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Comment by zelos | Hacker News Reader

Maybe I'm just way too risk-averse, but 3-4 months of expenses in savings is what I'd consider a minimum while in a stable full-time job.

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I completely agree. There's a hell of a lot to be said for having a buffer like this for your mental health. When a long-term relationship I was in collapsed and I was struggling with a bad environment at work the one thing that stopped me from spiralling back to a more dangerous form of depression was the comfort and knowledge of having immediate expenses covered. It gave me enough breathing room to know I didn't have to panic or run away from it all. I really couldn't imagine taking on a mortgage with so little cash in the bank and relying on Steam sales. If the author could go contracting instead it seems like they'd be able to carry on with their journey between contracts. It's not perfect but would be preferable to the situation they're in now.

Re. the GP's comment though - I don't understand how you could do this without any savings, there must've been some? At least rent (assuming you don't live with parents), food, internet connection - it has to be paid somehow surely - either by "you" (through savings) or family/friends taking the hit (eg letting you crash, using their facilities). With the right setup and network you could live extremely cheaply but someone is going to be paying for it. I don't think this is limited to rich kids or upper middle class teenagers (not sure of the focus on children rather than independent adults?) - if the average person can save for a holiday or whatnot - they could equally save towards living expenses, even if only "paying for my own food whilst I stay on my friends sofa rent free".

Yes, our mortgage advisor recommended a certain buffer amount in savings, and it was quite a lot. Either one year or 18 months, and I think that was combined income. That was just to ensure the mortgage could still be paid for a while if we both lost our jobs.

I'm personally planning for an exit strategy which will see me working for myself in about 6 months time. I have roughly one year's take-home pay and will ideally have 18-24 months by the time I quit.

It sounds like the mortgage advisor encouraged you to borrow a larger sum, so that she/he could get a larger commission.

There's no need to keep that much money in the bank just in case you lose your job and can't pay your mortgage. Most lenders (at least where I'm from) will arrange a payment holiday if you tell them you've lost your job. After all, they benefit by earning more interest whilst you're not making payments.

Of course, there are many other good reasons to want that much liquid cash in the bank.

1 year in the bank (CD/savings) is for multiple reasons. Mostly it's for that really nasty scenario where there's a major recession leading to household job loss, when it can be particularly hard to find an equivalent replacement salary. And cash equivalent is important because selling assets in a down market is doubly expensive. Worse is a down market may make the mortgage lender even more likely to foreclose in the hopes of extracting some short term gains to offset losses in other investments. So you risk a losing your equity just by missing a single payment.

I certainly don't drop every dollar into my mortgage every month, it's just not worth the risk for a potential 4% return on investment.

I don't know if these exist in other countries, but some banks in the UK offer an 'offset mortgage', where any balance in a specific current account at the same bank deducted from the loan amount when calculating interest. The last time I looked, they were a little more expensive than regular mortgages, but would be worthwhile for someone who keeps 6 months or more of mortgage payments in their current account.

Forget 3 months, the rule of thumb is 6 months for an emergency fund

And twice your salary in a retirement fund by the age of 30, and three times your salary in retirement by 35.

Basically quit your day job only if your side hustle is already making more money per month (not per hour) because odds are even making more per month is still going to result in not being able to survive much past 57.

Side note, how many 57 year old indie game devs are there?

How does the average American put tens of thousands of dollars into a retirement account within 5 years at a point in life where there is a morgage and/or children? That does not seem like conventional wisdom.

This is the conventional "textbook" wisdom. It is obviously desirable, but in real life completely impossible. And the gap between reality and this kind of "on-high" prescription is why so many people/families have no savings and have no real way to get out of their current situation.

It's conventional wisdom in the same way that you're supposed to drink 8 glasses of water and eat 5 servings of vegetables ever day.

The average American doesn't do what is "conventional wisdom".

It's doable if you get 5% annual growth on the balance, and put in 10% of salary. I ignored compounding, and assumed your income was flat.

They don't.

Don't do the mortgage and children.

I would guess a few but they are retired from full time work.

Huh. I mean, I'm in a full time stable job and I don't keep that much in savings. Nowhere near in fact. But then again if the company wanted to fire me it would have to give me at least 3 months notice,so I treat that as my "buffer" to find a new job while still getting paid.

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