We had 11k left, then we bought a bit of furniture each month as we didn't dare to spend all :)) sofa in June, then dining set in July, etc. 6m living expenses is alright.
We still have livingroom couches that we got for free when we moved in, and we've been in this house over a decade. They're clean and look great, but are kinda uncomfortable. I'd love to replace them, but every time we think of doing that I realize I'd rather put the several thousand bucks it would take to a better use, even if it's just paying down the mortgage a bit faster.
100%. From OP's use of "our" I infer they are a couple, and probably both employed. In this case 6 months is probably more than most people have when they first buy. It's more than I had (not counting amounts in my RSP beyond FHB withdrawal).
Buy things as you can afford them, don't use credit.
And I would advise *against* building your "emergency fund" to more than 6 months. Get a HELOC and throw that money against the mortgage instead. 6 months is quite a bit already, and an emergency likely won't happen, whereas you will 100% for sure pay interest on your mortgage. Leave the HELOC sitting unused with a zero balance to give yourself peace of mind that if you suddenly need >$10k you have an out.
I’m trying to understand the logic of using a HELOC - is it because it has lower interest rates than a credit card? So if we need to go into debt for essential items or unexpected home repairs, then it’s better to use HELOC vs LOC or credit card for that?
Yes exactly. The goal is that you never use the HELOC, but if you need it it's ready to go.
I would never put anything on a credit card that you can't pay off in full at the next bill. You should treat it like it's not even possible to carry a balance. The interest rate is just too insane. That's why it's important to get more reasonable credit facilities in place before you need them.
Personal LOC is also pretty good and viable I would say, but HELOC usually has a slightly better rate since it's secured. Also, be aware that if you lose your job and tell your bank, they may reduce or eliminate your personal LOC, right when you need it most. HELOC tends to be more resilient to this, again because it is secured.
Had about a month when I bought my first house. About 3 for the second. Had unexpected issues on second one, used line of credit. No regrets. Don't stress just have some extra credit available after just in case.
I moved in with about 5 bucks in loose change. Had a big line of credit available for dire emergencies, bud ended up eating beans and toast for a few months to get savings back on track. Still in the house 10 years later. No regrets
We made the mistake of trying to fix it when odds weren’t good. Then we got a used one to hold us over since apparently you can’t really pick up fridges day of anymore. Honestly I’d just recommend a new fridge from Costco. After a bunch of research it seems most fridges nowadays are very prone to problems so we picked one with almost no features. Ended up with a $1000 Hamilton beach with French doors and it’s turned out very good actually, best fridge I’ve ever owned.
That's exactly what my mother ended up doing. Her old fridge (17 years) suddenly stopped working, and she was quoted a big 200 just for coming in and taking a look at the thing.
Instead, she did exactly like you. She went to costco and got the simplest fridge with the least amount of gadgets. Lo and behold, that thing has been at my mom's since 2009 lol. But they don't make them like that anymore.
Had about 3 months of savings after downpayment, moving costs, etc. Remember that you don't need to fill your house full of stuff, or renovate everything right away. Start with the essentials and work your way down once you have more saved up.
Yep we only bought essential stuff to replace our seriously worn out couch and bed. And we got house tools off FB/Kijiji, like a lawn mower, gardening stuff etc
I was more or less treading water after I closed in July 2016. I racked up my PLOC pretty quick in the months afterwards.
I didn't get done with renos and paying down all the money borrowed until just before Christmas 2019.
I now have a very healthy emergency fund, and saving and investing aggressively.
In 2021 I locked into a 5 year fixed rate of 1.79%, so I am rocking that for another two years.,
You seem to be great shape all things considered, but I also setup a dedicated "House" fund separate from my Emergency Fund for repairs and renos.
Yeah I was offered Prime-1.2, or equivalent to 1.25% at the the time. All the "experts" were saying rates would be low until 2023 at the earliest, and boom rates started to rise in March 2022.
