Savings when you’re paying a mortgage

Bsimcha

Thu, Aug 02 2018, 3:34 pm

Depends on how much you can afford.
If you just bought, then as time goes on, mortgage will usually only increase if taxes and insurance increase.
If income increases, can afford more.
What stage you're at makes a huge difference too, if your young, expenses will more than likely increase etc.
Ho much you save is really up to you, if your income is $1000 and bills are $990, do you save the $10 or cut elsewhere to make it 20or even 30? Or figure $10 is not enough, that you'll save when you can afford.
Buying a house is in of itself saving as you build equity that can be cashed in.

jd1212

Thu, Aug 02 2018, 5:18 pm

I'm a financial advisor/life and disability insurance broker and my suggestion to clients is always to start saving something, regardless of how little it is. Saving is a muscle and it's SO easy to let it fall by the wayside once expenses continue to add up.

There will always be something going on in life that gives you an excuse to feel like you can't save (hopefully for happy reasons!) When you start early on the right foot, it always helps.

My suggestion is to have an absolute minimum $ that's automatically deducted to go towards each area, and anything above that is extra. If income increases, so should the amounts. First step is 6 months worth of income (or at least of expenses) for an emergency fund, then for house repairs, retirement (if you have a 401k through work, or by setting up Roth IRAs), and simchas.

Some numbers people in the (non-frum) personal finance world throw around 15-20% of your gross salary- with 10-12% of that towards retirement, as as an "ideal" savings percentage.

On average, it's estimated that 1% of your house value will be spent annually on repairs/maintenance (spread out over time)- so preparing for that is a good priority for homeowners.

For the vast majority of frum families- this 15-20% isn't possible, it's so dependent on tuition costs, cost of living, family size, etc. You can come up with your planned needs over the next however many years in terms of home repairs and estimate simcha costs and divide into $/month for the next X years- that can be a good place to start.

Last edited by jd1212 on Thu, Aug 02 2018, 5:23 pm; edited 2 times in total

unexpected

Fri, Aug 03 2018, 7:57 am

We never saved at all when we had a mortgage. Every extra penny went towards paying down principal on the mortgage and extra expenses that cropped up went on the credit card. It took us 7 years to pay up the mortgage on our house and BH we never had to refinance. We still don’t save much bec BH, lots of expenses. But the house is our safety net...

amother

Mistyrose

Fri, Aug 03 2018, 8:10 am

unexpected wrote:

It's great that you don't have debt, but it's risky to be 100% invested in real estate. Maybe speak to a financial advisor about how to diversify.

amother

Orchid

Fri, Aug 03 2018, 10:26 am

Besides for 6 months I think it is very important to save toward kids weddings and bar mitzvas. Unless your the type were they fund it themselves its very difficult to come up with the extra cash then.

You also need money in case something in the house breaks (big ticket items are expensive - air, heat, water heater, ...) . New houses have insurance and hopefully warranties on appliances. But even then things can go wrong.

I've found direct deposit to be extremely helpful in saving. We just don't have the money to spend.

amother

Puce

Fri, Aug 03 2018, 10:31 am

amother wrote:

It's great that you don't have debt, but it's risky to be 100% invested in real estate. Maybe speak to a financial advisor about how to diversify.

I own my three family house in the center(ish) of Boro Park. If I have extra money it would be great to diversify but for now I can’t think of anything else that will give me a higher return (2 rentals plus tripled in value...)

cookies6

Fri, Aug 03 2018, 11:27 am

unexpected wrote:

Did you pay off the credit card in full each month? I'm asking because in my mind this way doesn't make sense. Why would you work so hard to pay off extra mortgage principal which is charged 4-6% in interest rather than a credit card which is charged 20%?