How much cash do you save each month?

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jebmke
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Re: How much cash do you save each month?

Post by jebmke »

maddogio wrote: Tue Jul 09, 2024 4:29 pm I'm not sure what you mean by this.
jebmke wrote: Tue Jul 09, 2024 11:39 am
PNWpilot wrote: Tue Jul 09, 2024 11:33 am
jebmke wrote: Tue Jul 09, 2024 11:19 am The thread is confusing because it seems to be a mix of "how much to save" and "holding cash." Those are two different objectives.
Sorry for the confusion. I'm trying to get advice on how much "extra" I should save beyond retirement savings. I calculate this as leftover cash at the end of each month. I understand not many people have this type of leftover, but I'm curious if I should be aiming for a certain % of savings beyond retirement each month.
OK; in that case, I will change my answer. What we did is identify up front buckets of income that went to investing. Everything else was fair game. Some of it went to retirement accounts but there was additional that went to our taxable investing.
When you discover that you are riding a dead horse, the best strategy is to dismount.
maddogio
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Re: How much cash do you save each month?

Post by maddogio »

Thanks. That clarifies.
SubPar
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Re: How much cash do you save each month?

Post by SubPar »

After maxing our employer-sponsored retirement/HSA accounts, paying monthly expenses, etc., we auto-transfer $x,xxx to taxable, $x,xxx to DD's 529, and then have $x,xxx cash left over that's swept into the HYSA on a monthly basis. That HYSA balance either builds up to a point where we'll make a chunky contribution to taxable, or we spend it on something else (e.g., a home improvement project). We keep a healthy emergency fund, so this HYSA cash is separate from that kitty.
MathWizard
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Re: How much cash do you save each month?

Post by MathWizard »

The goal was to enjoy ourselves with family, and save at a rate where we could at least replace our lifestyle in retirement.

Early in my career , I was saving 15% in tax deferred while paying off student loans.

My strategy was to save 1/2 of (net) raises. This started out really small, but grew to allow us to save enough for a down payment.

After buying a fixer upper house (with 20% down), we started maxing Roths and using the rest for repairs, mostly just materials as we supplied the labor.

We paid off the house in 17 years vs. 30.

As we paid things off (student loans, mortgage) we put that money toward savings.

By the end we were saving over 50% of gross pay.
Jeepergeo
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Re: How much cash do you save each month?

Post by Jeepergeo »

PNWpilot wrote: Tue Jul 09, 2024 10:16 am Spouse and I fully fund two Roth IRA's and two Traditional 401Ks. In total, we contribute 16% of our income to retirement accounts.

Emergency fund contains 6-months expenses (VMFXX). We cash flow all fixed, and variable, expenses with our biweekly paychecks.

Aside from retirement savings, we save a variable amount of cash each month. Depending on circumstances, this ranges from 0-30% of our monthly take-home pay. I sweep the leftover cash into a taxable account at the end of each month.

Question:
- Beyond retirement savings, what is an ideal percentage of take-home pay (cash) to be saved each month?

It really depends. Are you in your 20s or 30s? Or in your 50s? Do you have kids? Often, as you get older and grow into your house payment and get kids out of college, saving capability can increase dramatically. In my 20s, it was ~12-15%, decreased to ~10% in 30s due to kids and mortgage, back to ~15% in my 40s, to ~25% in my 50s, and ~30-50% in 60s, though this year it has been 100% YTD. Of course, actual dollars per year varied with increases in salary nearly every year.

Edited to add: I feel like we are "overspending" when we don't save a huge chunk of cash each month. Is this a correct feeling?
Jeepergeo
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Re: How much cash do you save each month?

Post by Jeepergeo »

PNWpilot wrote: Tue Jul 09, 2024 10:16 am Spouse and I fully fund two Roth IRA's and two Traditional 401Ks. In total, we contribute 16% of our income to retirement accounts.

Emergency fund contains 6-months expenses (VMFXX). We cash flow all fixed, and variable, expenses with our biweekly paychecks.

Aside from retirement savings, we save a variable amount of cash each month. Depending on circumstances, this ranges from 0-30% of our monthly take-home pay. I sweep the leftover cash into a taxable account at the end of each month.

Question:
- Beyond retirement savings, what is an ideal percentage of take-home pay (cash) to be saved each month?

It really depends. Are you in your 20s or 30s? Or in your 50s? Do you have kids? Often, as you get older and grow into your house payment and get kids out of college, saving capability can increase dramatically. In my 20s, it was ~12-15%, decreased to ~10% in 30s due to kids and mortgage, back to ~15% in my 40s, to ~25% in my 50s, and ~30-50% in 60s, though this year it has been 100% YTD. Of course, actual dollars per year varied with increases in salary nearly every year.

Edited to add: I feel like we are "overspending" when we don't save a huge chunk of cash each month. Is this a correct feeling?
txgolfer_19
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Re: How much cash do you save each month?

Post by txgolfer_19 »

We are in the red every month except for bonus month. Depending on interest rates on cash vs debt, I either use a securities backed line of credit during the year that I pay off with bonus, or I hold some of the bonus in cash to fund the monthly shortfalls.
Dottie57
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Re: How much cash do you save each month?