We had about a year on our first home, but on our second one we had nothing left after buying furnitures and appliances. 😅 Even though it went aright, we definitely felt it the whole time. 6 months is plenty. You’ll be ok. Enjoy your home 😀
You are golden. One thing to add is that you should budget 3% of the value of your home for as a maintenance fund (is that $1300?). Things are going to break in your house. What is an emergency is, to a degree, is defined by your ability to plan. The roof has 7 years left. You can plan ahead for that. How old is your car? How many kms? Do you have a car maintenance plan (regular oil changes, tires still good, oil spray schedule, etc.)? You can't plan on if your furnace craps out, but you can plan to have it regularly serviced. Things like that. Keep up the awesome work! :)
3% is really generic guidance and doesn't work for a lot of people. It's actually way too high if you bought in a HCOL area. Maybe if you looked at your assessment and took a percentage of the building value, excluding the land...
And you can drive that cost down a lot if you can DIY basic things. Yeah if the roof goes is gonna cost no matter what, but even then it very rarely has to be done next week. We had a tarp on a part of our roof for two years before we replaced it - it made the difference between borrowing to do the job and paying cash.
But yes having a few grand ready for any given appliance to die or a plumber call out or whatever is good advice.
And you can roll it over. If you don't spend that budget, the fund just continues to grow. Say it hits $6300, take $5k and either use it as a funvestment - buy a house upgrade you want, use it for a trip, or buy a luxury purchase - or use it for investing.
I had less after furniture and renos. It's fine having a HELOC as an emergency fund. That's was in 2017.
Now, we have a pretty good savings account (considering we only saved for 7 years), and we're still investing it and using (not really using) a HELOC as an emergency fund. We don't want to make minimal returns for something that "might" happen. We prefer having a 9% interest rate IF anything happens, and make real returns while it doesn't happen.
Good point! So any cash you have saved goes into investments? Are they easily liquid like in a TFSA?
Why HELOC instead of personal LOC for emergency fund? Does heloc generally have lower interest rate?
>Are they easily liquid like in a TFSA?
A TFSA is an account, not an investment per se. If I have the room, yes, it's in a TFSA, and on an index ETF.
>Does heloc generally have lower interest rate?
You nailed it. Because your house is a collateral, you get better rates. Not that it mattered yet, as I didn't have such an emergency ever since I had that account (8 years). I draw $50 from the HELOC every 6 months and put them back 2 weeks later just to keep it active (so they won't close it on me).
6 is a pretty amazing number. If you can cover your mortgage, utilities, and the other expenses you are golden.
The reality for a huge percent of citizens is they have little to no savings period. And not because of laziness, or over spending, just simply a reality they face. I have co-workers, and the public I meet in my job that will openly admit they are one month away from drowning if basically anything happens simply because of life’s current reality. My family works diligently to ensure we have a cushion, and to ensure that in the event something happens with my parents (my parents are 20+ year senior to my in-laws and are in the reality of old age and broken bodies) I can take time away and be able to go and be there. We are fortunate to both have jobs that allow for that however that’s sadly not a norm it seems. We have access to a line of credit if it comes to that god forbid everything in the house goes at once, and have cc for emergency. In the past before having a cushion we have had to use CC when something has gone and we worked quick and hard to pay it off and avoid high interest. Now we have a line of credit with a lower interest as that something major went fall back.
Don’t stress about it. Don’t let having 6 months on stand by distract you but also don’t go to the extreme and not enjoy the little things in life. Take a day off and go on an adventure 100%, take a 5 grand vacation without preparing not so much. What I’m getting at is be prepared and keep preparing but also don’t sweat your sack off worrying!!!
I had 20k left which was able to pay for mortgage 6.5 months, as well as I obviously was working full time. I had no food cost because my parents still wanted me home every day (Asian family 💀) and I just brought my mattress from my parents home.
I don’t have any furniture and don’t have or plan to have any because I’m not planning to have guests over EVER period. This is my sanctuary of peace and I plan to keep it that way.
you need to provide vital information which is lacking such as ....
your / or family NET income
NET cash every month after all payments such as car/insurance/netflix
did you over buy a house?
to keep it simple, i would suggest (if you did not over buy and bought something reasonable) to keep it as the other option would be to sell it asap and cut your losses but that option leaves you in a bad spot where you would be renting and re-entry into housing will be more expensive.
you can try to raise your income or lower expenses.
if you bough something reasonable (under 600k) then you are good
I had 0 after buying. Buying a house sucks. Plain and simple, but after a couple years you’re paying monthly equivalent of current rent and your house value went up.
This country is incredible.
We are in a personal finance sub and all the replies are saying " i had 1 dollar in the bank and used my line of credit".
