Number is pretty irrelevant if you're not relating it to expenses. Living with 4 roommates or something for $200 a month is going to take a lot less cushion than if you have a family of 3 and a mortgage.
Ask HN: How much savings did you have before quitting your industry job?
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Re: Ask HN: How much savings did you have before quitting your industry job?
#121 year of expenses including rent,healthcare, food ,etc. When doing financial planning you should always try to save up to 6 months of all expenses. This is hard to achieve but the recommended number even if you are staying at your industry job. You never know what can happen.
Seriously, how do you do this?
My family makes a good income, own a modest home, drive 10 year old cars, have $0 debt ex-mortgage and don't do exotic trips. We put 20% away for retirement.
Our baseline cost to live including mortgage, property tax, food & minimal extras is probably around $45k. Our area has a tight rental market, so owning the house is a net money saver.
Other than cannibalizing retirement, building up that much is tough.
Re: Ask HN: How much savings did you have before quitting your industry job?
#13$10,000 savings
I could survive on $2,000 per month.
Re: Ask HN: How much savings did you have before quitting your industry job?
#14savings?
i should make some of those before i quit my industry job... although i was hoping i would get up and running on the side, and not needing any other peoples money...
i might quit after something takes off enough to need full time attention. :)
Re: Ask HN: How much savings did you have before quitting your industry job?
#15I had about $11,000 USD after working for 20 months at IBM, lasted for about year and a half. Best decision ever. =)
What did you do after that?
Re: Ask HN: How much savings did you have before quitting your industry job?
#16If you plan on quitting your job, don't just follow what people comment here. The actual amount you need should be calculated yourself, based on your plans. 1) How much money do you need to get round per month. 2) Add a chunk ontop of that for unforseen expenses, broken fridge for example... 3) How long do you estimate you'll be working on your project? 4) Add a large percentage to that estimate for unexpected issues…
This! Everyone's situation is different :)
Re: Ask HN: How much savings did you have before quitting your industry job?
#17If you plan on quitting your job, don't just follow what people comment here. The actual amount you need should be calculated yourself, based on your plans. 1) How much money do you need to get round per month. 2) Add a chunk ontop of that for unforseen expenses, broken fridge for example... 3) How long do you estimate you'll be working on your project? 4) Add a large percentage to that estimate for unexpected issues…
You should also factor in time to get paid. If in your new venture you are going to be invoicing people directly then you should allow at least a couple of months to be paid.
i.e. you say 30 day payment terms on your invoice, but nobody will pay until that 30 days has elapsed, some people will pay you in the 4 weeks after that, and sometimes even with aggressively chasing you will have invoices which are 2 months overdue (i.e. no money for 3 months after they received the invoice)
Re: Ask HN: How much savings did you have before quitting your industry job?
#18$10k liquid + $15k in withheld taxes the government owes me.
At least 5-8x that in an HSA, 401k, SEP, IRAs, Roth IRAs and tax-advantaged government bonds paying 7.5% that I bought a few months after I cashed out of the Janus fund in Dec 1999. (My broker fired me for that)
I'm going to hold on to those bonds as long as I can, and I'd much rather borrow against the equity of the "home" I own at a lower rate. (I bought the home in cash, so this is my "first" mortgage -- I opened the account when I wanted some capital to take a chance at buying an adjoining property at a tax auction.)
One of the first things I did when I quit was write a check from the heloc to the HSA so I wouldn't have to think about making contributions for it.
It's a little more complex than that because I have two houses on one large lot and my wife's riding academy and the rental income creates a financial situation that's so sweet it's almost a scam. I think last year I got $16k of rent, experienced a positive cashflow of around $14k from it, but the IRS says we made $4.5k of income because of depreciation on our property.
(I have no idea why anybody buys a single family house; as much as muggles make a big deal of the mortgage interest deduction, owning a duplex means you can write off half the principal plus you get a cash flow to help w/ the mortgage and property taxes. Maybe you even get a cool neighbor.)
One key to making this work is that I can get a high deductible health insurance plan through COBRA for $500 a month and that will tide me through until Obamacare comes unless the Republicans defund it. That's important because there really isn't any such thing as individual health insurance in NY. (I'd better write that letter to my Republican congressman before I forget.)
Anyhow, it isn't all roses. I pay $4k a year in taxes for a "persistently dangerous" school that my son goes to where probably 1/2 of the parents w/ college educations don't send their kids to because they homeschool. They haven't had a principal last more than two years so long as I know.
The internet sucks out here too. Github works OK, but it took 30 seconds to create a trouble ticket with the off-brand project management software at my last job, which was one of the reasons I quit. Netflix and Amazon instant video work, but I can't really watch Youtube. I used to use Flickr a lot, but with the latest update it is so slow I can't even use my own photographs when I make a presentation because it takes 1 minute+ to load.
Re: Ask HN: How much savings did you have before quitting your industry job?
#191 year of expenses including rent,healthcare, food ,etc. When doing financial planning you should always try to save up to 6 months of all expenses. This is hard to achieve but the recommended number even if you are staying at your industry job. You never know what can happen.
6 months is a decent starting point for one-size-fits-all advice, which is why it is the standard context-free recommendation, but I honestly think there are circumstances where you can skimp on it.
For example, in the totality of your personal situation, you might have:
+ multiple independent sources of income + insurance against common forms of risk (e.g. very good health or occupational coverage) + strong non-market safety nets, either via your government or social network + better than average marketability of your skills + a lifestyle which was amenable to belt-tightening in the event of an emergency + access to credit which would survive events likely to cause a hit to your income
I appreciate that there is a wide range of the risk tolerance spectrum represented on HN, and I'm probably towards the "I'd prefer more consistent, smaller returns" side of it, but there are many people for whom six months of savings is underbuying risk given their positioning and preferences.
Re: Ask HN: How much savings did you have before quitting your industry job?
#201 year of expenses including rent,healthcare, food ,etc. When doing financial planning you should always try to save up to 6 months of all expenses. This is hard to achieve but the recommended number even if you are staying at your industry job. You never know what can happen.
Seriously, how do you do this? My family makes a good income, own a modest home, drive 10 year old cars, have $0 debt ex-mortgage and don't do exotic trips. We put 20% away for retirement. Our baseline cost to live including mortgage, property tax, food & minimal extras is probably around $45k. Our area has a tight rental market, so owning the house is a net money saver. Other than cannibalizing retirement, building…
When I scored my first job out of school, I moved out into a tiny apartment in downtown Toronto—walking distance from the office. I managed to save about half of my after-tax income for a year and a half which came out to $26k.
No car, no family to support, no travel, no expensive purchases (I remember deliberating for weeks about buying an iPod Nano). Doubt I could have done it with a family to support and multiple cars.
I did have immediately family as a safety net but I covered my own expenses for whatever I needed after moving out, with the exception of a few meals here and there.