This family needs to be especially careful with expenses. If the debt is heavier than 35% of monthly income, the breadwinner should seek refinancing options and choose a new loan after refinancing with great care. (For help managing your cash flows, write to us at info@personalfn.com to build you a Financial Plan.)

Conclusion

While knowing what type you are can be fun, there are a few serious messages here which you should remember.

1. Regardless of what your lifestyle choice is, things can change and you should be prepared for this change. Have a contingency fund in place immediately.
 

2. Whatever you choose, there are pros and cons. Know them and make the most of the lifestyle you have.

3. Lastly - there is another type – the GUAVA – Grown Up And Very Affluent. To become a GUAVA, you need to plan ahead. No matter what you start off as, a DINC, a SINC, or a nuclear family, you can become very affluent with the right planning and guidance. To create your financial plan and be Grown Up And Very Affluent, call us at (022) 6136 1200, we’d be happy to help you.

Add Comments

Comments
hostmaster@nic.edu.cn Mar 24, 2012 Dude, right on there brother.

 1