Post by Dottie57 »

I don’t save in retirement. I just try to be very judicious in spending my money.
RetireWhen
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Re: How much cash do you save each month?

Post by RetireWhen »

KlangFool wrote: Tue Jul 09, 2024 11:14 am OP,

I believe in saving 1 year of expense every year. Aka, save as much as you spend.

The saving is automated by send the amount to be saved into the taxable brokerage, 401K, HSA from the paycheck.

KlangFool
KlangFool,

No disrespect or anything. I'm just wondering if I'm reading your comment correctly. You are saying each and every year you spend 50% of your income and save 50% of your income. And you do this year after year?

If this is true, and I am not judging, why do you save so much? Is it that you have such a large income that you can spend freely and don't need to or want to spend more? Or is it more from the saving side that you keep your spending to a minimum so you can save as much as possible? If the latter, why are you saving so much?

Again, I'm not judging, but rather just wondering. To be upfront I believe in a balance of spending and saving based on obligations, needs, future needs/wants while also balancing enjoyment of life that involves both today's enjoyments and tomorrows. By enjoyments I mean items, experiences, gifts to others, etc. that are not needed to survive/live.

I will also be upfront and say that you and I have politely disagreed in other threads concerning savings rates.

And once again I can't stress enough, I am not looking to argue, but rather I find your statement of saving 50% of income intriguing and I would like to understand more.
bltn
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Re: How much cash do you save each month?

Post by bltn »

When I was working, I saved with no particular end point in mind. From my monthly paycheck, I set aside 30-40% of the take home pay in savings at the first of each month. The rest of the money we were free to spend or accumulate in our checking accounts as seemed appropriate. Lumpy expenses were covered by accumulated checking account money and savings in our money market if needed. At the end of the year we had a sizable bonus from which all 401k contributions were taken. We made the maximum contributions to our 401k.
The most important thing we did was take our savings out of our monthly check before we spent our money.
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8foot7
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Re: How much cash do you save each month?

Post by 8foot7 »

During summers, we actually operate at a modest but noticeable loss each month due to the high cost of weekly summer camps. (4 kids - 15, 8, 3.5yo twins). We are generally able to cash flow most of this through the strategic use of grace period float on credit cards although sometimes we'll draw down the emergency fund. From September through May we have a small surplus of under $1,000. I have come to live with this as the season of life we are in. On the plus side, it is good practice for paying for college for the older kid, as we pay far more in childcare now than we expect his education to cost even at an expensive private school.
bltn
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Re: How much cash do you save each month?

Post by bltn »

RetireWhen wrote: Wed Jul 10, 2024 8:14 am
KlangFool wrote: Tue Jul 09, 2024 11:14 am OP,

I believe in saving 1 year of expense every year. Aka, save as much as you spend.

The saving is automated by send the amount to be saved into the taxable brokerage, 401K, HSA from the paycheck.

KlangFool
KlangFool,

No disrespect or anything. I'm just wondering if I'm reading your comment correctly. You are saying each and every year you spend 50% of your income and save 50% of your income. And you do this year after year?

If this is true, and I am not judging, why do you save so much? Is it that you have such a large income that you can spend freely and don't need to or want to spend more? Or is it more from the saving side that you keep your spending to a minimum so you can save as much as possible? If the latter, why are you saving so much?

Again, I'm not judging, but rather just wondering. To be upfront I believe in a balance of spending and saving based on obligations, needs, future needs/wants while also balancing enjoyment of life that involves both today's enjoyments and tomorrows. By enjoyments I mean items, experiences, gifts to others, etc. that are not needed to survive/live.

I will also be upfront and say that you and I have politely disagreed in other threads concerning savings rates.

And once again I can't stress enough, I am not looking to argue, but rather I find your statement of saving 50% of income intriguing and I would like to understand more.
To some people, finacial security is an important reason to save. And to some people, spending beyond a certain level doesn t provide additional happiness.
Klang Fool apparently was laid off twice in his career for more than a year. Having the financial security to withstand that kind of bump in his career was very important to him. I happen to think that money doesn t provide us with happiness due to increased consumerism so much as it provides an increased degree of control of ones life and well being. To somepeople that means FIRE. To me it means being able to withstand any financial needs or mishaps that come our way..
RetireWhen
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Re: How much cash do you save each month?

Post by RetireWhen »

PersonalFinanceJam wrote: Tue Jul 09, 2024 11:40 am
PNWpilot wrote: Tue Jul 09, 2024 10:16 am ...
Question:
- Beyond retirement savings, what is an ideal percentage of take-home pay (cash) to be saved each month?

Edited to add: I feel like we are "overspending" when we don't save a huge chunk of cash each month. Is this a correct feeling?
As others have said I don't believe there is an ideal, there's only what is right for you. Your feeling of overspending when not having a large chunk of savings at the end of each month resonates with my younger self and was something I felt I needed to work on. I don't particularly think it's a correct feeling given your situation of apparently decently high income. I think it leads to too many what if scenarios which can make you miss out on life if you are not careful because you always need to have money saved at the end of the month for "something".

