Ask HN: Average savings per month?
Hi, I usually read about devs making 110-130k in the West Coast, and generally less in other states... But I'm curious about how much on average do they end up saving at the end of the month.
I know it differs a lot depending on the lifestyle, but how much is the norm? (For a single, with no kids, to simplify things) A simple breakdown of the main expenses would be greatly appreciated, i.e. taxes, rent, food, health, services, leisure, rest=savings.
What percentage of your salary do you end up saving? Thanks!
(Answers from other countries would be interesting too, for a richer comparison!!)
58 comments
[ 2.4 ms ] story [ 123 ms ] threadI agree that 500 euros/month seems very low for a salary in Netherlands.
We save 48% of our take home pay, so spend 52%. We live the extreme early retire lifestyle, not for everyone. Some extreme early retire people would laugh at our savings rate (only 48%!).
The breakdown of the 52% spend is
- 27% goes to housing (mortgage, property taxes, house insurance)
- 5% goes to fixed costs (car insurance, life insurance, internet, cell phones, utilities, Skype phone, Netflix, VPN service, etc.)
- 20% goes to variable costs (groceries, gasoline, supplies like toilet paper, light bulbs, entertainment like restaurants, bars, movies, sport league fees, etc.).
I know variable costs are big, but we only loosely keep track of this. We control it by only allowing ourselves so much spend cash per month for these variable things and we stick to it, if we get low, we don’t do it or we have a serious discussion. We’ve tried to lower it more, but this seems the right level for our lifestyle.
I know I know, we own a house in Vancouver. Hey, we bought fixer upper years ago and got lucky with the market. I don’t count house equity in our extreme retirement plan, as far as I am concerned, it will be icing on top of the cake. Our only debt is mortgage (student loans paid off, 1 car that we paid cash for).
mrfusion as in General Fusion? Or Andrea Rossi ecat?
So timing and a bit of luck. I could not afford to enter the Vancouver housing market today.
When they speak about the percent income required to own a house in Vancouver, they only speak about first time home buyers entering the market today. The housing costs for current owners who have been in the market for some time (like me) or current owners selling and buying are not as high because their starting mortgages were much lower and they have lots of equity for a down payment.
But I do sometimes feel the pain of people trying to enter the market or renters. For example, I’ve had a couple great job offers in the SF bay area in the last few years, but I turned them down because the cost of renting would have eaten away more than the salary increase. I was not willing to sell my house in Vancouver to remedy this (i.e. have a big down payment for a house there).
> I don’t count house equity in our extreme retirement plan, as far as I am concerned, it will be icing on top of the cake.
If that turns out to be true, you are doing very well indeed with your saving. For typical income in Vancouver vs typical housing price (and even in other parts of Canada, but to a lesser extent), your house is the cake and everything else is a rounding error. There is a vast net worth chasm in this country between those who purchased before housing started going nuts vs those who did not, regardless of your saving level.
Housing has gone up nation-wide, but not everywhere is nearly as crazy as the major urban centers (Vancouver, Toronto, etc). For mid-sized cities or smaller, I don't think the gap can be called a "chasm".
if i sold my house today and found a place to rent for the same housing costs, we would only have to work 4.5 years before "retiring" (work by choice, earn enough interest to cover expenses) compared to the 10 to 13.5 years I mentioned above.
but i don't want to sell right now to "retire" earlier. my kids are still young and in school and we love our place. We can walk and bike almost everywhere. My current job is still interesting. If things change (jobs, health, etc.) then maybe I would sell and move.
My prediction is you'll find holding turns out to be a wise financial move as well, I think another doubling of housing (houses, not condos) prices will happen, within 10 years if not much sooner.
sure there are extremes, one should be making a multiple above the poverty line. but if you assume this is the case, then how much you make can either be translated into earlier financial freedom through an increased savings rate or "nicer things".
here is an ouput of my simple retirement calculator:
https://drive.google.com/file/d/0B8k8RO7VeaIbc0JlUExLZmktSkE...
Sorry, just a little bitter that I lived below my means and actually saved, unlike those who stretched dangerously to buy as much house as possible, and essentially won the lottery in the process.
This does not answer much of what you asked for though, since you are not in the same situation.
When I was in university I worked part-time, and I also got a loan&stipend from the government (as all students do in Norway). I usually made enough to save 40-50% of my income, which is why I have money saved up now. I made maybe $15k before taxes from work and got about the same in student loans. 40% of the student loans gets converted to a stipend if you pass your exams.
