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How to save up for the big purchases?

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  • Bastille
    replied
    It will ensure you get the best possible product at the best possible price. I really have to discipline myself to do this. Patience isn't a virtue I was born with, but I have found that if I take my time and do my due diligence,
    Last edited by Bastille; 01-22-2011, 12:33 AM.

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  • krantcents
    replied
    Originally posted by Coronet View Post
    So I have a question for everyone. The general rule of thumb is to save 20% of your gross income a month, right? I was thinking about how little that truly is in actual numbers for me. My take home after taxes, 401k deductions, medical deductions, etc. is ~$3200/month (I make ~$60k/year). Of that $3200 a month I put $800 straight into a savings account which is about 25% of my take home.

    Even saving $800/month I wonder how I will ever be able to save up a 20% downpayment for a house. It just seems like so much money! I'm thinking about buying a 200-225k house in the future, so my 20% downpayment would be $45,000. If I saved for no other financial goal it would take me about 4.5 years to save for a downpayment. I know other people save for other goals like cars, vacations, college, etc. so that number just seems daunting to me.

    Do most of you guys save more than 20% of your gross income a month or does it take seemingly forever to save up for the big things?
    My savings rate is much more, however my children are grown. I have no debt except for a mortgage, which is small. Everyone is in different circumstances. The key is establishing a savings habit, you can always increase it.

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  • disneysteve
    replied
    Originally posted by scfr View Post
    Wait! I didn't ask that (the quote attributed to me). How did that happen?
    I have no idea. I fixed it.

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  • greenskeeper
    replied
    Originally posted by Joan.of.the.Arch View Post
    It is very striking that 4.5 years seems like a long away goal for a house purchase. Personally, I would expect most people need to save that long, probably longer. Your feeling that 4.5 years is a long time to save for a house might be influenced by the recent years when people could arrange near instant financing with little to no down payment. Those were "disordered" times. Try not to be sad or impatient about having to save. In the long run, it will put you in a more secure place.
    that and people want everything right now, not in the future. Especially young people who see the things their parents have, want them now, and not wait through 30+ years of work to have those things.

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  • scfr
    replied
    Originally posted by disneysteve View Post
    Money needed for a short-term need like a down payment should be kept safe and secure in a money market account or CDs.
    Wait! I didn't ask that (the quote attributed to me). How did that happen?

    Leave a comment:


  • Hector
    replied
    Originally posted by Coronet View Post
    I live in a very expensive place where $150k is just not doable. For a modest 2 bedroom house/condo $200k would be the bare minimum unless I wanted to live in dangerous neighborhoods. I also know that my salary will be jumping $20k in 2-2.5 years.

    Thanks for all the feedback, everyone.
    Good thing that your salary will be jumping 20k in a couple of years.

    For others, I dont think buying a house worth 250k is MUST because 150k is not doable.

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  • Coronet
    replied
    Originally posted by jpg7n16 View Post
    There was an old rule of thumb of "don't buy a house worth more than 2 1/2 times your annual salary"

    That would put you at a $150k home MAX, needing $30k down, which at $800 a month would be just over 3 years.

    $30k is no joke. Neither is buying a house.

    I live in a very expensive place where $150k is just not doable. For a modest 2 bedroom house/condo $200k would be the bare minimum unless I wanted to live in dangerous neighborhoods. I also know that my salary will be jumping $20k in 2-2.5 years.

    Thanks for all the feedback, everyone.

    Leave a comment:


  • disneysteve
    replied
    Originally posted by Hector
    During this period, where do you guys park your money?
    Money needed for a short-term need like a down payment should be kept safe and secure in a money market account or CDs.
    Last edited by disneysteve; 12-26-2010, 06:37 AM.

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  • Hector
    replied
    In most cases its normal that one needs multiple years to have enough for down payment towards house. During this period, where do you guys park your money?

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  • jpg7n16
    replied
    There was an old rule of thumb of "don't buy a house worth more than 2 1/2 times your annual salary"

    That would put you at a $150k home MAX, needing $30k down, which at $800 a month would be just over 3 years.

    $30k is no joke. Neither is buying a house.

    Leave a comment:


  • creditcardfree
    replied
    Originally posted by scfr View Post
    One way to reach your goal sooner would be to set your sights on a slightly less expensive house.
    This was my first thought when I read the post. I personally would try to find a less expensive first home given your income.

    Leave a comment:


  • scfr
    replied
    I agree with what the others have said. It sounds like you are dong very well.
    One way to reach your goal sooner would be to set your sights on a slightly less expensive house.

    Leave a comment:


  • kork13
    replied
    Definitely agree with the rest... I've been saving aggressively toward a home downpayment for about the last 3.5 years now, and only just this month got to my goal of $50k. However, I've been saving between 30%-40% of my gross income for that entire time.

    Just remember, saving is not a race--it's a slow, methodical process that takes time. 4.5 years is a completely reasonable timeframe to save up a home's downpayment. Thinking of it differently, you're saving $10,000/year toward your future house! That's very significant! And if you're not happy with that, you can slowly increase the level of your savings.

    In the end, I wouldn't worry about it... You're saving at least 20% of your gross income including your 401k (I find gross income easier to work with), which is far above what most of the country is doing. Take it slowly, and you're doing just fine.

    Leave a comment:


  • GREENBACK
    replied
    I agree that 4.5 yrs. is a pretty short time. Took me close to ten. Oh, don't forget to save more than the 20% down. If it's your first home you'll need much more for various things.

    Leave a comment:


  • jIM_Ohio
    replied
    I noticed same thing Steve did- if you are saving in 401k (pre tax) then also setting aside 20% of NET pay, you are probably saving close to 30-40% of gross pay total. That is excellent.

    Leave a comment:

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