What is your savings rate?


#21

Over what period of time? Mine is completely variable. Depends on how much “extra” income I make in a given month, and also how much spending I do. I don’t have much in the way of fixed costs, but I still find plenty of things to spend my money on.

Monthly savings rates over the past 13: months: 42%, 32%, 28%, 74%, 55%, 49%, 8%,34%,48%,51%,30%,76%,18%,32%.

I calculate it with after-tax salary + extra income (pre-tax) as the income number, so expenses include estimated taxes but not withheld taxes. I’ll go with it’s the “lazy yet confusing” way to calculate it.


How do you calc savings rate?
#22

I save around 30% of my teaching income and 100% of any side money I make


#23

Great topic.

I’m currently around 45% to 60% depending on if I’m traveling in a particular month.


#24

If you include excess debt payments as savings, I’m at 56%. As a recent grad, I’m currently living with mom and dad, so once I move out this will likely drop to around 45%.

Edit: I forgot about my 401(k) contributions. They come out before I notice they’re gone, so I don’t think about it! Not counting employer match, I’m actually at 62%, which will drop to 51%.


#25

Impressive. Ours is roughly:

19% towards retirement (includes employer match)
15% towards home equity (regular plus extra payments)
~8% towards cash savings

Let’s call it 40% of gross income going directly towards increasing our net worth.


#26

42% this month, projecting 50% for December.


#27

I’m at about 40-45% right now. I’m really going to have to bump that up if I want to retire “early” (meaning 55 of me)


#28

Depends how it’s calculated. I like to count my student loan payments as savings as well as mortgage principle, and that makes a huge difference to my rate since my single largest expense, by a large margin, is student loans. More than taxes and mortgage individually, and more than all my other expenses combined.

If you grant me that leeway (to count those as savings since the student loan payments otherwise would be saved and the mortgage principle is net worth-positive), my savings rate of my gross is about 80%. Mine and Mrs. Vigilante’s combined is a bit higher, like 84%.

If you take the student loans away and call them an expense, my household savings rate of gross is as follows (from my budget, which is a slight overestimate of expenses and underestimate of income):

Me alone: 59.47%
Mrs. alone: 34.89%
Combined: 48.15%

So to be fair, I guess I’d say our house saves about 50-55% of our gross income, bottom line.

PS - Really neat things happen when we talk about savings rate of net. My savings rate of my net income this past year (if we count student loans as savings) was 105.44%. Seriously. Next year, I project it may be more like 134%. Obviously, there’s some funky math happening if that ~$1,850 per month payment is classified as “savings”, but since it otherwise would be, I guess it’s nice to know I am actually putting more into savings each year than I even bring home!


#29

Something else to consider when talking about savings and saving percentages…I think there are smarter places to put that savings that actually can multiply your “savings rate”. Maxing out on tax preferred accounts like a 401K that may also get a match from your employer is a smart way to save and extend your savings. Don’t forget, too, using an HSA account to extend your health care savings by letting Uncle Sam contribute a portion. Last, in today’s low interest savings accounts (this may change soon) it may make more sense to “save money” through additional mortgage principle payments instead of stuffing it in a savings account that pays a fraction of one percent interest. These are just some of the ways to increase our effective savings rate.


#30

My current savings rate is 44% of gross. I do plan on putting all side gig money to savings though so hopefully that will grow and up my savings rate.


#31

I am at 65% of my net take home pay.

The bad news is all of it goes towards my student loans! The good news is sometime in early 2017, that will be my actual savings rate and ill be debt free :slight_smile:


#32

40% of gross; I always get confused on this question; do we calc based on gross? net? are we asking savings rate after retirement accounts? (e.g. don’t include 401k, IRA, HSA only calculate % of net income after?)…

maybe I’m making it too difficult… :grimacing:


#33

I’m sure there are differences of opinion, but that’s because savings rates could be calculated for different purposes. If your purpose, like mine, is to see how your current “standard of living” - i.e. spending on housing, groceries, technology, travel, etc. - affects your time to retirement, then the basics are probably like this:

  • Always use gross income. That’s the only number that really tells you how you’re doing; savings after taxes skips a kind of important step - the step that, for some, is the most costly even though it’s easy to reduce: taxes! Plus, if you use net, you run into weird situations like mine where your savings rate is over 100% but you aren’t yet financially independent. In which case, what’s the point?

