Source
r/AusFinance•
HalfBlueCat1

How long did it take for you to save six months of living expenses?

A very common refrain I hear on personal finance subs is save a rainy day fund of 6 months worth of living expenses. I get the sentiment, but was hoping to hear people’s experiences doing this.

At a 20% saving rate, you’re looking at five years of saving (assuming 0% in interest). This seems like a long time to save, especially if you haven’t bought a house.

So, who is doing this, and how are you doing it?

Posted Dec 16, 2023, 4:14 AM UTC

1351
Wow_youre_tall•

Your maths is wrong, at 20% It’ll take 2 years to save 6 months of living expenses.

Be mindful the emergency fund is essentials only (rent, bills, food)

28
BennetHB•

That's also assuming that your living expenses are 80%-100% of your take home pay, which if true, would suggest you are living beyond your means.

11
HalfBlueCat1OP•

My understanding is that 20% savings rate is pretty common in Australia, albeit not in this sub.

3
BennetHB•

Well you asked how to save faster than 5 years dude. I've given you the answer.

7
Flimsy-Mix-445•

But 80% is not just living expenses and also includes discretionary expenses.

According to the ABS and what is commonly known about mortgage serviceability assessments, 1/3 of expenditure is discretionary which means about 54% would be considered living expenses.

This means about 16.2 months to save 12 months of living expenses.

7
Chii•

My understanding is that 20% savings rate is pretty common in Australia

just because it's common, doesn't mean it's desirable.

2
HalfBlueCat1OP•

What would you say is desirable? Say for a couple, no kids, 220k HHI.

2
newser_reader•

To spell it out for the OP .8*6 = 4.8 (that's how much you need). You save .2 per month so you take 24 months to get to 4.8.

7
Money_killer•

Strong math game

3
HalfBlueCat1OP•

Thanks, fixed it.

-1
newser_reader•

you 'fixed it' by suggesting a savings rate of 20% means you're spending 20% of your income. Delete and try again tomorrow?

2†
BennetHB•

My savings rate is higher than 20%, and my living expenses are lower than 80%. That's how.

If you are having trouble saving, usually the main offender is that you are living in a place that is more expensive than you can comfortably afford.

People tend to get upset when I suggest that your rent or mortgage repayment should be max 30% of your take home pay, but if you do this and are conscious about not spending on fun stuff excessively, you will be able to save and invest more than 20% of your pay, and build a decent emergency savings with it.

15
SpiderMcLurk•

Even with 30% on housing once you prioritise child care, school fees, insurances (say health, house, IP and life/tpd) and wellness activities (say a gym), kids activities (say a sport or swimming lessons) it could be quite easy for a family with 3 kids to be spending 80%

5
HalfBlueCat1OP•

We spend about 30% of our post tax income on housing, and have more than enough in savings to cover us for a year, perhaps more. That said we didn’t save much this year, because it was very, very expensive,

2
BennetHB•

If you have a years savings already I'm a little unsure why you're asking the question at all.

9
huckstershelpcrests•

I reduced my parents living expenses and upped my savings simply by poisoning them! Great success!

8
PhilosophyCommon7321•

Did you poison with mushrooms?

3
huckstershelpcrests•

As there is a case before the courts, no comment

10
[deleted]•

[removed]

1
Calm-Drop-9221•

Jeez OP you got burnt a bit. Tough crowd.but I get what you're asking and This is the reason I work in Oz for 6 mths so I can then have enough savings to live in Thailand comfortably for 8 mths to 12 mths I save 4k a month while I'm in Oz I get paid just over 80k and pay minimal tax Works car and subsidised housing with no Bill's.

8
HalfBlueCat1OP•

Cheers, sounds like you’re living the dream

3
mrbootsandbertie•

What job do you do?

1
Calm-Drop-9221•

I'm a nurse in mental health with a bit of experience so its not a problem getting contracts. I also don't mind working rural and remote so you get the housing and travel assistance

2
[deleted]•

[removed]

1
auscrash•

Yer couple of years sounds about right when we reached the 6months expense mark in our savings.

2 years goes plenty fast enough.