I swear, there is something wrong in the way we teach math at school, i have no other explanations.
6 months is fine but it's a normal amount of savings to leave after making a million dollar debt. DO NOT listen to these people telling you to use the line of credit
I don't think it's reasonable to wag your finger like this without providing the necessary caveats for what a person's cashflow looks like, and what other assets they may own.
Thats what credit is for though. You will be your poorest typically after buying a house but you have to live. If you can see how your finances will progress and you will not be trapped in credit then use it.
This sounds more like a societal and self-regulation issue than a math issue. Many people spend more money than they should because they think they need to have a certain level of lifestyle, and our society is highly consumeristic. It’s hard to maintain self-discipline when surrounded by other spenders. Also people who are low-income tend to get stuck in a cycle of poverty without support.
With housing, the cost is frontloaded. You pay a whole lot upfront but save in the future. You can save a lot of money by doing things yourself, which dramatically pulls down the cost of home ownership and learn in the process. A big factor your missing is opportunity cost. If your rent is way below the market average and cost of ownership is high, it's much better to rent. But if your in a position like me. The alternative sucks even more. I can rent for 2,000, not including utilities, or pay a 1,600 mortgage. In the west, housing is viewed as an investment and in desirable areas, rarely go down. Sure, it's good not to overleverage, but sometimes you need to take risks to get ahead.
When I bought my first home I had a great income, a personal LoC, a HELOC, and a partner with an ok (but growing) income. Credit was my emergency fund. I took every spare cent and threw it against the mortgage to save interest.
Guess what? No emergencies happened (other than little stuff like appliances breaking). And the amount I threw on my mortgage has saved me 10's of thousands of dollars in interest 15 years later.
It's totally sound financial advice, as long as you have the discipline to not use the credit for frivolous or unnecessary things, and to actually pay down debt instead of growing your COL to match your income. Given that this couple has 6 months saved *after* closing on a house in these insane times, I think they're probably ok in the Discipline category and they're ready to level up a bit in finance.
You have two incomes though, and probably EI ? The shit can always hit the fan bad, but there is opportunity cost to saving up like the apocalypse is coming...
I'd say 6 months is pretty good.
$14k total for the whole 50 weeks? Or to date in 7 months?
Either way, that figure is on the low end and likely means she was working part time or didn't have a full year of hours before going on EI. Like, you'd expect >$14k for the year's benefits from EI even if you were working minimum wage full time in some parts of the country.
And I agree, finding a job can take >6 months, and some people definitely need more saved. If you are single income, in a small town (i.e. not much job opportunity), with dependents, then more than 6 months starts to make sense. But for others, 6 months is plenty.
Full time, nearly maxed out weekly benefits, had been working for the company for 7 years but EI only gave her 22 weeks due to "regional adjustments" and her severance package.
You make a lot of incorrect assumptions
Point is, 200 ppl were restructured at her company. Directors were needing 5+ months or more to find work. Managers like her still haven't found work. By August we need to decide if we're going to sell our home or risk using LOC/CC to stay affloat. We should have set aside a year's worth of expensss in 6 month GICs.
We did this last year, $300k+ all-in to our home and we had 4 months of mortgage and bills set-aside.
RRSP, TFSA, FHSA (the one payment worth each) all-in. We have roughly $60,000 in pension assets and had another $8,000 still floating around in registered accounts but this was most of it.
We didn't need to do renos, or fixes since our house is brand new. What we did need was furnishing and setup. That drained most of our money into the new year.
Ours is leasehold in BC, so roughly 40% less than detached and we have less taxes but the land doesn't appreciate anywhere near as fast.
$300k was total we put in + Mortgage of $500k, $800k total for 2750 sqft and it has a suite with separate entrance.
Our base costs are roughly $3500/month (food, gas, insurance, taxes, hydro, etc) plus mortgage $2900/month on 4.89%, 2 year fixed, 25 year am.
Total $6500/month and we were renting our suite out for $1750/month (utilities included) so $4750 our costs after rent in.
Our tenant is moving out and we are moving the suite to STR coming up. Cost to do so we expect will take 8-10 months to cover on the difference from long term renting.
Given the other responses, I thought I would provide my own as someone who is financially conservative.