  • Things that are clearly savings:

    • Anything put into a retirement account. Even employer matches.
    • Anything put into an after-tax investment of any kind - or even a savings account.
    • Any principle payment on what is typically an appreciating asset. For most of us, that just means mortgage interest. It could also mean other real estate, a coin collection, or a really expensive and sought-after collector’s edition video game for all I care. Whatever you think will sell in the future for more than you bought it for.
  • Things that are clearly not savings:

    • Any loan payment on a depreciating asset. Most commonly this includes car loans. Also includes weave loans.
    • Any interest payment on any loan. Sole exception to this rule, in my personal book, is student loans that will be paid off before retirement. Why? Well, if you needed them to get through the education you needed for your job, they are not optional, lifestyle inflation-type expenses that you need to cut back on. And without them, that money could otherwise be entirely savings. Plus, those principle payments are net worth-positive, and the interest payments may not be but again are unavoidable and not affecting your “standard of living,” so not something that needs to be “cut back.” As long as you will be saving this money in the future, might as well count it as savings now. Plus, it makes my savings rate WAY more impressive :slight_smile:
    • Obviously, any money that leaves your pocket for any other reason. Taxes, penalties, expenses (from rent and groceries to cable bills and alcohol), and gifts/charitable giving. Anything you don’t get back.

So take all those “savings” categories added together, divide it by the total gross salary and other money you made that year, and boom - savings rate.


#34

Some interesting thoughts here. I would generally disagree with including the interest portion of student loan payments in a savings rate, since they are an expense in every sense. Principal makes sense, because it does have a positive impact on net worth, but the interest you pay doesn’t. Obviously in the future, when the debt is paid off, you can put the full amount towards savings, but since you currently aren’t, and the full payment isn’t currently affecting your net worth, it doesn’t make sense to include the full amount.

I would also argue that the logic you apply to justify including the interest portion could also be used to make an argument to use after-tax income, rather than gross, to calculate savings rate. Taxes are easy to reduce (to a point) by contributing to tax-advantaged accounts, interest on student loans is easy to reduce by paying down your debt. There are also other items that get deducted from your gross income that you can’t reduce (CPP & EI in Canada, what I believe are called FICA taxes in the US) which are unavoidable and not affecting your standard of living, not to mention something that you likely won’t be paying in retirement (just like taxes, in all likelihood). Aso, in the way that if you needed student loans to get your job, if your job is responsible for your high taxes, they are not optional, lifestyle inflation-type expenses that you need to cut back on (although I would argue you should do as much as possible to minimize them).

My method seems to be slightly different that most people’s here. I calculate my net worth each month and divide the change in my net worth by my net income to get my savings rate. If I get something like a tax refund or a meal allowance from my job (they always go straight into savings), I add it to my net income. I think in the US it would also make sense to add back your employer’s match (in Canada, it’s included in income and then deducted again, basically just an in-and-out for a net impact of nil). This method might change at some point, because I’m still at the point where market returns have basically no impact compared to my actual contributions, but for now it works. I feel that it captures everything I need it to: My own saving contributions, my employer match, my debt reduction, and any income (i.e. dividends) from investments that gets reinvested rather than spent. As with everything else personal finance-related, lots of ways to do the same thing, it’s just a matter of finding what works best for and makes the most sense to you.


#35

Using the method outlined in How do you calc savings rate?, I came out to 53% for the year through the end of Oct.!


#36

I would generally disagree with including the interest portion of student loan payments in a savings rate, since they are an expense in every sense.

Yeah, but then my savings rate goes down by about 10-15% and I get sad. But you are correct, strictly speaking, that I’m not “saving” that interest.

the logic you apply to justify including the interest portion could also be used to make an argument to use after-tax income

I do disagree here, although nothing you say is wrong. We’re just using it for a different purpose. The distinction I make is that tax payments are purely a loss. They do nothing to change my income, and they are something that is avoidable as part of an adjustment of my lifestyle. In other words, if I choose to bring home less money per paycheck, I can save more money - it’s relevant for the purpose of calculating my savings rate. But my student loan payments aren’t optional, and have nothing to do with my reason for checking my savings rate, which is primarily to see how my progress will be if I continue to live as I do today. My mortgage payment, on the other hand, does have something to do with my lifestyle; I could downsize houses. Can’t downsize my education!

Interesting nonetheless, thanks for your contribution!


#37

Holy cow folks! THose numbers are impressive. 3 mo avg is 29.3% on net income. Looks like I gotta step up my game…


#38

So I realized from another thread that I wasn’t tracking 401k employer match in my cash flow sheet. I’ve added that back in for this year and my savings rate is a little over 20%. That helps line up the NW jump a little better.


#39

You crazy Matt! 60%!


#40

Do you find that saving 65%-70% of your incomes you still are able to have awesome experiences? That is my challenge - I always want to save more, but I also like going and having awesome experiences (Coachella, Art Basel, Paris each fall etc.)… I am at about 40% myself, but can’t get any higher because there is always something I am planning… Do any of you feel like you miss out saving more than 50%?