By the budget I have planned for when I buy an apartment, it will look something like this:
- Rent/Loan: 40%
- Groceries: 12%
- Utilities/Electricity/Stuff: 16%
And then there are probably more expenses I have not accounted for, but hopefully I will be able to save some money, but probably less than 32%
Loan interest is very low at the moment, around 2.7-2.9%, and to counter everyone loaning way too much, you need to have 15% of the loan sum in order to qualify. I can expect to pay maybe $320k for a apartment in Oslo, depending on how big and where it is. $320k would typically be >50m2 somewhat central, or 30-40m2 very central (those go for even more). I will need to have about $48k in cash to be able to get a loan at that price.
I also have some student loans, but I have basically my whole life left to pay them off at a very low interest, so I pay like $154 every two months or something I think. It is the best interest loan I am ever going to get, so there is no point just paying it down immediately even if I have the cash for it.
TL;DR: Paying for a mortage is better than paying someone else rent, and I do not want to live in my parents basement forever.
I never understood why buying a home is a good investment option since ROI is very low for a very long time unless you sell the house for a higher price or you make all the money through rent, which is probably never happening considering other costs that come with owning a home.
This article makes all the point I was going to write and some more.
http://www.jamesaltucher.com/2011/03/why-i-am-never-going-to...
There are jobs with greater salary, but I'm suggesting a medium perspective in the region of eastern Europe. I used to have a job in a smaller city which left me with 0% savings, and I had to live without internet for that, it's just the way it is/was, I'm just glad it's getting better for some cities and young engineers.
Running the numbers quick. Based on my take-home paycheck, I have a cash savings each month of 20% and on top of that I'm putting about 10% into retirement. So 30% savings.
Full break down:
20% Cash savings
10% Retirement
30% Student Loans
5% Housing/Utilities/Phone/Internet
15% Groceries
20% Misc & Vehicle Expenses
Breaking down the original amount provided by the company:
28.5% - Tax
3.5% - Pre-tax contributions for healthcare and transportation
17% - 401k Savings
2.79% - ESSP Savings
3.67% - Direct Savings
23% - Rent
21% - monthly expenses
After taking out taxes and pre-tax deductions (the money I have more control over):
17% - 401k Savings
5.5% - ESSP Savings
7% - Direct Savings
44% - Rent (it could be as low as ~33% if 401k contributions are eliminated)
27% - monthly expenses
When I made 100K, my monthly expenses were ~$3000, but I took home about $5000, which left me with a little over 2K in savings each month. The #1 expense is rent (SF Bay Area is bad), followed by food (I eat out for lunch every day, and I don't cook often in my shitty apartment).
One thing to consider is that $1 is $1 anywhere in the country. Consider the following scenario:
50K salary = 37K take-home pay - 50% expenses (keep the math simple) = ~18K savings
100K salary = 65k take-home-pay - 50% expenses = ~32K savings
In my experience, even though the cost of living is higher, the salary-to-expenses ratio is roughly the same (give or take a few K). In other words, even if I have to pay $2500/mo for my 1BR apartment in San Francisco, and my monthly expenses reach $4000, I'm still saving at least $1000/mo, which is more than I'd be able to save making a comparable salary (~40K) back home in Alabama.
My roughly 7k (pre-tax) a month goes to:
28% Taxes
10% Rent
15% ESPP
7% 401k
4% Vanguard
Most of that is automatically deducted (except for rent), and I usually end up with only a few hundred at the end of the month, meaning I'm saving about 25%. The rest goes towards groceries, car insurance, student loans, and way too many concerts/restaurants/nights out with friends.
I should probably increase my savings considerably but I like the lifestyle I'm living too much.
On a per month basis:
I could probably put effort into tracking that last item better, but I'm happy enough just tracking the top line.* 1/3 goes to tax withholdings (I'm a 1099 contractor so my taxes are a bit higher than normal)
* 1/3 goes to living expenses
* 1/3 goes to saving and investing
$300,000 (work income)
+22,000 (rental income)
-----------
$322,000 income
-90,000 (~30% effective tax rate for CA + Federal taxes + SSI, ignoring rental income)
-18,000 (401k contribution)
-----------
$108,000 taxes and pre-tax investment
-36,000 (rent)
-17,000 (home mortgage, insurance, property taxes)
-8,000 (miscellaneous expenses, shopping)
-5,000 (groceries)
-5,000 (restaurants and bars)
-4,000 (property manager)
-2,500 (public transit, auto: gas, car insurance, maintenance)
-2,000 (vacation)
-1,800 (utilities)
-1,000 (pet)
-----------
$82,300 spending
$322,000 - 108,000 - 82,300 = 131,700 savings per year
So, my total savings per year is $131,700 into taxable investment vehicles + $18,000 401k (+ additional company match money) + equity in my rental property
If I made $130,000, my spending would be at about 60% of my income, my taxes would be at about 20-25%, so my savings would be at 15-20%. However, I'd likely cut back some of my spending pretty substantially if that were the case.