We set a decently high savings goal of about 30%. This pretty much automatically happens and goes in at a set asset allocation of the total portfolio so not necessarily cash. Bonus/RSU payouts mean there is a little manual effort here but not too much. We have sinking funds for what we consider the knowable lumpy expenses. This is pretty much the stuff that happens like clock work every year such as taxes and auto insurance payments. The reset is available for spending. We are natural savers which it sounds like you are too so there is always some slush available to pay for vacations and other random lumpy expenses. If we truly get in a bind with a truly large unexpected bill then we can go to the portfolio, but so far that hasn't happened.

I became a much more enjoyable person once I let go of the constant need to save more and could look at it and say it's all taken care of. The reset is available to enjoy.

Your last statement rang true with me. Once I felt comfortable with establishing what our future needs/goals were and the amount for those needs/goals, I too became a much more enjoyable person, and I would go as far as to say it also improved my relationship with my wife. The extra is available to enjoy, which isn't to say we go out of our way to find ways to spend it.
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Sandtrap
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Re: How much cash do you save each month?

Post by Sandtrap »

PNWpilot wrote: Tue Jul 09, 2024 10:16 am Spouse and I fully fund two Roth IRA's and two Traditional 401Ks. In total, we contribute 16% of our income to retirement accounts.

Emergency fund contains 6-months expenses (VMFXX). We cash flow all fixed, and variable, expenses with our biweekly paychecks.

Aside from retirement savings, we save a variable amount of cash each month. Depending on circumstances, this ranges from 0-30% of our monthly take-home pay. I sweep the leftover cash into a taxable account at the end of each month.

Question:
- Beyond retirement savings, what is an ideal percentage of take-home pay (cash) to be saved each month?

Edited to add: I feel like we are "overspending" when we don't save a huge chunk of cash each month. Is this a correct feeling?
DW had her own business, I had 3. Not employees with paychecks so we did not have the option of budgeting to save.
We saved every extra dollar and shopped at the thrift stores for many years.

Perhaps cultural: Save every dime, take nothing for granted, life happens.
j
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RetireWhen
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Re: How much cash do you save each month?

Post by RetireWhen »

maddogio wrote: Tue Jul 09, 2024 4:06 pm
sailaway wrote: Tue Jul 09, 2024 3:41 pm
maddogio wrote: Tue Jul 09, 2024 3:27 pm This is a timely question for us. As state employees, we have more tax advantaged space than we have income. This includes two defined contribution retirement plans, plus 403b and 457 for each of us, Roth IRAs, and HSA. So the advice to fill all available tax advantaged space before saving in taxable doesn't exactly work for us. We need to have some cash for cars, home repairs, vacations and the like. Right now, we save in tax advantaged retirement accounts 75 cents for every dollar we spend. We'll certainly have to back off on that when we cash flow our kids' college expenses. I've never really been confident that I'm saving (and holding) the right amount of cash.
Do you count your Roth IRA contributions as available funds during this period?
I consider those funds to be behind glass to be broken only in case of emergency, like job loss. I'd not use them to fund a vacation. It's hard for me to imagine using them to pay for educational expenses for the kids.
I like that analogy "...those funds to be behind glass to be broken only in case of emergency." That's sort of how I look at some of our funds. I'll use that with my 20 year old as we discuss her own financial plans for the future.
Harmanic
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Re: How much cash do you save each month?

Post by Harmanic »

Enough to cover monthly bills goes to checking. Another 3-6 months expenses into high yield savings. Most people call this emergency savings, but it is just to cover lumpy expenses without having to sell investments, mostly home and vehicle related. My true emergency fund is my ibonds.
The question isn't at what age I want to retire, it's at what income. | - George Foreman
jadedfalcons
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Re: How much cash do you save each month?

Post by jadedfalcons »

Just whatever's left after I

- contribute 35% of my income to my portfolio
- contribute 2.5% of my income to ibonds
- contribute 10.5% of my income to a fund earmarked for buying a new car or potentially upgrading to a more expensive house
- pay the bills

After all that, my cash reserves only tend to grow by a few hundred a month, and by the time I buy the occasional new toy or fixtures to remodel my house, it stays largely flat.
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bd7
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Re: How much cash do you save each month?

Post by bd7 »

PNWpilot wrote: Tue Jul 09, 2024 10:16 am Question:
- Beyond retirement savings, what is an ideal percentage of take-home pay (cash) to be saved each month?
The correct answer IMO is any number greater than zero. If you can max out your appropriate retirement funds and still have cash left over after expenses, then you are in the financial happy zone.

In our case that number happens to be $400--after maxing out the 403(b), 457(b), 2 HSA, 2 Roth IRA (all with 55+ catchups) and $20k to I-Bonds.
RetireWhen
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Re: How much cash do you save each month?

Post by RetireWhen »

bltn wrote: Wed Jul 10, 2024 8:43 am
RetireWhen wrote: Wed Jul 10, 2024 8:14 am
KlangFool wrote: Tue Jul 09, 2024 11:14 am OP,

I believe in saving 1 year of expense every year. Aka, save as much as you spend.

