Post # 1
I read a post recently where a bee was stressed about unexpected housing costs (things that popped up like a broken appliance, etc).
One of the responses was from a bee that said that before you buy a house, you should have an “emergency fund” with enough money to get you through 6 months if one of you should lose your job or something.
I felt that her response was a bit ….. snarky. But more than that, I was shocked to hear this perspective.
My husband and I saved for THREE YEARS just to have enough to put a down payment on a house and furnish it. When we moved in, we had a few hundred bucks in our savings account. And about a year later, there’s only about a thousand. We’d probably need about $30,000 to get us through 6 months of expenses (mortgage, utilities, groceries), and honestly, that figure, to us, would be impossible to ever save. (If you want to live, I mean). Seriously. We’d be living with our parents til we were 60 if we wanted to save that kind of cash!
Further more, I don’t know anyone who DOES have that much in a savings account. None of my friends do, and I know my parents never did.
Granted, I live in a pretty affordable area, and my friends and family are mostly average, middle class citizens with average jobs and salaries, so maybe this is something only the “upperclass” can do but …. just curious to see how common this is.
Post # 3
@dirtylittlesecret: I do feel it’s a great idea to have at least 6 months worth of living expenses saved up somewhere. And that’s for barebones living, because I would expect us to cut internet and cable in dire situations.
Do you have Roth IRAs? Any money that you put into it – your own personal contributions – (not counting the earnings), can be withdrawn at any time without any penalties. To be honest, a good portion of our “emergency fund” lies in our Roth IRA contributions.
But that would call for a DIRE emergency, as in BOTH of us are out of a job and we’ve depleted our checking which is about 4 months of living expenses (after cancelling cable, internet and all unnecessary spending). So that seems pretty unlikely, but it’s there for extreme emergencies. It would not be pulled for a new roof, new furnace, etc.
Not all retirement accounts have that capability, and I would not withdrawal early from any other accounts. I’d wait tables before that happens.
Post # 4
@dirtylittlesecret: Commenting to follow. As a young bee (25) just starting out post graduate school, with a FI who has a ton of student loans and is still in graduate school, and I’m having trouble finding work where he lives, it’s so hard not to stress about this. I’m worried we won’t even have a downpayment let alone an emergency fund. And children? AHHHH.
Post # 5
I mean we’re 20 and 22, just bought a house and have over a year of living expenses saved up. We do live fairly cheaply though. We had over $15K when we first moved in while we were both still students.
Post # 6
I don’t know how to answer. We have investments we could tap into, but we don’t have 6 months just sitting in a savings account. Our LOC makes up a portion of our emergency financial plan.
Post # 7
We just cleared our mortgage, so yeah, our saving will take us well over 6 months of living expenses. Before the mortgage was cleared, our goal was to have 3 months covered in case of emergency – that’s in our shared savings account. If we combine all our savings (retirement fund, investments accounts and savings), we have more than we need for a very long time.
But we are both good at saving money, we live well within our means and our combined salaries is enough to live very comfortably.
Post # 8
I think that 6 month figure is something that most people just like to throw around like you know… you should really have this before doing anything major in life like buy a house or habe a kid” without actually calculating what that would mean. In reality, it’s just not realistic for most people, and most people who do end up losing their jobs, figure it out, without having 6 months worth of their income saved up. They cut corners, get unemployment, are supported by a spouse, etc…
Post # 9
Our goal is six months worth in savings (not in our retirement accts). We are working towards three months worth right now.
Post # 10
One of our bank’s requirements to get a mortgage was to have 6 month’s worth of salary in savings for emergencies. Of course, that doesn’t prevent you from blowing it all the moment they give you the mortgage, but you still had to have it to be approved.
We have savings, but its not 6 month’s worth of both of our salaries.
Post # 11
We are going to be closing on our first house soon, and we won’t have anything close to 6 months saved up at the time of closing. We will be working towards rebuilding our savings once we do close, but I doubt we’ll have 6 months saved up um ever…maybe two would be my short term goal.
However, I work in a field which is extremely secure and it is extremely unlikely that I would ever lose my job. We are buying the house based on my salary only so if my husband were to lose his, we would be ok.
I think this is a personal thing as people have different appetites for risk. Or different types of back-up plans in case something were to go wrong financially.
Post # 12
@adoc86: That sounds way overcautious to me! Does it matter what someone’s salary was? 6 months of living expenses could very easily be much smaller than 6 months of salary.
Post # 13
@MrsN14: if you don’t mind me asking. How were you able to do that? My fiancé and I are the same age and we are trying to do the same thing. I go to school full time and work full time and our combined income is like $52000 and it hard to save up enough money.
Post # 14
Well, we don’t own a house, but yes, we have that much saved if you include our investments.
We have about 3-4 months of expenses in a high-yield savings account–we prefer not to put more than that in there because it’s not really doing much work. So the rest of our money is in our IRAs and our investments. In a disaster scenario where we both lost our jobs and couldn’t find new jobs for, like, years, we could use the money from those places.
Post # 15
- Wedding: August 2013 - Rocky Mountains USA
Yes, but in various retirements funds – so I don’t want to touch them if it’s not absoulutely necessary! In actual savings we never had that much. I don’t think you need to do that before buying a house – sure it’d be nice, but that would postpone home ownership for a LONG time for a lot of people.
Post # 16
We are not homeowners yet but we do have enough saved for a downpayment, we’re just waiting to buy a house because we’re not planning to live in the same area long-term. We also have a 6 month emergency savings account, plus additional retirement accounts we can tap into that would float us for quite awhile if we had an extreme emergency. We don’t make a huge amount of money, we just live far below our means and save a large portion of our income.
IMO, having emergency savings is a prerequisite to buying a house. We built up our emergency savings before our house savings, and would never buy a house without a large cushion. Not least because buying a house often comes with unexpected expenses. Plus, I think home ownership is a luxury, not a necessity as it’s often portrayed. It’s not always a wise investment. We have a toddler and have always rented, even though we could have afforded to buy a house years ago, because we’re not yet in a situation where it would be financially advantageous.