House Budget question (% of income for bills)

Move to a cheaper location. I would love to get out of Seattle, we are getting scammed here on house prices. I have a starter house that would be me about 5 times that house in most parts of the country.

But in seriousness, 80% is way too high in my opinion. I try to shoot for the mortgage and real estate taxes to be no more than 20ish % of NET income. I don't see anything in here about retirement, if you leave such a thin margin there will be no money for retirement. Also, you should have a huge emergency fund with such a thin margin each month.

yikes;

I've spoken about our complicated setup before - but we each put 65% of net into the "kitty" (joint expenses like mortgage, utilities, daycare, etc) and 10% into savings. Note that these are AFTER retirement deductions (pre-tax); I put 20% of gross in, and my wife puts $150/check plus 8% (pension, obligatory).

I came about these values by summarizing all our relevant and predictable expenses, categorizing via family vs personal, then toying with the %'s to give a comfortable margin for the family expenses while leaving money for personal spending.

what stands out immediately though is your $500k mortgage and $3200 payment. That's obscene.

Quote from Dr. J : what stands out immediately though is your $500k mortgage and $3200 payment. That's obscene.

Seriously, what kind of hellish rate does he have? I thought that must include impounds but then those are mentioned separately.

Quote from LivninSC : Seriously, what kind of hellish rate does he have? I thought that must include impounds but then those are mentioned separately.

I can't edit my post for some reason (404 error) but in addition to the things he's listed he also needs to include water, insurance, and I prefer to set aside some $$ for upkeep. Depends on the house but I've got painted wood siding so I'm painting every 5-7 years not to mention the usual (broken dishwasher, fridge, faucet replacement, etc..)

What about HOA dues? Those can easily add up as well.

I don't know who ever suggested 35% of everything but I can tell you that's unrealistic for most people. I've heard of a 35% LTV requirement but out here it's usually allowed to go higher than that.

The answer is that there isn't one percentage that will work for everyone. A large percentage of my income goes to my housing but that's because of where I live and I feel that overall housing is a sound investment, and one that you actually get to use. It's worth it to me to be a bit risky and have a really nice house that I get to live in that should appreciate more than a middle of the road house. To others though it isn't. It's a personal choice.

50% for needs (housing, utilities, food, transportation, insurance, etc.)

15% for wants (items/services you could easily do without)

35% for savings (emergency fund, retirement, college, etc.)

here's a list of what's in my xls sheet:


Mortgage - Principal & Interest
Mortgage - Taxes
Landline/Cell/Internet
Satellite
CL&P (electricity)
Daycare
Medical / FSA
Student Loans
Insurance-Home
Insurance-Vehicles
Vehicle Taxes
Sewer Tax
Dog Licenses

For personal expenses we have
Car payment
Gas (I have a record of the past few years' of gas usage and make an estimate on that)

Find a smaller, cheaper home. You will not only save on the mortgage but also on the utilities and tax.

The only piece of advice I can offer is you and your wife have separate personal accounts and 1 joint, it has cut out a lot of grief out of our marriage.

How it works for me and my wife. Everything goes into joint except 150 per paycheck and that goes into our personal. The rule is, you can buy anything you want and the other party cant complain about the expidenditure.

Out of joint comes all household expenses, and mutally agreed upon charges with the left over going to savings. Since we both have the same amount there is a lot less grief....

Quote from 808Lurker : The only piece of advice I can offer is you and your wife have separate personal accounts and 1 joint, it has cut out a lot of grief out of our marriage. How it works for me and my wife. Everything goes into joint except 150 per paycheck and that goes into our personal. The rule is, you can buy anything you want and the other party cant complain about the expidenditure. Out of joint comes all household expenses, and mutally agreed upon charges with the left over going to savings. Since we both have the same amount there is a lot less grief....

That's more or less how we do it - personal checking accounts and joint checking and savings accounts. Although pay is DD'd into the personal accounts, I have auto xfers setup to move $$ into the joint accounts.

We've always done it this way - my parents used to do the "you pay the cable and I'll pay the telephone" method but I never understood how that was equitable.

Quote from Dr. J : That's more or less how we do it - personal checking accounts and joint checking and savings accounts. Although pay is DD'd into the personal accounts, I have auto xfers setup to move $$ into the joint accounts.

Yep thats how we do it. It has cut the financial arguments to 0...

Quote : We've always done it this way - my parents used to do the "you pay the cable and I'll pay the telephone" method but I never understood how that was equitable.

Ouch. I don't see how that is equitable either. My parents were worse..

My father earned about 75% of the income, my mom 25% and everything went in the joint and my dad took care of all the expenses. Whenever my mother went to buy something she would have to give the receipt to my dad and sometimes justify it. My mother was paranoid for years to buy anything....it lead to some bad fights...good thing my dad mellowed hard core..

Yeah, your most incorrect number is $3400 on a $500k mortgage.

I bought my first house in Nassau County this year with around that mortgage and pay only slightly more than that per month, and that includes taxes and homeowner's insurance.

And why would you buy a house on LI and pay HOA fees?

And do not compare your situation to someone's in North Carolina. The housing prices and property taxes on LI vs. NC are completely different. Unless you live well below your means, it is very difficult to be able to save half your after-tax income. That's just the price you'll have to pay to live on LI, unfortunately.

LivninSC
>Seriously, what kind of hellish rate does he have? I thought that must include impounds but then those are mentioned separately.
>

I don't have a rate yet. Like I said, I'm trying to determine budget (so we know what price range to look for a house).
As for the monthly payment, I did a google search on "mortgage calculator" and plugged in 500k and used the default interest rate that was there, and it spit out the monthly payment.


>I don't know who ever suggested 35% of everything but I can tell you that's unrealistic for most people.

I did some searches for "how much mortgage" - and various sites all recommend something like 35% of gross for debt.
I believe 35% of gross is equal to about 50% of net (taking into account taxes, etc)


>lickeals

Thanks for that. Yeah, so you are kind of aligned with my thoughts. Bills should be about 50% of income.


>808Lurker

We don't care about who spends the money...the debate is how MUCH money to spend (in terms of % of gross income)
It doesn't matter if we have 1 joint account or separate accounts...the amount of money to spend is still the issue.

How much percentage wise of your and your wife's total income is going to bills?
I think the percentage should be 50% of total gross income with the other 50% going into savings, but she thinks it should be higher.


Zytos
>Yeah, your most incorrect number is $3400 on a $500k mortgage.

hmmmm, let me try again:
I did a google search on mortgage calculator and went to:
http://www.bankrate.com/calculato...lator.aspx
I plugged in 500k (I left everything else default) - and it spit out: 3326.51


>And why would you buy a house on LI and pay HOA fees?

I did not mention anything about HOA fees.


>And do not compare your situation to someone's in North Carolina.

Thats what the wife says.


>Unless you live well below your means, it is very difficult to be able to save half your after-tax income

Thats what Im here to find out
How much is resonable to pay for bills?
If total bills (mortgage and electrcity and others) equals 99% of net income, then I think thats bad, because any issue and you're in big trouble.
I say 50% (which is probably too conservative) and the wife thinks 80% (which I think is high), so I was hoping to get some more opinions from like minded people.

Thanks everyone!

I think when I moved to pittsburgh I couldn't believe all the house you can get out here for the cost. I live in a 4 bedroom ranch sits on a wooded lot, 5 minutes from the city, 3500 sq ft, sunroom with fireplace, 3/4 acre yard, privacy all brick and it was only 120K

People should pay all those crazy home prices else where.