How much do you save per month (as a percentage)? (Reston: mortgage, loans)

[vauser]

Yes, the question is open ended and yes, the easiest answer is "save as much as you can". But, going beyond that, how much should one generally aim to save without sacrificing every aspect of the lifestyle in entirety?

Assumptions:
* Mid to late 30s.
* Married with 1 kid (middle schooler).
* Family Income: $150-175K/year
* No loans but for mortgage.
* PITI: approx. $1500/month

What's the least this income should allow a saving of, on a monthly basis? And what would an "awesome" amount of money to save?

http://finance.yahoo.com/news/Savings-rate-falls-to-lowest-cnnm-3993513007.html?x=0 (broken link)

Thanks!

[CaliTerp07]

Is this a NoVA question or a personal finance question?

[vauser]

Originally Posted by CaliTerp07

Is this a NoVA question or a personal finance question?

Good point, I am so used to this forum (and this alone) that I tend to post it all here. This is perhaps more appropriate for the other forum you mention but if it is okay, I might just leave it here as my question is sort of tied to someone living in NoVA and what a reasonable savings target could be (assuming the cost of living here).

[michgc]

Well, to keep it NoVA related, I think it partially depends on what your plans are for staying in this area. Do you plan on sending your child to a VA state school? Will you stay here in retirement or do you plan to move to a cheaper locale? And what are your savings goals - retirement? college for your child? a new car? a bigger house? a vacation house? a boat?

Having said all that, I think you could be saving A LOT based on your mortgage and your income plus having just one kid. But I tend to be a super saver. I think you should be maximizing your 401(k) savings for each of you if both you and your spouse are working. And you should each be putting $5K into a Roth IRA each year.

With one child in middle school - so about 4-6 years from college - you should be putting away a good chunk of change toward that - assuming that you are planning on paying for some or all of his/her college. I'm not sure of a dollar amount, but I'd go to one of those college calculators and figure out the cost of VA tuition (if that's the route you're going) and see what they recommend you should be putting away each year.

With a $150K-$175K income and a pretty low mortgage and no debt, I would expect that you could be saving at least 25-30% of your income (toward retirement, education, and other savings goals). This is assuming you have an emergency fund in place already (~6 months' worth of income). If you don't, I'd do that at the same time as saving for retirement and then start saving for college.

To compare - we are in our early 40's. We have 3 children (4, 6, and 10) and make slightly less than you (one wage earner). Our mortgage is $2300 per month, and we have no other debt. My husband maximizes his contribution to his 401(k), we each put $5K into a Roth each year, and we save $2K each year for each of our kids' college fund (which clearly won't be enough to fully pay for their college). But I do hope that my kids choose a good state school and keep costs low. And we do plan on moving to a cheaper area when we retire, so we would be able to cash in on our home. Hope this helps.

[HEATHER72]

Everyone's situation is different.
Least: 0%
Most: 100%

[vauser]

Originally Posted by michgc

Well, to keep it NoVA related, I think it partially depends on what your plans are for staying in this area. Do you plan on sending your child to a VA state school? Will you stay here in retirement or do you plan to move to a cheaper locale? And what are your savings goals - retirement? college for your child? a new car? a bigger house? a vacation house? a boat?

Having said all that, I think you could be saving A LOT based on your mortgage and your income plus having just one kid. But I tend to be a super saver. I think you should be maximizing your 401(k) savings for each of you if both you and your spouse are working. And you should each be putting $5K into a Roth IRA each year.

With one child in middle school - so about 4-6 years from college - you should be putting away a good chunk of change toward that - assuming that you are planning on paying for some or all of his/her college. I'm not sure of a dollar amount, but I'd go to one of those college calculators and figure out the cost of VA tuition (if that's the route you're going) and see what they recommend you should be putting away each year.

With a $150K-$175K income and a pretty low mortgage and no debt, I would expect that you could be saving at least 25-30% of your income (toward retirement, education, and other savings goals). This is assuming you have an emergency fund in place already (~6 months' worth of income). If you don't, I'd do that at the same time as saving for retirement and then start saving for college.

