2014 Savings Rate Goals

[Ian]

This didn't feel like a very frugal month, but looking at my numbers I did acceptably: it barely rounds up to 90%. I'm hoping to do better in June, because I shouldn't have to travel out of bike range or buy food in bulk.

[nikki]

This didn't feel like a very frugal month, but looking at my numbers I did acceptably: it barely rounds up to 90%. I'm hoping to do better in June, because I shouldn't have to travel out of bike range or buy food in bulk.

What do you usually eat, Ian? I know my food costs are much higher than yours because I get the organic CSA, use olive oil more than before, buy cheese occasionally, make yogurt, and use milk for coffee regularly. And I bake a lot, which means I probably go through butter, flour, etc. much quicker than you do. I don't buy meat very often, though I intend to buy frozen shrimp today for a couple ultra-fancypants meals this week.

I imagine you eat a lot of stir frys, rice dishes, maybe eggs?, and maybe even ramyeon. Potatoes? Enlighten me! :-)

As for my savings rate as of the end of May, a paltry 75.16%. Just kidding--that's still decent; just not compared to Ian's!

[FIreDrill]

This didn't feel like a very frugal month, but looking at my numbers I did acceptably: it barely rounds up to 90%. I'm hoping to do better in June, because I shouldn't have to travel out of bike range or buy food in bulk.

What do you usually eat, Ian? I know my food costs are much higher than yours because I get the organic CSA, use olive oil more than before, buy cheese occasionally, make yogurt, and use milk for coffee regularly. And I bake a lot, which means I probably go through butter, flour, etc. much quicker than you do. I don't buy meat very often, though I intend to buy frozen shrimp today for a couple ultra-fancypants meals this week.

I imagine you eat a lot of stir frys, rice dishes, maybe eggs?, and maybe even ramyeon. Potatoes? Enlighten me! :-)

As for my savings rate as of the end of May, a paltry 75.16%. Just kidding--that's still decent; just not compared to Ian's!

If 75% is paltry then I don't want to know what my 36% would be considered :P

[nikki]

This didn't feel like a very frugal month, but looking at my numbers I did acceptably: it barely rounds up to 90%. I'm hoping to do better in June, because I shouldn't have to travel out of bike range or buy food in bulk.

What do you usually eat, Ian? I know my food costs are much higher than yours because I get the organic CSA, use olive oil more than before, buy cheese occasionally, make yogurt, and use milk for coffee regularly. And I bake a lot, which means I probably go through butter, flour, etc. much quicker than you do. I don't buy meat very often, though I intend to buy frozen shrimp today for a couple ultra-fancypants meals this week.

I imagine you eat a lot of stir frys, rice dishes, maybe eggs?, and maybe even ramyeon. Potatoes? Enlighten me! :-)

As for my savings rate as of the end of May, a paltry 75.16%. Just kidding--that's still decent; just not compared to Ian's!

If 75% is paltry then I don't want to know what my 36% would be considered :P

I jest! I jest! We're all doing fabulously. It's just fun to compare with Ian because he's the only other poster I know of in South Korea.

[happy]

My goal for 2014 has been to stay > 50%. Currently running at 56%.

[Ian]

What do you usually eat, Ian? I know my food costs are much higher than yours because I get the organic CSA, use olive oil more than before, buy cheese occasionally, make yogurt, and use milk for coffee regularly. And I bake a lot, which means I probably go through butter, flour, etc. much quicker than you do. I don't buy meat very often, though I intend to buy frozen shrimp today for a couple ultra-fancypants meals this week.

I imagine you eat a lot of stir frys, rice dishes, maybe eggs?, and maybe even ramyeon. Potatoes? Enlighten me! :-)

I don't know that I've ever done an inventory of my diet, but now's as good a time as any. To start, my school lunches (at my main school) are pretty good: I always get rice, soup, kimchi, a vegetable dish, 1-2 meat dishes, and periodically fruit or other things outside those categories. This drops my costs and adds variety that I probably can't duplicate in most other jobs.

