As humans, we’ve been putting each other into boxes since the beginning of time. And, even though we live in an age when labels are falling out of favour, there is one area where we cannot escape being put into groups with similarly-minded people;
Finance.
There are a variety of acronyms for people at different stages of life and with varying financial priorities. But, where do you fit in and does that change how you should handle your money?
SINK (single income no kids)
SINKS are usually young adults, though it is of course possible to be an older SINK. Having no partner or dependents means that your money is your own and the only person you need to answer to is yourself.
To make the most of this financial freedom, you should be focusing on building capital to use when needed. This will include:
- In an emergency
- Buying a house
You will also need to focus on maintaining a good credit score to buy a house.
Take advantage of workplace pensions to include long-term aims in your immediate plans.
DINKY (double income no kids yet)
With two incomes and no dependents yet, this is the ideal time for couples to start saving for the future and to establish roots before making additions to the family. Working together to create a plan is the key here.
Again, building capital is the key for those with big plans. Focus on increasing your reserves and savings. These will serve two main purposes:
- Protecting you in a financial crisis
- Giving you a good foundation to work with for the big commitments, like buying a house or starting a family.
DINKER (double income no kids, early retirement)
If you are in a relationship where children are not on the agenda but being able to support yourselves without working full time is, then your focus should be on saving and ensuring that you have a reliable income for the rest of your life.
Concentrate on building up your retirement capital and determining what type of lifestyle you want to live when you are no longer working. Then take advantage of all available options, including ISAs, Workplace Pensions and investments to help you to reach your goals.
DINO (double income, no options)
Couples with no emergency savings, no spare income and no financial protection leave themselves, and each other, in danger. If one income should stop suddenly, both parties will suffer the consequences.
Whether it is through accident, illness or death, the loss of an income to a household with no buffer has terrible effects. Therefore, couples in this situation should be focussing on implementing protections, such as:
- Life Insurance
- Critical Illness cover
- Income Protection
- Building an emergency fund in case of unexpected costs
HENRY (high earner, not rich yet)
A high income does not always mean lots of disposable cash. Maybe you are paying off old debts, or it may even be a case of getting too excited and spending it all at once.
There’s nothing wrong with treating yourself every now and then, but it is important to put some aside for the future and use your above-average income to help meet your goals.
To make the most of your circumstances, you may want to consider making a budget and talking to a financial adviser.
SKI (spending kid’s inheritance)
If spending money on your own enjoyment is a higher priority than leaving every penny to future generations, then you might be part of ‘Generation SKI’. There’s no shame in spending your hard-earned money on yourself, but there is a wrong way to do so.
Before you splash out on large expenses, make sure that you have an income in place which will last for the rest of your life. Spending too much, too soon, will leave you in a very uncomfortable position in your later years.
WOOF (well-off older folk)
Well-established in their retirement and used to enjoying the finer things in life, WOOFs are more likely to be living in a home they own, with no outstanding debts and ample capital to both draw an income and have provisions for future generations. If this is you, or potentially your parents or grandparents, the next step is estate planning.
It’s never nice to think about what happens when we die, but it is an important part of managing your retirement finances. If you want to have a say in what happens to the assets you leave behind, then you will need to have a valid will in place.
Whatever stage of life you are at, and whether you fit into one of the above groups, or are carving your own niche, financial advice can help you to be more confident in your decisions, better off in retirement and better equipped to handle the ups and downs that life often throws at us.
To get started, get in touch with Sarah or Bev on 0115 933 8433.
