How much do you need to feel safe?

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Proteus2006

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I have a very simple question. How much do you need in today's Ireland to feel well off?

I have 40,000 in savings.
I have a mortgage of 200,000 on a property that is probably worth around 300,000.
My income varies but I usually save around 200 a week.
I am 31, single and have no pension or other investments.

How am I doing? Am I rich? Comfortable? Average? Or should I feel insecure?

I would really appreciate any feedback on this.
Thanks,
Proteus
 
Well done. It sounds like you are in a good position.

Would you consider starting a pension now? Just curious?

And if not why not?
 
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Thanks for your reply. Yes, starting a pension is the next thing on my agenda. But what I'm really curious about is: how safe should I feel? I see so much conspicuous spending around me these days that I just don't know where I rank on the scale.
As you may gather, I am very cautious by nature. But I don't want to let that caution stopping me from spending more if that's what I should be doing.
That's why I'd be interested to hear from others: how much do you keep in your bank account and how much do you allow yourself to spend? How much do you need stashed away before you can feel truly confident about the future?
 
Proteus2006 said:
I have a very simple question. How much do you need in today's Ireland to feel well off?

I have 40,000 in savings.
I have a mortgage of 200,000 on a property that is probably worth around 300,000.
My income varies but I usually save around 200 a week.
I am 31, single and have no pension or other investments.

How am I doing? Am I rich? Comfortable? Average? Or should I feel insecure?

I would really appreciate any feedback on this.
Thanks,
Proteus
Click to expand...

I think you are doing really well. If your 40K savings is not earning you much in interest why not use some of it to reduce your mortgage payments.
 
I wouldn't be the best person to answer as I am cautious too.

But I agree - when you see what is going on around you then you start to ask questions about your own spending habits and what you are doing right/wrong. But I think that you are better off not thinking about what other people are doing.

There are so many factors -

1) Credit card debt
2) In essence the bank owns everything they have
3) Inheritance fortunes
4) Lotto fortunes
5) Right place, right time fortunes

As my father would say: "I have enough to do minding my own business without having to mind anybody elses'

But I do appreciate what you are trying to find out - a little reassurance that your financial ways are on the straight and narrow and that it's not a case of everyone else knowing something you don't!
 
You're right - it's earning me very little interest and I really should make better use of it.
But my problem is, having a lot of money in the bank gives me a nice, warm, fuzzy feeling and I start to feel very insecure if the balance goes down.
At the moment, my plan is to keep saving until I get a balance of 100,000 (which will probably take another five years) and only then start relaxing and spending.
Am I being ridiculously cautious? How big a balance would you need before you started to feel really safe?
 
Whelanfiona - yes, you've hit the nail on the head. I find that today you can ask people absolutely anything except how much they earn and how much they have in the bank. Even with your best friends, it's just too embarrassing.
That's why I'm posting here, under the cover of anonymity...
 
I think you're comfortable at the moment. I hope you have your savings in Northern Rock and are drip feeding it into a regular saver at 6%!

In general, you need to have a rainy day fund. Some people like to have anything from 6 months to 12 months expenses 'just in case'. Personally, I'd try to pay down the mortgage once the rainy day fund was in situ. Then I'd look at a pension. I doubt there are too many people your age, and in your position, i.e. house purchased already, with 40k in the bank.
 
Thanks Liteweight. What worries me is, I know things look ok on paper, but if I did anything like get married or trade up to a bigger property, all those savings could be wiped out at a stroke. That's why I don't see how anyone with less than 100,000 in the bank can feel truly secure. Or am I completely out of touch with reality?
 
It's impossible to get into the level of someone else's subjectivity. But in my level of subjectivity, I think that if you had 100k, it still wouldn't be enough. For example, if you lose your job or can't work for whatever reason, you still have to pay the mortgage, bills etc. which will eat a large hole in your 100k over a year. However if you do your best to pay down this mortgage, while maintaining a rainy day fund, you're better off if hard times hit.

It's very easy to want to have more and more, but really there's no one answer to 'how much is enough'. If you just keep all your spare cash in a deposit account it will be eroded by inflation. Better to diversify, you have property and a deposit account, how about investments? After that 'safe' is a state of mind.
 
I don't think i'm alone in the view that the point is not to 'stash' money away to make you feel secure that you have enough - you will probably never achieve this - but rather to learn how to invest in assets that will increase your wealth for you.
This requires that you begin to release some of your cautious nature but also that you take the time to learn how to invest well (you're first investment should be a few good books).
I think you will find that this approach is much more rewarding and the calculated risks you will take as you progress, ironically, will ultimately give you the security you desire.
 
I want to give a long reply to this, but it's late and I've had a long day travelling. Maybe tomorrow. But in the meantime

I was talking to one of my friends yesterday, discussing the post I have on this forum (in great Financial debates) and he asked me a question

How much money did Enzo Ferarri leave when he died?