The saving is automated by send the amount to be saved into the taxable brokerage, 401K, HSA from the paycheck.

KlangFool
KlangFool,

No disrespect or anything. I'm just wondering if I'm reading your comment correctly. You are saying each and every year you spend 50% of your income and save 50% of your income. And you do this year after year?

If this is true, and I am not judging, why do you save so much? Is it that you have such a large income that you can spend freely and don't need to or want to spend more? Or is it more from the saving side that you keep your spending to a minimum so you can save as much as possible? If the latter, why are you saving so much?

Again, I'm not judging, but rather just wondering. To be upfront I believe in a balance of spending and saving based on obligations, needs, future needs/wants while also balancing enjoyment of life that involves both today's enjoyments and tomorrows. By enjoyments I mean items, experiences, gifts to others, etc. that are not needed to survive/live.

I will also be upfront and say that you and I have politely disagreed in other threads concerning savings rates.

And once again I can't stress enough, I am not looking to argue, but rather I find your statement of saving 50% of income intriguing and I would like to understand more.
To some people, finacial security is an important reason to save. And to some people, spending beyond a certain level doesn t provide additional happiness.
Klang Fool apparently was laid off twice in his career for more than a year. Having the financial security to withstand that kind of bump in his career was very important to him. I happen to think that money doesn t provide us with happiness due to increased consumerism so much as it provides an increased degree of control of ones life and well being. To somepeople that means FIRE. To me it means being able to withstand any financial needs or mishaps that come our way..
I can appreciate the impact of losing income for an extended period of time. My wife's business was completely shutdown for two years due to Covid and we use our emergency savings account to help get by, with other steps too. So, I understand saving for items like that. I also appreciate that for some, saving and having a portfolio a certain size brings them comfort and happiness. I also respect others who do spend and find happiness from that. Spending extra money does not solely mean consumerism, as it can entail donations to organizations, gifts (and not soley material gifts) to family and friends or numerous other things. Also, consumerism itself does not necessarily equate to control or damage to well being. Consumerism such as purchasing a gym membership can aide to one's well-being or perhaps the purchase of gift of a spa day for a loved one to who has been working hard and could use some relaxation. Uncontrolled consumerism and the consumption just to consume, I will agree can be controlling and is not good for one's well being. The level and type of consumerism needs to be conveyed before it can be determined to be bad or not.
KlangFool
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Re: How much cash do you save each month?

Post by KlangFool »

RetireWhen wrote: Wed Jul 10, 2024 8:14 am
KlangFool wrote: Tue Jul 09, 2024 11:14 am OP,

I believe in saving 1 year of expense every year. Aka, save as much as you spend.

The saving is automated by send the amount to be saved into the taxable brokerage, 401K, HSA from the paycheck.

KlangFool
KlangFool,

No disrespect or anything. I'm just wondering if I'm reading your comment correctly. You are saying each and every year you spend 50% of your income and save 50% of your income. And you do this year after year?
RetireWhen,

A) Gross Income = Annual Expense + Annual Savings/Investment + Taxes

I save 1 year of expense. Taxes is not part of my expense.

B) I come from a culture with an average gross saving rate of 30+%. So, I do not understand why saving less than 5% of gross income makes any sense to me. Vice versa, you cannot understand why saving more makes sense to you.

C) If someone earn 150K per year but choose to live like someone earning 100K per year, the person can save 50K per year.

KlangFool
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KlangFool
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Re: How much cash do you save each month?

Post by KlangFool »

RetireWhen wrote: Wed Jul 10, 2024 8:14 am
KlangFool wrote: Tue Jul 09, 2024 11:14 am OP,

I believe in saving 1 year of expense every year. Aka, save as much as you spend.

The saving is automated by send the amount to be saved into the taxable brokerage, 401K, HSA from the paycheck.

KlangFool
KlangFool,

No disrespect or anything. I'm just wondering if I'm reading your comment correctly. You are saying each and every year you spend 50% of your income and save 50% of your income. And you do this year after year?

If this is true, and I am not judging, why do you save so much? Is it that you have such a large income that you can spend freely and don't need to or want to spend more? Or is it more from the saving side that you keep your spending to a minimum so you can save as much as possible? If the latter, why are you saving so much?
RetireWhen,

I save/spend 50K to 60K per year. I buy less houses than my income peers. I only buy my house when it was significantly cheaper than renting. Hence, besides housing, I spend as much as my income peers.

So, I am not frugal. I only buy new cars and I eat out regularly. The only key difference is the house.

KlangFool
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smitcat
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Re: How much cash do you save each month?

Post by smitcat »

RetireWhen wrote: Wed Jul 10, 2024 8:14 am
KlangFool wrote: Tue Jul 09, 2024 11:14 am OP,

I believe in saving 1 year of expense every year. Aka, save as much as you spend.

The saving is automated by send the amount to be saved into the taxable brokerage, 401K, HSA from the paycheck.

KlangFool
KlangFool,

No disrespect or anything. I'm just wondering if I'm reading your comment correctly. You are saying each and every year you spend 50% of your income and save 50% of your income. And you do this year after year?

