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Stockpile [money questions]

I'm wondering about two general rules-of-thumb. These are pretty recent concepts for me because up until the current postdoc position I really didn't have the luxury of considering them (see: student loans, non-unionized postdocs, grad school underpayment).

1. What proportion of one's income should one be attempting to sock away into savings, and into what sorts of categories should one consider allocating the sockings? The different places where I have postdoc'd have offered various random flavors of retirement accounts, which I am mostly ignoring for now. I'm currently socking slightly over 10 percent but I wonder if I should do more and scrutinize my frills.

2. How much avocado toast should one forego in order to make a house down payment? (in case you don't understand the reference) In other words, what proportion of a house's price should one have on hand for a down payment, generally speaking?

Two weeks ago, I went over to the house across the street, which had a "for sale" sign up. The asking price made for an interesting thought experiment: if I allocated my entire current salary to house payments and there was no interest involved whatsoever, it would still take 13 years to pay for it. It's a "cozy" 3 bedroom, 1 bath place. Granted, this is in El Cerrito, and we're experiencing another national housing price crescendo.

This entry was originally posted at http://rebeccmeister.dreamwidth.org/1158595.html. Please comment there using OpenID.


( 2 remarks — Remark )
May. 30th, 2017 02:53 am (UTC)
Generally you want 20% for a down payment in order to avoid having to pay extra for mortgage insurance that most lenders would require. I'm also guessing that having that much makes it easier to get a loan and get a better interest rate since you've then demonstrated to the lender that you are able to manage money well enough/are paid well enough to get to that point. And of course bigger down payments = smaller monthly payments and less overall interest to pay.

Do you have an IRA?
May. 30th, 2017 02:58 pm (UTC)
When I was lower income, i would try to sock away 10% into retirement plus another 10% into savings. Now that I'm higher income and have an emergency fund I'm more lackadsical, though I still do 10% into retirement (and get another 10% retirement matching), and put $500/month into the kids' 529s, and I've started putting $100/month into the new-roof fund. I probably should be putting more into regular savings. For down payment, I think it's great if people can have 20% but obviously it depends on where you live if that is possible for most people. I also think a lot of this really requires two incomes. Then there's the college loan factor (we didn't have a lot of that). So what is ideal isn't necessarily going to be realistic.
( 2 remarks — Remark )

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