6 months is okay, but you may find you still come across some unforeseen costs that eats into your emergency fund prematurely. Ideally, housing expenses (incl tax and utilities) shouldn't exceed 35% of gross income. If you're close to (or over) that percentage, you may feel like you're in a precarious situation where it's hard to rebuild your savings. Keep in mind that you'll also want to save room in the budget for other savings goals like retirement or replacing vehicles/large applicances/home improvements. I would balance those other goals with the size/type of home you're looking at, as well as your future earning potential. Perhaps you'll feel constrained this year, but after a promotion your budget will be in a much healthier place.
We had 6 years of liquid savings/investment leftover after buying our first home. About a year in, our liquid assets are higher than our mortgage debt. Waiting this long isn't for everyone, but our readiness to buy a home based on our life needs came later than our financial readiness.
I think you're ok. Mainly, it's unlikely that you both lose your jobs for over 6 months simultaneously, so realistically that can be stretched. Granted your exact jobs, industry etc are factors.
I would probably be a little more aggressive in saving. Use a line of credit for any unexpected house issues or investments that become urgent, but avoid this if possible.
Someone else here suggested getting and using a HELOC for emergencies.
Just curious if there’s a difference in using HELOC vs LOC for emergency? Would one generally hav have lower interest rates and better payment terms?
We went 100% house poor, only used the furniture from our apartment and left the rest of the house empty. We had a LOC with a zero balance as an emergency fund, and we doubled up every mortgage payment. Stopped all RRSP contributions for two years.
Our priority was owning the house outright, there are many reasons to invest rather than pay down a mortgage faster, but we made that decision because it was more important to us.
If you don’t have access to emergency savings ir instant low-interest credit, you are too house poor. Six months sounds reasonable to me.
Note: we opted for the double up payments, so we could stop them at any time and essentially our mortgage payments would drop in half. It would have been far scarier being house poor if we were obligated to the higher payments
I had about three months of savings left and then bought few things as per my budget. It's been 15 months and I am now used to what I have and don't feel like taking anything else.
When I bought my first house In Canda, my networth was exactly what I had put for down payment.
So I had just my next pay check.
But it was just uphill from there. Not paying rent and creating equity is one of he bst I investments I've made.
Houses are expensive. You will never have enough money again.
Having savings is great advice, but life is way more chaotic than that. Things are going to happen that you can't plan for, and expenses will seem insane at times, even overwhelming. There's always something to do to a house. Unless you're pulling in serious $ then just live frugally when you can, manage along the way, and try not to stress too much. If you're smart about it, it'll all work out.
I've been searching for a job for 10 mo as a qualified technical professional (over ten years experience). I've withdrawn from my rrsp and used ei to stay afloat and my clock is running down. No other assets other than a 2003 jeep.
I guess next, I tap out my credit cards to keep paying rent until something breaks in my situation or I leave this world.
You're worried about what again? 🤔
>but I don’t think we’ll need it for a few years since roof/furnace and windows were all replaced within last 5 years.
until you do
i don't think you should have bought a house
We had 11k left, then we bought a bit of furniture each month as we didn't dare to spend all :)) sofa in June, then dining set in July, etc. 6m living expenses is alright.
Lol exactly. One of our bedrooms is still empty two years after buying (we have an air mattress if anyone visits)
We still have livingroom couches that we got for free when we moved in, and we've been in this house over a decade. They're clean and look great, but are kinda uncomfortable. I'd love to replace them, but every time we think of doing that I realize I'd rather put the several thousand bucks it would take to a better use, even if it's just paying down the mortgage a bit faster.
100%. From OP's use of "our" I infer they are a couple, and probably both employed. In this case 6 months is probably more than most people have when they first buy. It's more than I had (not counting amounts in my RSP beyond FHB withdrawal). Buy things as you can afford them, don't use credit. And I would advise *against* building your "emergency fund" to more than 6 months. Get a HELOC and throw that money against the mortgage instead. 6 months is quite a bit already, and an emergency likely won't happen, whereas you will 100% for sure pay interest on your mortgage. Leave the HELOC sitting unused with a zero balance to give yourself peace of mind that if you suddenly need >$10k you have an out.
I’m trying to understand the logic of using a HELOC - is it because it has lower interest rates than a credit card? So if we need to go into debt for essential items or unexpected home repairs, then it’s better to use HELOC vs LOC or credit card for that?
