I am a 33 year old male, living in Kentucky, married, with two children. I am currently about 1 week away from closing on my very first house (FHA-Backed Mortgage with 3.5% down). My monthly mortgage payments will be approximately $150 less than my current rent payment. I plan on taking this additional income and contribute it directly towards an emergency fund.
Starting out, I will have apx. $3,000 for my emergency fund, with my eventual goal to be $10,000 which should cover any scenario that comes up whether it's loss of job, significant repairs needed to the home, car repair/replacement, etc.
Additionally in 5 years I will top out in pay at my job and be making an extra $15,000 annually. I also receive 2 bonuses yearly which is around $1,000 and $3,000 respectively and have averaged about $5,000 in tax refunds in years previous but have no idea how owning a home is going to impact that (plus I will be exceeding the max for EIC qualification in the next year or two).
I will have a home warranty on the major systems of my house (provided by the seller, no cost to me) for the first year so I should have 2 bonuses and another tax refund before I need to worry about potential costly home repairs (Roof/HVAC/Electrical type of stuff).
I also plan on doing some home improvements to this house, the most significant of which (financially speaking) I can think of right now is to put a privacy fence around my backyard (though no clue what the costs involved there are) and re-grade the concrete patio in the backyard (it slopes down towards the foundation instead of away so there's water accumulation). There's a lot of minor things that cost less than $100 to do as well.
Of course my first priority is to establish a good safety net emergency fund. My wife is a homemaker and makes no income so I provide for all 4 of us. My Mother-in-law also will be living with us and she is employed and will be paying most of the utility bills while living with us, but otherwise not expecting any other contributions from her. So here's my questions:
-
Is $10,000 a good safety net goal? It would be enough to cover any potential home repair or cover all my bills including groceries for at least 3 months if I were to lose my job (which I should mention I feel I have decent job security). Is there a good formula to figure out what a good emergency fund amount should be?
-
Right now my emergency fund is just in a high yield savings account at my Credit Union, I want it to remain fairly liquid so I can easily access it if I need to but is there a better alternative to consider for putting it? I definitely want it to be able to accumulate as it sits there.
-
At what point can I safely start shifting some of my extra money towards home improvements? I know this is kind of variable on my own level of acceptable risk but it would be nice to be able to plan for when I can expect to be able to start making such improvements.
-
Should I continue to contribute towards my emergency fund even after hitting my initial goal (with smaller installments) or should I focus on investing that extra money elsewhere?
Submitted February 27, 2019 at 04:56AM by sbourwest https://ift.tt/2UbWzHg