Answer....
.
.
.
.
All of it!

Goodnight.
 
Excuse me while I just take this interesting topic somewhere else. What are you trying to feel secure from?

You seem to have an income constantly coming in which will look after you. Altough it might vary, 200 a week seems a lot to be saving a week, or your salary must be very good.

You seem to be able to afford to pay the mortgage, but some would say that you pay less in your savings and more on you loan, but then again that is another arguement altogether, and is more a personnel choice really which I have discussed on here before.

So all in all you seem in pretty good shape and I would see my self alot like you but may I ask what is the plan for the rainy day fund if that day never comes.

Sorry for the derailment but am I making any sense here? Should one enjoy oneself? I am not saying you are not. But maybe you should enjoy yourself some more.

I mean to me 40,000 seems like a big rainy day fund. It might help me understand your suituation more if you said more about what you planned to do with it. In 5 years 100,000 can do alot, but would you spend some of it and then save some more again before it reached another level?

Sorry again, but hopefully I asked some useful questions for the topic to maybe develop some more.

Thanks.
 
€40000 sitting in a low interest savings account, being eroded by inflation seems like a waste of your hard earned savings. Why not invest in yourself? Go back to education, improve your qualifications and career prospects, invest in a small business opportunity?? I would think your position, for your age, is comfortable. You have no commitments other than your mortgage, why not put some of your savings to work.
 
Proteus2006 said:
That's why I don't see how anyone with less than 100,000 in the bank can feel truly secure. Or am I completely out of touch with reality?
Click to expand...

in a word yes!

It is not really money in the bank that would make me feel secure. I guess I would feel most secure if I had no debt - that way if anything happens, you lose your job, want to go travelling etc then you have no financial committments except general living expenses which could be paid by any low paying job that you could easily pick up.

So my first choice would be to reduce mortgage.
 
I would also be cautious and feeling secure would definitely be more important to me then having fun as i would find it hard to relax with worry hanging over me. However I feel I can spend on myself a bit, if I have at least made plans to be secure and feel I am on the right path.

It is definitely important to invest in yourself. Never forget that time anad health are the most precious things we all have. Do not let opportunities pass you by because you don't want to disturb your nest egg. What age will you be when you have E100 saved up? Where will you be in your life and will it be too late to do other things? Are there things you could do while continuing to save a certain amount? Who will you be? Someone with 100k saved up or someone who done things they wanted to do?

I also often ask myself these questions and find it difficult not to compare myself with others. However it's pointless because people have different definitions of success. Besides, there will always be someone with more money. It's particuarly important nowadays to decide your own goals and do things on your own terms.

Myself and my fiancee have just bought a house for a mad amount and will be getting married next year. It's hard to tell what's ahead and what we're letting ourselves in for. I do know that there is no way I could settle down now in the commuter belt, if I hadn't had a damn good time and lived my life to the max around the world in my 20s. I have it behind me and it's worth a lot.
 
Proteus2006 said:
At the moment, my plan is to keep saving until I get a balance of 100,000 (which will probably take another five years) and only then start relaxing and spending.
Am I being ridiculously cautious? How big a balance would you need before you started to feel really safe?
Click to expand...

Hi Proteus,

I used to think like this too, i.e. I used to believe I would reach some magic point where I would feel I could start living. But you never reach that point.

In five years, if you have 100,000 in the bank, you'll feel exactly the same. You won't relax and start spending. You could wipe out 100K by trading-up just as easily as you could wipe out 40K. Plus you'll be five years older and things will likely be more expensive.

Plan your saving/investing with timescales in mind, and not just amounts.
 
Thanks for all the interesting comments. There seems to be a consensus that it's wrong to save so much and that we deserve to live a litle. But here's what I don't get:

We all want to retire around the age of 65, right?

Assuming we have around 15 years of life left, need AT LEAST 30,000 a year to have a decent standard of living and have a state pension of 10,000, you need a lump sum of AT LEAST 300,000 to last you for the rest of your life.
And that's 300,000 in cash, since I'm also assuming that we want to retain ownership of our houses.

To have 300,000 in cash by the age of 65, you need to save roughly 200 every week of your working life (after you've bought your house, which will persumably leave you cash-poor).

I know these calculations are a bit crude, but I think the basic point is valid. How can you feel save until you have a huge amount of cash in the bank?

Or am I missing something?
 
I can see where you're coming from but I think people tend to think of it more in terms of various long term investments, and of course their pension rather than having one big lump sum to tide you over.
This is long term savings so you would be losing money if it was sitting in a deposit account.

To be honest I haven't yet been able o work out how much of a pension I will need / will end up with. Work in progress I guess. I find all the media on the subject quite frustrating. It doesn't help you actually figure out how much you will need. I guess E30k p.a. isn't a bad starting point.
 
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