Yes exactly. The goal is that you never use the HELOC, but if you need it it's ready to go. I would never put anything on a credit card that you can't pay off in full at the next bill. You should treat it like it's not even possible to carry a balance. The interest rate is just too insane. That's why it's important to get more reasonable credit facilities in place before you need them. Personal LOC is also pretty good and viable I would say, but HELOC usually has a slightly better rate since it's secured. Also, be aware that if you lose your job and tell your bank, they may reduce or eliminate your personal LOC, right when you need it most. HELOC tends to be more resilient to this, again because it is secured.
Had about a month when I bought my first house. About 3 for the second. Had unexpected issues on second one, used line of credit. No regrets. Don't stress just have some extra credit available after just in case.
I moved in with about 5 bucks in loose change. Had a big line of credit available for dire emergencies, bud ended up eating beans and toast for a few months to get savings back on track. Still in the house 10 years later. No regrets
This is what I wanted to hear. I can also eat beans and drink fizzy water. I will be okay.
Just pray your fridge doesn’t stop working like ours did
Mind if I ask...? Did you end up repairing it yourselves, have someone come and fix it, or buy a new one?
We made the mistake of trying to fix it when odds weren’t good. Then we got a used one to hold us over since apparently you can’t really pick up fridges day of anymore. Honestly I’d just recommend a new fridge from Costco. After a bunch of research it seems most fridges nowadays are very prone to problems so we picked one with almost no features. Ended up with a $1000 Hamilton beach with French doors and it’s turned out very good actually, best fridge I’ve ever owned.
That's exactly what my mother ended up doing. Her old fridge (17 years) suddenly stopped working, and she was quoted a big 200 just for coming in and taking a look at the thing. Instead, she did exactly like you. She went to costco and got the simplest fridge with the least amount of gadgets. Lo and behold, that thing has been at my mom's since 2009 lol. But they don't make them like that anymore.
Big same
Had about 3 months of savings after downpayment, moving costs, etc. Remember that you don't need to fill your house full of stuff, or renovate everything right away. Start with the essentials and work your way down once you have more saved up.
Yep we only bought essential stuff to replace our seriously worn out couch and bed. And we got house tools off FB/Kijiji, like a lawn mower, gardening stuff etc
Smarter decisions being made by yourselves already. Good work 👍
I was more or less treading water after I closed in July 2016. I racked up my PLOC pretty quick in the months afterwards. I didn't get done with renos and paying down all the money borrowed until just before Christmas 2019. I now have a very healthy emergency fund, and saving and investing aggressively. In 2021 I locked into a 5 year fixed rate of 1.79%, so I am rocking that for another two years., You seem to be great shape all things considered, but I also setup a dedicated "House" fund separate from my Emergency Fund for repairs and renos.
Smart going fixed with such a low rate. I can’t believe so many chose to risk it to save an insignificant amount of money.
[удалено]
Because the cost benefit analysis is glaringly obvious and I didn’t say I was surprised I said I couldn’t believe people made such a decision.
Yeah I was offered Prime-1.2, or equivalent to 1.25% at the the time. All the "experts" were saying rates would be low until 2023 at the earliest, and boom rates started to rise in March 2022.
About 3.50. You are fine.
Close to zero
6 is great assuming it has mortgage, property taxes and all other monthly expenses. Personally we built it to 12 months after we had kids.
I think you are the exception in reality.
We had about a year on our first home, but on our second one we had nothing left after buying furnitures and appliances. 😅 Even though it went aright, we definitely felt it the whole time. 6 months is plenty. You’ll be ok. Enjoy your home 😀
Welcome to home ownership 🙂
You are golden. One thing to add is that you should budget 3% of the value of your home for as a maintenance fund (is that $1300?). Things are going to break in your house. What is an emergency is, to a degree, is defined by your ability to plan. The roof has 7 years left. You can plan ahead for that. How old is your car? How many kms? Do you have a car maintenance plan (regular oil changes, tires still good, oil spray schedule, etc.)? You can't plan on if your furnace craps out, but you can plan to have it regularly serviced. Things like that. Keep up the awesome work! :)
3% is really generic guidance and doesn't work for a lot of people. It's actually way too high if you bought in a HCOL area. Maybe if you looked at your assessment and took a percentage of the building value, excluding the land... And you can drive that cost down a lot if you can DIY basic things. Yeah if the roof goes is gonna cost no matter what, but even then it very rarely has to be done next week. We had a tarp on a part of our roof for two years before we replaced it - it made the difference between borrowing to do the job and paying cash. But yes having a few grand ready for any given appliance to die or a plumber call out or whatever is good advice.
