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two money ratio/percentage questions

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two money ratio/percentage questions

Old 03-13-08, 02:24 AM
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two money ratio/percentage questions

the thread about how much of your income should you be paying to your mortgage each month got me thinking...

1) what percentage of your savings can you/should you put towards the downpayment of a home? eg, if you have $20,000 in savings it would make no sense to put all of it towards a home because youd have $0 left over for savings/emergency account/spending money/monthly bills/etc. i know you are suppose to have 20%+ of the house saved up for but how much of your actual bank account can you put towards the downpayment?

2) what ratio should you have of savings vs retirement account? eg, its a bad idea to have ONLY savings and no retirement and the opposite is also true - having all your money in 401K/IRA/etc and nothing in a liquid form/savings account/checking accounts/etc. is its a good idea to go 50% savings/50% retirement? or more of one than the other? i guess it probably depends on your age too. is there a chart/webpage that gives this info?
Old 03-13-08, 07:58 AM
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I think 3-6 months living expenses in available cash is a good amount. Everything else can be invested in house, market, etc. And once the house is bought, I prefer building up a few grand for "house things." When we needed a new A/C last year, it was great just be able to fork over the cash we had saved.
Old 03-13-08, 08:00 AM
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Also, I think if you start retirement investing at a fairly young age. 15% of your earnings should be plenty for retirement. Everything else can go to other investing, savings, or consumption.
Old 03-13-08, 09:34 AM
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Originally Posted by atari2600
the thread about how much of your income should you be paying to your mortgage each month got me thinking...

1) what percentage of your savings can you/should you put towards the downpayment of a home? eg, if you have $20,000 in savings it would make no sense to put all of it towards a home because youd have $0 left over for savings/emergency account/spending money/monthly bills/etc. i know you are suppose to have 20%+ of the house saved up for but how much of your actual bank account can you put towards the downpayment?

2) what ratio should you have of savings vs retirement account? eg, its a bad idea to have ONLY savings and no retirement and the opposite is also true - having all your money in 401K/IRA/etc and nothing in a liquid form/savings account/checking accounts/etc. is its a good idea to go 50% savings/50% retirement? or more of one than the other? i guess it probably depends on your age too. is there a chart/webpage that gives this info?
Tough to answer specifically. To avoid PMI you should put down 20% but I would not liquidate all of my ready cash just to avoid PMI. You need to take a serious look at all your cash flow for 6 mos. to a year to get an idea of how long it would take you to restore cash.

Retirement is also a tough question. Basically you should be taking advantage of any 401K that is available to you because of any matching funds from your employer. Beyond that you can start to save other money that is DIFFERENT from your regular emergency cash stash which should be anywhere from 3 to 6 months of net income.
Old 03-13-08, 10:07 AM
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Just remember to spend the money once you retire.

I'm tired of retirees stealing the toilet paper out of the restrooms.

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