To compare - we are in our early 40's. We have 3 children (4, 6, and 10) and make slightly less than you (one wage earner). Our mortgage is $2300 per month, and we have no other debt. My husband maximizes his contribution to his 401(k), we each put $5K into a Roth each year, and we save $2K each year for each of our kids' college fund (which clearly won't be enough to fully pay for their college). But I do hope that my kids choose a good state school and keep costs low. And we do plan on moving to a cheaper area when we retire, so we would be able to cash in on our home. Hope this helps.

Thanks michgc. A couple of questions:
* 25-30% of Net Income or Gross? Meaning, is it 30/100 * 175K => $52.5K roughly per year?
* 6 months' of emergency savings: is it 6 months' worth of typical monthly expenses? Or, actually 6 months' worth of income (175K/12 * 6)?

[oneasterisk]

I grew up poor so I've learned to be pretty good with finances out of necessity. So I save as much as I can and minimize spending while still try to enjoy myself. That being said I maximize my TSP account and I'm currently putting $200 a month in a ROTH-IRA. Then at the end of the year if I have extra scratch, I make a lump payment into the ROTH to max it. On top of that I've forced myself into paying 10% of my salary into a savings account. I also have a regular IRA but I don't contribute and I'm contemplating on if I should roll into my TSP.

I'm 31, only debt is my mortgages (1 Personal home and 1 investment property that cash flows). Single and no dependents. If the SHTF I've got enough saved for at least 18 months of expenses.

[athensvaasi]

Originally Posted by oneasterisk

I'm 31, only debt is my mortgages (1 Personal home and 1 investment property that cash flows). Single and no dependents. If the SHTF I've got enough saved for at least 18 months of expenses.

For a (possibly future) DC metro resident, what are good places to own investment property? I assume it would have to be reasonably priced, and low taxes to make a positive impact.

[vauser]

Originally Posted by athensvaasi

For a (possibly future) DC metro resident, what are good places to own investment property? I assume it would have to be reasonably priced, and low taxes to make a positive impact.

Reston, Herndon, McLean, Tysons Corner, Vienna and some in Loudoun as well: Ashburn, Brambleton, Lansdowne (they are growing quite rapidly).

[michgc]

Originally Posted by vauser

Thanks michgc. A couple of questions:
* 25-30% of Net Income or Gross? Meaning, is it 30/100 * 175K => $52.5K roughly per year?
* 6 months' of emergency savings: is it 6 months' worth of typical monthly expenses? Or, actually 6 months' worth of income (175K/12 * 6)?

Well, I'm only making suggestions based on what you've said and what we do (making a somewhat comparable income and similar situation.) Since you make more and have a lower mortgage and fewer children, I think it's quite possible for you to save more than we do (but we're not big spenders). Having said that, we save about 25% of our gross income, so I'm thinkling you can do at least as much.

First things first, you should have an emergency fund. Experts don't agree on how much. They used to say 3-6 months' worth of expenses, but now many say a year's worth because of the economy. (But emergencies take all shapes - loss of job, major illness, natural disasters, etc.) I think 6 months' of current expenses is a good start, and you can always add more to it later to bring it up to a year's worth, if you think you want to.

I think you can save for an emergency fund and for retirement concurrently. Because you cannot go back and fund your retirement for years that you missed contributing to it. (Some suggest saving for an emergency fund first; I disagree.)

I always like to save as much as I can as allowed by law if I'm able. So if you and your spouse each work and are allowed to contribute $16.5K into your 401(k), then I would. That would be $33K. Then if your income qualifies you to put $5K each into a Roth IRA, I would. That's a total of $43K (the 401(K) is generally pre-tax). The retirement savings has good tax benefits, and by saving early, you will have a lot of time to allow your savings and earnings to compound.

College to me is the biggest question mark, because you didn't mention if you've already started saving or not. And it being 4-6 years away you don't have much time if you haven't started. If you haven't been saving for college but plan to, and you're 5 years away, you'd need to put a heck of a lot away each year to cover the full cost. On the other hand, anything you can contribute is better than nothing, so if you can add $10K per year to your savings until your child goes away, I think that would be a great contribution.

Qualifier: Please note that I am not a financial advisor nor do I play one on t.v. - but I do play one on C-D . (I was a finance major in college though, and it is an interest of mine, so I'm not a total idiot on the subject.)