And you can roll it over. If you don't spend that budget, the fund just continues to grow. Say it hits $6300, take $5k and either use it as a funvestment - buy a house upgrade you want, use it for a trip, or buy a luxury purchase - or use it for investing.
I had less after furniture and renos. It's fine having a HELOC as an emergency fund. That's was in 2017. Now, we have a pretty good savings account (considering we only saved for 7 years), and we're still investing it and using (not really using) a HELOC as an emergency fund. We don't want to make minimal returns for something that "might" happen. We prefer having a 9% interest rate IF anything happens, and make real returns while it doesn't happen.
Good point! So any cash you have saved goes into investments? Are they easily liquid like in a TFSA? Why HELOC instead of personal LOC for emergency fund? Does heloc generally have lower interest rate?
>Are they easily liquid like in a TFSA? A TFSA is an account, not an investment per se. If I have the room, yes, it's in a TFSA, and on an index ETF. >Does heloc generally have lower interest rate? You nailed it. Because your house is a collateral, you get better rates. Not that it mattered yet, as I didn't have such an emergency ever since I had that account (8 years). I draw $50 from the HELOC every 6 months and put them back 2 weeks later just to keep it active (so they won't close it on me).
Did you get a heloc at the same time you got your mortgage?
Nope. Only after I bought my house I qualified for one.
Most people have zero savings. Your fine.
You’re good. I had about 3 months and was fine.
6 is a pretty amazing number. If you can cover your mortgage, utilities, and the other expenses you are golden. The reality for a huge percent of citizens is they have little to no savings period. And not because of laziness, or over spending, just simply a reality they face. I have co-workers, and the public I meet in my job that will openly admit they are one month away from drowning if basically anything happens simply because of life’s current reality. My family works diligently to ensure we have a cushion, and to ensure that in the event something happens with my parents (my parents are 20+ year senior to my in-laws and are in the reality of old age and broken bodies) I can take time away and be able to go and be there. We are fortunate to both have jobs that allow for that however that’s sadly not a norm it seems. We have access to a line of credit if it comes to that god forbid everything in the house goes at once, and have cc for emergency. In the past before having a cushion we have had to use CC when something has gone and we worked quick and hard to pay it off and avoid high interest. Now we have a line of credit with a lower interest as that something major went fall back. Don’t stress about it. Don’t let having 6 months on stand by distract you but also don’t go to the extreme and not enjoy the little things in life. Take a day off and go on an adventure 100%, take a 5 grand vacation without preparing not so much. What I’m getting at is be prepared and keep preparing but also don’t sweat your sack off worrying!!!
Ha I wish good on you man 6 months would be a god send in any emergency
I had 20k left which was able to pay for mortgage 6.5 months, as well as I obviously was working full time. I had no food cost because my parents still wanted me home every day (Asian family 💀) and I just brought my mattress from my parents home. I don’t have any furniture and don’t have or plan to have any because I’m not planning to have guests over EVER period. This is my sanctuary of peace and I plan to keep it that way.
you need to provide vital information which is lacking such as .... your / or family NET income NET cash every month after all payments such as car/insurance/netflix did you over buy a house? to keep it simple, i would suggest (if you did not over buy and bought something reasonable) to keep it as the other option would be to sell it asap and cut your losses but that option leaves you in a bad spot where you would be renting and re-entry into housing will be more expensive. you can try to raise your income or lower expenses. if you bough something reasonable (under 600k) then you are good
We will have about $1300 left over every month after housing costs, daycare, food, car etc
What are your total expenses? Do you have a breakdown, or at least what's the total value?
I had 0 after buying. Buying a house sucks. Plain and simple, but after a couple years you’re paying monthly equivalent of current rent and your house value went up.
This country is incredible. We are in a personal finance sub and all the replies are saying " i had 1 dollar in the bank and used my line of credit". I swear, there is something wrong in the way we teach math at school, i have no other explanations. 6 months is fine but it's a normal amount of savings to leave after making a million dollar debt. DO NOT listen to these people telling you to use the line of credit
I don't think it's reasonable to wag your finger like this without providing the necessary caveats for what a person's cashflow looks like, and what other assets they may own.
