Home Improvement - savings/borrowings ratio

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.

kneelo said:

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

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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.

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

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.