| I made a throwaway, because I don't want friends to know the details of my finances. Your categories (after tax): A. Rent - 10%
B. Debt service - No loans, no pending CC debt.
C. Discretionary - 30%
D. Net (savings) - 60% How do we do it? Well, we make a lot of money (me, $225k, she, $100k, this before tax), so that's one thing. We have no kids. We travel a bit but not a ton because I am something of a homebody. We don't have lavish tastes. And we were lucky enough to have parents that paid our way through college. What I mean by the last thing is that I feel no pressing need to own a house, an expensive car, a boat or a plane. My hobbies are inexpensive relative to my means (computer gaming, reading, skiing). And she and I are of one mind on finances. My advice around saving (from when I was making much less): as a hacker you should be thinking about what you are spending money on. The simplest way to increase your net is to reduce spending on non-necessities that cost a lot of money. That is, focus on the inner loop, the big ticket items, the cars and AC replacements, backyard pools and mortgage payments. I have no idea the scale you are talking about when you say home improvement, but it can easily be a non-necessity depending upon the condition of the house. If you bought a house that requires 35% of your income in mortgage payments AND needs expensive fixups AND you are carrying significant personal debt, you may have overextended. That's not the end of the world, provided that your home improvement costs are efficiently appreciating the value of your house or you are willing to cut on your other discretionary spending. Appreciating your existing assets is a form of saving. But biting off more than you can chew is risky. By living paycheck to paycheck you are running a great risk in the event that anything happens to your income. At a savings rate of 2-5%, it takes you anywhere from 7-17 months to build up a single month of mortgage payment buffer, and that's not including the cost of putting food on the table. I'm not well versed enough in real-estate to say whether selling your house and getting something more manageable is the right choice for you. But I can say, not knowing the composition of your discretionary spending and assuming zero transaction costs, I would probably downsize if I were in your shoes. Of course you could always just start making more money, and that is advice that HN likes to throw out there, but I personally think it's easier to spend less than to make more, especially in the short run. |