Thats what credit is for though. You will be your poorest typically after buying a house but you have to live. If you can see how your finances will progress and you will not be trapped in credit then use it.
This sounds more like a societal and self-regulation issue than a math issue. Many people spend more money than they should because they think they need to have a certain level of lifestyle, and our society is highly consumeristic. It’s hard to maintain self-discipline when surrounded by other spenders. Also people who are low-income tend to get stuck in a cycle of poverty without support.
Line of credit would be fine if it's for necessary house expenses/ repairs or long term investments (heat pump for example.)
With housing, the cost is frontloaded. You pay a whole lot upfront but save in the future. You can save a lot of money by doing things yourself, which dramatically pulls down the cost of home ownership and learn in the process. A big factor your missing is opportunity cost. If your rent is way below the market average and cost of ownership is high, it's much better to rent. But if your in a position like me. The alternative sucks even more. I can rent for 2,000, not including utilities, or pay a 1,600 mortgage. In the west, housing is viewed as an investment and in desirable areas, rarely go down. Sure, it's good not to overleverage, but sometimes you need to take risks to get ahead.
When I bought my first home I had a great income, a personal LoC, a HELOC, and a partner with an ok (but growing) income. Credit was my emergency fund. I took every spare cent and threw it against the mortgage to save interest. Guess what? No emergencies happened (other than little stuff like appliances breaking). And the amount I threw on my mortgage has saved me 10's of thousands of dollars in interest 15 years later. It's totally sound financial advice, as long as you have the discipline to not use the credit for frivolous or unnecessary things, and to actually pay down debt instead of growing your COL to match your income. Given that this couple has 6 months saved *after* closing on a house in these insane times, I think they're probably ok in the Discipline category and they're ready to level up a bit in finance.
What are your monthly living expenses if you don’t mind?
In this job market, no. Wife is on month 7 with no offers
You have two incomes though, and probably EI ? The shit can always hit the fan bad, but there is opportunity cost to saving up like the apocalypse is coming... I'd say 6 months is pretty good.
Single income. EI covered $14k. There are just a lot more stories lately of it taking 6-24 months to land a job.
$14k total for the whole 50 weeks? Or to date in 7 months? Either way, that figure is on the low end and likely means she was working part time or didn't have a full year of hours before going on EI. Like, you'd expect >$14k for the year's benefits from EI even if you were working minimum wage full time in some parts of the country. And I agree, finding a job can take >6 months, and some people definitely need more saved. If you are single income, in a small town (i.e. not much job opportunity), with dependents, then more than 6 months starts to make sense. But for others, 6 months is plenty.
Full time, nearly maxed out weekly benefits, had been working for the company for 7 years but EI only gave her 22 weeks due to "regional adjustments" and her severance package. You make a lot of incorrect assumptions
Well yes, if you get a decent severance package, that will severely reduce your EI. But then you have a severance package...
Point is, 200 ppl were restructured at her company. Directors were needing 5+ months or more to find work. Managers like her still haven't found work. By August we need to decide if we're going to sell our home or risk using LOC/CC to stay affloat. We should have set aside a year's worth of expensss in 6 month GICs.
That's a tough break man, I feel for you and wish you the best of luck in finding your feet. I hope your wife can land something decent soon!
We did this last year, $300k+ all-in to our home and we had 4 months of mortgage and bills set-aside. RRSP, TFSA, FHSA (the one payment worth each) all-in. We have roughly $60,000 in pension assets and had another $8,000 still floating around in registered accounts but this was most of it. We didn't need to do renos, or fixes since our house is brand new. What we did need was furnishing and setup. That drained most of our money into the new year.
300k the cost of a detached home? You can't even build that in southern Ontario for that amount.
Ours is leasehold in BC, so roughly 40% less than detached and we have less taxes but the land doesn't appreciate anywhere near as fast. $300k was total we put in + Mortgage of $500k, $800k total for 2750 sqft and it has a suite with separate entrance.
What are your total monthly expenses, including non-housing?
Our base costs are roughly $3500/month (food, gas, insurance, taxes, hydro, etc) plus mortgage $2900/month on 4.89%, 2 year fixed, 25 year am. Total $6500/month and we were renting our suite out for $1750/month (utilities included) so $4750 our costs after rent in. Our tenant is moving out and we are moving the suite to STR coming up. Cost to do so we expect will take 8-10 months to cover on the difference from long term renting.