6
Raida7s•

Starting from near zero, it took me about 3 months to save 4 month's expenses: this is mortgage repayments, utilities, insurance, plus low groceries amount. Calculated annual figures then divided into monthly amounts.

I renovated my kitchen before moving in when I bought, single person single income no housemate.

6
HalfBlueCat1OP•

If you’re saving 20% of your income (let’s call it x)then you have (6*0.8x)/0.2x, which works out to be 24. so 24 months = 2 years.

So yeah, it blows be away that people are saving 50%, and so commonly, when 90% of comments here are about CoL

1
Raida7s•

Okay, so what you're saying is ALL expenses, not I NEED TO PAY MY BILLS expenses.

I know a few people who, with a sudden complete loss of income, would have months or years worth of expenses saved up, if they made no alterations to their spendings and didn't get a job.

But I've never heard of the calculation being done as though it was for covering discretionary spending, gifts, eating out, hobbies, holidays, new clothes, etc etc.

I save approx 35%. Once I hit the point of four months for the emergency fund, then I moved on to 'start saving' money that I allow myself to access for whatever I'm saving for.

6
HalfBlueCat1OP•

That makes more sense

2
vespertineflutter•

Why 80%? I follow barefoot investor which is 3 months of whatever is in your "blow" bucket (60%).

6
Money_killer•

Never have 😂🤣

4
ThatHuman6•

imo 6 months is too much, especially if you have an in demand skill and are covered for health insurance wise. Very unlikely you’d go six months without work. For low skill workers maybe it makes more sense though.

3
No-Fix-444•

Low skill and specialised workers. When you're specialised or at the top it can be very hard to find another position. Because a) overqualified for anything less b) there's not as many jobs available.

All walks of life on this sub

7
DownUnderPumpkin•

Isn't low skill easy? Since you have more choice, I.e factory line, hospitality, cleaning, fruit picker.

3
No-Fix-444•

There's heaps of people applying for them, I would say

2
Money_killer•

Exactly, literally one week is enough for me to get another job. But yes 3 months is ample for us personally

-5
MT-Capital•

Probably save 6 months of living expenses every 3 months.

3
HalfBlueCat1OP•

That’s very impressive.

3
Tango2Alpha1•

We only have 2 months living expenses saved up, don't need more than that for two people, for us anyways

2
Oh_FFS_1602•

We did it after having a house, felt like forever but it was probably 6-12 months. We don’t spend half of our earnings but had a few unexpected expenses pop up during that saving period so it would be 5 steps forward, 1-2 steps back along the way.

It was pre-COVID and gave us immense peace of mind once lockdowns were announced and prior to government support being rolled out (not that we needed it as it turns out, but it was a period of high uncertainty and we know many others did not have the same outcome)

2
ShadowPhynix•

Living expenses =/= your current monthly expenditure.

It means the absolute minimum you could live on for that month, so:

  • Rent/Mortgage
  • Other debt repayments
  • Bills
  • Transport
  • Basic food (cheap, bulk buy and cook, drinking water only)

If your minimum expenses really are the full 80%, I’d suggest lifestyle changes are needed because you’re probably living beyond your means at that point, especially given you mentioned your combined income was 220k.

2
HalfBlueCat1OP•

We have a lot of fat to trim. Buying Epic ski passes is probably the first thing to go.

1
emmainthealps•

Well I’ve been an adult for 16 years and still haven’t saved it. So….

2
johnwicked4•

my credit card is my rainy day fund, i keep it aside and only ever use it for emergencies then pay it off the following monthly pay day

2
the_doesnot•

I’ll be honest, I have credit cards and parents to fall back on. Never had an emergency fund.

I invest $2k a month so if I switched that to HISA I’d have saved up an emergency fund in 18 months I reckon.

1
Professional_Elk_489•

I save about 50% of my income, I save about 1.66 X my living expenses per month. It would take me 3.6 months to save 6 months living expenses

1
Due-Selection966•

I would get there quicker if I didn't have shitty landlords and employers.

1
Old_Dingo69•

9years. Sold the house and banked 4 yrs worth of living expenses. Yet some still swear black and blue that property is not the best investment. Where is he? 😂

-1