If this is true, and I am not judging, why do you save so much? Is it that you have such a large income that you can spend freely and don't need to or want to spend more? Or is it more from the saving side that you keep your spending to a minimum so you can save as much as possible? If the latter, why are you saving so much?

Again, I'm not judging, but rather just wondering. To be upfront I believe in a balance of spending and saving based on obligations, needs, future needs/wants while also balancing enjoyment of life that involves both today's enjoyments and tomorrows. By enjoyments I mean items, experiences, gifts to others, etc. that are not needed to survive/live.

I will also be upfront and say that you and I have politely disagreed in other threads concerning savings rates.

And once again I can't stress enough, I am not looking to argue, but rather I find your statement of saving 50% of income intriguing and I would like to understand more.
Saving 50% of income will allow you to retire early – much earlier than most people.
If you save 50% of your income and are not retired much earlier ...then it would be best to review your goals for savings
Besides expenses savings ratios are greatly affected by things like: savings accounts available, pensions available, number of wage earners, deferred comp, etc.
Savings at ratio of 50% of income will only work out for folks in a specific range of income – those folks that have lower earnings, as well as those folks that have higher earnings can easily be outside that arbitrary 50% savings ratio.

“To be upfront I believe in a balance of spending and saving based on obligations, needs, future needs/wants while also balancing enjoyment of life that involves both today's enjoyments and tomorrows”
Agreed – we have found that a balanced approach has given us and the happy folks we know the best approach.

“If the latter, why are you saving so much?”
The only reason to save is to eventually spend – savings without a plan to spend are illogical (spend = yourself, charity, heirs, etc)
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bd7
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Re: How much cash do you save each month?

Post by bd7 »

KlangFool wrote: Wed Jul 10, 2024 10:11 am So, I am not frugal. I only buy new cars and I eat out regularly. The only key difference is the house.
If I buy a nicer house but drive old cars that I maintain myself and eat mostly home-cooked meals made in our nice kitchen with groceries from Aldi, you'd say that I was "house poor".

Granted, current conditions make your position seem more reasonable, but I suspect you'd have said the same thing when we bought our house over a decade ago. At the time PITI was more than 25% of our gross income and 35% more than our rent (on a similar house) and that was after putting the majority of our available cash down or toward improvements.
KlangFool
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Re: How much cash do you save each month?

Post by KlangFool »

bd7 wrote: Wed Jul 10, 2024 10:39 am
KlangFool wrote: Wed Jul 10, 2024 10:11 am So, I am not frugal. I only buy new cars and I eat out regularly. The only key difference is the house.
If I buy a nicer house but drive old cars that I maintain myself and eat mostly home-cooked meals made in our nice kitchen with groceries from Aldi, you'd say that I was "house poor".

Granted, current conditions make your position seem more reasonable, but I suspect you'd have said the same thing when we bought our house over a decade ago. At the time PITI was more than 25% of our gross income and 35% more than our rent (on a similar house) and that was after putting the majority of our available cash down or toward improvements.
bd7,

You are a lucky person. You did not face a bad sequence of events. Many of my peers that overstretched on their housing was wiped out in the Telecom bust. Millions were laid off from that industry over that stretch of time. Some were permanently unemployed or under-employed. They never recovered.

KlangFool
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LittleMaggieMae
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Re: How much cash do you save each month?

Post by LittleMaggieMae »

PNWpilot wrote: Tue Jul 09, 2024 10:16 am Question:
- Beyond retirement savings, what is an ideal percentage of take-home pay (cash) to be saved each month?

Edited to add: I feel like we are "overspending" when we don't save a huge chunk of cash each month. Is this a correct feeling?
"retirement savings" and "savings" are loaded words - they mean different things to different people.

Maxing the available tax advantaged accounts may not be enough "retirement savings" - as it's really all about what you expect your expenses to be in retirement. I imagine those with bigger incomes during their career need to save move as they will most likely have bigger expenses in retirement. (bigger incomes usually mean having higher "fixed" expenses - a bigger house, nicer car, nicer clothes, nicer vacations, more entertaining, nicer stuff that gets replaced often.)

I don't really save outside of tax advantaged accounts for retirement. my income allows me to contribute the maximum to the accounts (and I need to do so - as I didn't really pay attention to retirement savings until I was in my late 30's - so the 15 years of saving 8% of my income wasn't going to get me to a 'comfortable' retirement OR allow me to NOT have to work until 65 or worse my FRA of 67.)

My regular 'savings' are mostly money I am saving to spend (sinking funds) - I have a lot of large lumpy expenses every year. Also, I cannot cash flow a vacation or season tickets or a new car. I cannot cash flow "impulse" buying over $200 a month. I don't have enough income.

All that said. If you are have more money than you know what to do with - perhaps you should look at what you 'value' and spend accordingly. Sure it's nice to be able to buy lots and lots of stuff (that perhaps you quickly loose interest in) or chase experiences (and are always looking for the next thrill). having lots of money lets you do that. And it's ok to do that if that is what you 'value'. If you are spending because it's what you thought you should spend money on... maybe it's time for some introspection. When you have more money than you need - you need to reassess your how you view money and what you "value". You need to know what's "good enough" or "enough" for YOU.
Gecko10x
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Re: How much cash do you save each month?