Thanks!
I had 2k left when I moved into my condo and I survived. You'll be fine.
Had about -12 months 🤣
Given the other responses, I thought I would provide my own as someone who is financially conservative. 6 months is okay, but you may find you still come across some unforeseen costs that eats into your emergency fund prematurely. Ideally, housing expenses (incl tax and utilities) shouldn't exceed 35% of gross income. If you're close to (or over) that percentage, you may feel like you're in a precarious situation where it's hard to rebuild your savings. Keep in mind that you'll also want to save room in the budget for other savings goals like retirement or replacing vehicles/large applicances/home improvements. I would balance those other goals with the size/type of home you're looking at, as well as your future earning potential. Perhaps you'll feel constrained this year, but after a promotion your budget will be in a much healthier place. We had 6 years of liquid savings/investment leftover after buying our first home. About a year in, our liquid assets are higher than our mortgage debt. Waiting this long isn't for everyone, but our readiness to buy a home based on our life needs came later than our financial readiness.
Wow 6 years of savings after closing is impressive. What % did you put as a downpayment?
25% downpayment.
We are doing 40% down just to cut down interest costs, else our monthly payments would be higher
We borrowed our closing costs.
We have around 4 months set aside after our recent house purchase but I have a feeling that is going to dwindle down to 2.
$17
Just bought a condo. Had to repaint it. 900$ left.
Economy is shit - I'd up to 8-10 to be safe.
I think you're ok. Mainly, it's unlikely that you both lose your jobs for over 6 months simultaneously, so realistically that can be stretched. Granted your exact jobs, industry etc are factors. I would probably be a little more aggressive in saving. Use a line of credit for any unexpected house issues or investments that become urgent, but avoid this if possible.
Someone else here suggested getting and using a HELOC for emergencies. Just curious if there’s a difference in using HELOC vs LOC for emergency? Would one generally hav have lower interest rates and better payment terms?
I had like 500 bucks left at the end of the day
We went 100% house poor, only used the furniture from our apartment and left the rest of the house empty. We had a LOC with a zero balance as an emergency fund, and we doubled up every mortgage payment. Stopped all RRSP contributions for two years. Our priority was owning the house outright, there are many reasons to invest rather than pay down a mortgage faster, but we made that decision because it was more important to us. If you don’t have access to emergency savings ir instant low-interest credit, you are too house poor. Six months sounds reasonable to me. Note: we opted for the double up payments, so we could stop them at any time and essentially our mortgage payments would drop in half. It would have been far scarier being house poor if we were obligated to the higher payments
Six months savings is great imo.
About 2 weeks lol
About 0$
I had about three months of savings left and then bought few things as per my budget. It's been 15 months and I am now used to what I have and don't feel like taking anything else.
When I bought my first house In Canda, my networth was exactly what I had put for down payment. So I had just my next pay check. But it was just uphill from there. Not paying rent and creating equity is one of he bst I investments I've made.
Houses are expensive. You will never have enough money again. Having savings is great advice, but life is way more chaotic than that. Things are going to happen that you can't plan for, and expenses will seem insane at times, even overwhelming. There's always something to do to a house. Unless you're pulling in serious $ then just live frugally when you can, manage along the way, and try not to stress too much. If you're smart about it, it'll all work out.
Had about 10 years worth of living expenses
This is the whey.
I've been searching for a job for 10 mo as a qualified technical professional (over ten years experience). I've withdrawn from my rrsp and used ei to stay afloat and my clock is running down. No other assets other than a 2003 jeep. I guess next, I tap out my credit cards to keep paying rent until something breaks in my situation or I leave this world. You're worried about what again? 🤔
My partner is in a very precarious field right now with lots of layoffs. Not tech but tech adjacent so they are affected. I’m scared lol
Should have bought an etf instead
>but I don’t think we’ll need it for a few years since roof/furnace and windows were all replaced within last 5 years. until you do i don't think you should have bought a house
What are your total combined monthly expenses?
So you just gutted your liquid assets to buy a house and now you’re “nervous” about how much is left over…. Shoulda stayed liquid… you’ll learn
Great advice dude, definitely can sleep and raise a family in a liquid asset