Home Improvement - savings/borrowings ratio

[kneelo]

Hi All,

Let's say we have €100k in savings and a home improvement/extension plan that will cost €100k.

What's the general advice on savings/borrowings ratio? How much should we retain as savings while minimising a loan from bank?

Obviously the less we borrow the less of a hit we'll take on interest, but the security of having a decent savings is important.

I know it's completely subjective and depends on personal circumstances, but I'm curious what "rules of thumb" there are out there.

Thanks in advance.

 

[Coldwarrior]

I know it's completely subjective and depends on personal circumstances, but I'm curious what "rules of thumb" there are out there.

It does depend on circumstances, particularly the security of your job/s, but the general "rule of thumb" is to keep 3 to 6 months expenses in an easily accessible emergency fund. Some on this site think this is unnecessary and the savings should be used to pay down debt but personally speaking I sleep a lot better at night with a healthy emergency fund.

 

[Gordon Gekko]

It depends how safe and secure your employment is and how quickly you could build your savings back up.

 

[kneelo]

I agree that the 3 - 6 months buffer is a sensible safety-net approach where possible, which falls roughly around the 80/20 rule I was edging towards. Obviously there are other factors as well, which may mean different things to different people.

Thanks for the replies guys.