Post by Gecko10x »

It sounds like what you're getting at is how to manage and target the correct amount for what some people would call sinking funds, or lumpy expenses?

We have always budgeted, so we manage this with sinking funds with various buckets like home maintenance, auto repair, next car fund, medical, etc. I used to target the monthly savings goal for each bucket via an average expense estimate (how much was spent last year / 12, or how often will the car be replaced and divide the typical cost by that many number of months). I have recently refined this a bit for some buckets to have a defined cap that is 2x the annual savings target. For example, if medical expenses are $6k/year on average, then the monthly savings target is $500, with a cap of $12k in that bucket.

If you're not a budgeter, the other way to do this would be to run the exercise above, add all the buckets together and make that your target cash buffer.
RetireWhen
Posts: 108
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Re: How much cash do you save each month?

Post by RetireWhen »

Gecko10x wrote: Wed Jul 10, 2024 12:42 pm It sounds like what you're getting at is how to manage and target the correct amount for what some people would call sinking funds, or lumpy expenses?

We have always budgeted, so we manage this with sinking funds with various buckets like home maintenance, auto repair, next car fund, medical, etc. I used to target the monthly savings goal for each bucket via an average expense estimate (how much was spent last year / 12, or how often will the car be replaced and divide the typical cost by that many number of months). I have recently refined this a bit for some buckets to have a defined cap that is 2x the annual savings target. For example, if medical expenses are $6k/year on average, then the monthly savings target is $500, with a cap of $12k in that bucket.

If you're not a budgeter, the other way to do this would be to run the exercise above, add all the buckets together and make that your target cash buffer.
Interesting. I do the same as you with sinking funds or long-term expenses (not monthly) such as car repair/maintenance, homeowners insurance, auto insurance, property taxes, Christmas gifts, etc. Things that happen annually or bi-annually or something like that. Once a year I figure out what the last 12 months have averaged and then put that aside in the account with a small inflation factor. Then when the property taxes come due in July like they just did, I know I have that money set aside. If the car expenses are more for some reason I'll throw a few more dollars in. If the account becomes highly funded because expenses have been lower, I'll move a portion of the overfunded amount out to something else. I don't consider this savings as they're living expenses just like food and shelter, they just occur on a different frequency.

Funny thing, my 20 year old college daughter was explaining to her mother and myself how she budgets her money, and she uses a similar approach even though I don't recall ever teaching her this approach. I was smiling and my wife said to me "Oh you're so proud, aren't you?" Yep!!!
howard71
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Re: How much cash do you save each month?

Post by howard71 »

2-3k/month if you just count what we save out of my wife's paychecks and my SS check.

5-6k counting all savings (wife's 401k, HSA, etc).
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bd7
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Re: How much cash do you save each month?

Post by bd7 »

KlangFool wrote: Wed Jul 10, 2024 11:23 am You are a lucky person. You did not face a bad sequence of events. Many of my peers that overstretched on their housing was wiped out in the Telecom bust. Millions were laid off from that industry over that stretch of time. Some were permanently unemployed or under-employed. They never recovered.
Lucky in some ways, but actually not in this regard. Due to some medical and other issues, things did not go at all as planned for us financially--and the house worked out just fine anyway, resulting in us meeting our 10-year goals in about 15 years instead. I certainly agree on the not overstretching part, but there's a hidden trap in my scenario and it is unstated below-market rent. I said that our PITI was 35% more than what we were paying in rent, but what I didn't say was that the rent was significantly below market and the landlord wanted to sell within a year. Our PITI on a 15-year mortgage was probably 10-15% over market rents back then. So in my view, it was a no-brainer at the time--and that's been tested and proven correct despite having $1M less gross income than we planned over that time. Instead of renting or buying a lot less house in a worse neighborhood, we scrimped (relatively) on cars, vacations and entertainment.

Below-market but non-controlled rent can be a huge trap for the unwary. Someone I know was renting an owner-occupied duplex in a LCOL area for some time without significant rent increases and ended up paying about 1/3 to 1/2 of the going rate for similar sized and placed homes. Despite high income for a while, they passed on opportunities to buy homes until the landlord started jacking up their rent very rapidly. Out of options they purchased a house fairly recently and now are stuck paying 3X their previous rent on a 30-year mortgage. Had they moved a few years earlier, they could have probably purchased a similar house and had a PITI of $1200-1400 on a 30-year or $1800 on a 15-year--which would have been a lot more than rent, but that's the trap.
Gecko10x
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Re: How much cash do you save each month?

Post by Gecko10x »

RetireWhen wrote: Wed Jul 10, 2024 1:57 pm
Gecko10x wrote: Wed Jul 10, 2024 12:42 pm It sounds like what you're getting at is how to manage and target the correct amount for what some people would call sinking funds, or lumpy expenses?

We have always budgeted, so we manage this with sinking funds with various buckets like home maintenance, auto repair, next car fund, medical, etc. I used to target the monthly savings goal for each bucket via an average expense estimate (how much was spent last year / 12, or how often will the car be replaced and divide the typical cost by that many number of months). I have recently refined this a bit for some buckets to have a defined cap that is 2x the annual savings target. For example, if medical expenses are $6k/year on average, then the monthly savings target is $500, with a cap of $12k in that bucket.

If you're not a budgeter, the other way to do this would be to run the exercise above, add all the buckets together and make that your target cash buffer.
Interesting. I do the same as you with sinking funds or long-term expenses (not monthly) such as car repair/maintenance, homeowners insurance, auto insurance, property taxes, Christmas gifts, etc. Things that happen annually or bi-annually or something like that. Once a year I figure out what the last 12 months have averaged and then put that aside in the account with a small inflation factor. Then when the property taxes come due in July like they just did, I know I have that money set aside. If the car expenses are more for some reason I'll throw a few more dollars in. If the account becomes highly funded because expenses have been lower, I'll move a portion of the overfunded amount out to something else. I don't consider this savings as they're living expenses just like food and shelter, they just occur on a different frequency.

Funny thing, my 20 year old college daughter was explaining to her mother and myself how she budgets her money, and she uses a similar approach even though I don't recall ever teaching her this approach. I was smiling and my wife said to me "Oh you're so proud, aren't you?" Yep!!!
Nice!

I suppose I could have been more clear; the reason I added the cap at 2x the target is because I was previously capping at the target, but then if you have a large expense that uses all or most of the bucket you're left with a very low bucket for the next several months. This happened to us last year after both large moving expenses and large medical expenses left us with almost no buffer at all and I was not very comfortable with that situation. Ultimately it's just "bigger buffer" but I wanted a way to quantify it instead of just waving my hands around :happy
SnowBog
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Re: How much cash do you save each month?

Post by SnowBog »

Gecko10x wrote: Wed Jul 10, 2024 3:28 pm
RetireWhen wrote: Wed Jul 10, 2024 1:57 pm
Gecko10x wrote: Wed Jul 10, 2024 12:42 pm It sounds like what you're getting at is how to manage and target the correct amount for what some people would call sinking funds, or lumpy expenses?

We have always budgeted, so we manage this with sinking funds with various buckets like home maintenance, auto repair, next car fund, medical, etc. I used to target the monthly savings goal for each bucket via an average expense estimate (how much was spent last year / 12, or how often will the car be replaced and divide the typical cost by that many number of months). I have recently refined this a bit for some buckets to have a defined cap that is 2x the annual savings target. For example, if medical expenses are $6k/year on average, then the monthly savings target is $500, with a cap of $12k in that bucket.

If you're not a budgeter, the other way to do this would be to run the exercise above, add all the buckets together and make that your target cash buffer.
Interesting. I do the same as you with sinking funds or long-term expenses (not monthly) such as car repair/maintenance, homeowners insurance, auto insurance, property taxes, Christmas gifts, etc. Things that happen annually or bi-annually or something like that. Once a year I figure out what the last 12 months have averaged and then put that aside in the account with a small inflation factor. Then when the property taxes come due in July like they just did, I know I have that money set aside. If the car expenses are more for some reason I'll throw a few more dollars in. If the account becomes highly funded because expenses have been lower, I'll move a portion of the overfunded amount out to something else. I don't consider this savings as they're living expenses just like food and shelter, they just occur on a different frequency.

Funny thing, my 20 year old college daughter was explaining to her mother and myself how she budgets her money, and she uses a similar approach even though I don't recall ever teaching her this approach. I was smiling and my wife said to me "Oh you're so proud, aren't you?" Yep!!!
Nice!

I suppose I could have been more clear; the reason I added the cap at 2x the target is because I was previously capping at the target, but then if you have a large expense that uses all or most of the bucket you're left with a very low bucket for the next several months. This happened to us last year after both large moving expenses and large medical expenses left us with almost no buffer at all and I was not very comfortable with that situation. Ultimately it's just "bigger buffer" but I wanted a way to quantify it instead of just waving my hands around :happy
You both have far more precision than I use... But I guess I do something similar...

For me my biggest variable is taxes, as a large portion of our income is variable as well. I also have a weird component to my income that some is paid "in advance", and in theory could be "owed back" if I don't hit certain milestones/metrics. Hasn't happened yet - but I plan as though it could.

After many years, I know an average of how much this varies - and keep that as my "baseline" amount of cash. Throughout the year I grow our cash pile, addressing both "advances" that show up and potentially taxes owed (I do make quarterly payments to stay within safe harbor). If all goes according to "plan", that money gets invested in January to frontload our HSA, IRA's, 529, Savings Bonds, etc. If something isn't according to "plan", it covers that difference, and I'll try to fund whatever I couldn't throughout the rest of the year.

This ends up covering "lumpy" expenses as well. As an example, spouse had an elective (not medically necessary - so not covered by insurance) medical procedure this year, funded from this cash buffer.

To "manage" the above I have a "monthly target" for my "cash" balance, which mostly grows later in the year as we prioritize tax-advantaged space early in the year. But as our excess income shifts into our "bank" accounts, I know how much to keep in "cash" vs. invest in our "taxable" accounts. Removes any ambiguity about "should I invest $x or $y" - I invest any amount beyond my target of cash.

Having said all that - I realize there is no "need" for this to be in "cash." I could sell assets and get cash if/as needed. Without a doubt, this generates a "cash drag" on our portfolio. But this amount is [now] < 2% of our portfolio. We can "afford" the "cash drag." This is simpler easier for us to manage, and helps us Sleep Well At Night (SWAN) knowing we have easy access to cash to deal with most things life throws at us.
JS-Elcano
Posts: 1063
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Re: How much cash do you save each month?

Post by JS-Elcano »

PNWpilot wrote: Tue Jul 09, 2024 10:16 am Spouse and I fully fund two Roth IRA's and two Traditional 401Ks. In total, we contribute 16% of our income to retirement accounts.

Emergency fund contains 6-months expenses (VMFXX). We cash flow all fixed, and variable, expenses with our biweekly paychecks.

Aside from retirement savings, we save a variable amount of cash each month. Depending on circumstances, this ranges from 0-30% of our monthly take-home pay. I sweep the leftover cash into a taxable account at the end of each month.

Question:
- Beyond retirement savings, what is an ideal percentage of take-home pay (cash) to be saved each month?

Edited to add: I feel like we are "overspending" when we don't save a huge chunk of cash each month. Is this a correct feeling?
I decide how much to save each paycheck at the beginning of the year when I make a rough estimation of my expenses for the coming year in excel. I take my gross, subtract the amount to max out 401k, 457b and other things that come out pre-tax, calculate income taxes, subtract RothIRA, subtract what I want to save each month, and arrive at the amount I have available for mortgage, bills, and misc spending each month. Sometimes I play with the savings a bit to see what's likely manageable without affecting my "live now" lifestyle. In the first couple of years my calculations were a bit tight so I reduced my savings a bit. These days I save ~15% of my take home on top of my maxing 401k, 457b, RothIRA; that seems to work for me. That 15% automatically goes from my paycheck into savings and then MM, so I never see it in my checking (though it's at the same bank so I see the amount when I open my banking app). So, to your question about feeling you are "overspending" if you don't have a chunk of money left over, I think that completely depends on one's income. If one earns 100k and maxes out two 401ks and RothIRAs then it would be to be expected that you don't have a chunk left over. If one earns 400k then one could expect to have a chunk left over. If you feel you are overspending then just move a set amount that you think you are overspending to savings on the day your paychecks come in and see if you can make it to the end of the month. It's not rocket science.

EDIT to add: I am not too hung up on this money being saved for retirement; it's not part of my projections. So, I am fine with using it for major renovations. I have yet to use it to buy a car as it feels off to me to use it for that.
lgb
Posts: 300
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Re: How much cash do you save each month?

Post by lgb »

vanuber wrote: Tue Jul 09, 2024 10:53 am
PNWpilot wrote: Tue Jul 09, 2024 10:16 am Spouse and I fully fund two Roth IRA's and two Traditional 401Ks. In total, we contribute 16% of our income to retirement accounts.

Emergency fund contains 6-months expenses (VMFXX). We cash flow all fixed, and variable, expenses with our biweekly paychecks.

Aside from retirement savings, we save a variable amount of cash each month. Depending on circumstances, this ranges from 0-30% of our monthly take-home pay. I sweep the leftover cash into a taxable account at the end of each month.

Question:
- Beyond retirement savings, what is an ideal percentage of take-home pay (cash) to be saved each month?

Edited to add: I feel like we are "overspending" when we don't save a huge chunk of cash each month. Is this a correct feeling?
I'm not sure what this thread is about other than bragging about your savings and income. Sounds like you are maxing out retirement accounts and taking big swings at cash savings and taxable accounts, which is much easier with a large income ($60K/16% = $375K). At that level of income, you are overspending if not saving a large chunk. Saving 30% leaves you $262.5K to spend each year.

Our household income is about $130K and we hope to save 20% this year (though I will be happy if we reach 15%).
That sounds like bragging to me because you've provided some specifics to your situation...... :sharebeer ....same as the original poster. If we're not allowed to discuss openly there are countries that would very much like those types of views... :happy

I too can feel others here have unimaginable amounts of money, compared to myself, but I also realize they are probably spending way more than me on all sorts of things that I wouldn't ever consider, unless of course I was making or inherited what they have, which for myself would give me pause to complicate my life with the largess, but for others would gladly lap in the luxury, which is totally fine as well.

You too may one day have extra income and extra savings and if you post about it, I won't think you're bragging, I'll just think you're trying to figure out what to do with what you didn't originally have and how to handle it wisely moving forward.
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snackdog
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Re: How much cash do you save each month?

Post by snackdog »

KlangFool wrote: Tue Jul 09, 2024 11:14 am OP,

I believe in saving 1 year of expense every year. Aka, save as much as you spend.

The saving is automated by send the amount to be saved into the taxable brokerage, 401K, HSA from the paycheck.

KlangFool
Yes, 30-50% savings is robust. We were lucky to have years where the company covered expenses so we were able to hit 100% or more.
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