Cheap Staples:
Rice
Oatmeal
Eggs
Carrots (one of my favorite foods, and I eat a bunch)
Ramen

Seasonal Things: (whichever few are cheapest at a given moment)
Vegetables (tomatoes, cucumbers, more I'm not thinking of right now)
Fruit (apples, pears, persimmons, oranges)

Sundries:
Yogurt (actually pretty cheap, but it's the sugary kind so I limit it for health reasons)
Spaghetti (adding Parmesan cheese knocks this out of the staples rank)
Bread (my biggest luxury expense, though the whole wheat loaves from Tours les Jours aren't terribly expensive)
Dark Chocolate (also luxury, but a little of this completely satisfies many of my desires for less healthy things)
Potatoes (not as cheap as I expected, but I like them and they're still reasonably priced)
Almonds (cheap by the kilo and great snacks)

I don't really like food preparation and it shows. I basically don't buy any meat anymore since I get enough at school and it seems expensive here; I'm a little jealous of everyone who can buy chicken breasts by the pound for cheap - the lowest I've been able to find in my neighborhood is about $5 for a single one (mostly pretty small). Not drinking coffee (never liked it) and not baking (no oven) probably lower my costs too.

I probably forgot about a few things, but that's a reasonably representative list.

[okashira]

I wish we could all standardize on how to calculate savings rate.

I prefer gross pay savings rate. This forces you to look at the big picture and consider taxes as an expense.
Gross pay should also include bonus's (gross) and 401k matches.

so gross pay would be gross salary + bonus + 401k match
savings would be 401k contribution + 401k match + cash savings + ROTH contributions + IRA/HSA/etc contributions + debt principle reductions

I'm shooting for 60% savings of gross this year.

[brysondad]

Question: does paying off mortgage early (extra principal) count as savings?


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[Ottawa]

May Savings Rate is in - see attachment!  Also, our cumulative 2014 average savings rate so far is 69.45%

[Zaga]

Question: does paying off mortgage early (extra principal) count as savings?


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I count the principle part of debt reduction as savings, it increases my net worth.

Also, regarding okashira's way of calculating using gross pay, I could never reach that savings rate, because between 35 and 40% of our gross pay goes to some tax or another.  Anyways, I like using net pay because in retirement I expect my taxes will be so very much less, saving what I can of the pay I can actually control (take home pay) makes more sense to me.

Also also, don't forget to add in the other half of the social security and medicare taxes as a part of your gross pay if you're going to do your calculation that way!

[okashira]

Question: does paying off mortgage early (extra principal) count as savings?


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I count the principle part of debt reduction as savings, it increases my net worth.

Also, regarding okashira's way of calculating using gross pay, I could never reach that savings rate, because between 35 and 40% of our gross pay goes to some tax or another.  Anyways, I like using net pay because in retirement I expect my taxes will be so very much less, saving what I can of the pay I can actually control (take home pay) makes more sense to me.

Also also, don't forget to add in the other half of the social security and medicare taxes as a part of your gross pay if you're going to do your calculation that way!

This is exactly why I preferr gross pay. Taxes are under you control.
You could:
-Make better use of 401k and other tax deferred accounts
-Move somewhere with lower taxes (state taxes I am guessing)
-Have a kid/get married
-Negotiate a different pay structure from your employer (more 401k contribution in lieu of salary, stock options, etc)
-Make sure you are taking full advantage of other deductions
-I've got to be missing something.

Don't say you can't control it.


And I wouldn't bother counting employer portion of medicare and social security tax. That's both an expense and "pay," in a sense, so they kinda cancel each other out anyway.

[Rbuckyfuller]

WOW!  Some of you are incredible.

If I had to guess, I'd say we are about 40%-60%; I'll have to track down more specific calculations.

The person with 90% could retire in like 3 years.  That is amazing!

[nikki]

WOW!  Some of you are incredible.

If I had to guess, I'd say we are about 40%-60%; I'll have to track down more specific calculations.

The person with 90% could retire in like 3 years.  That is amazing!

Actually, Ian's 90% is contingent upon employer-provided housing. Mine, too. So our FI calculations aren't a simple 25x annual expenses because once we retire, our expenses will go up significantly.

(Sorry for speaking for you, Ian! Just saw this and jumped in.)

[Ian]

I wish we could all standardize on how to calculate savings rate.

I prefer gross pay savings rate.

This is my natural inclination too, since most payments (salaries, dividends, etc) are given as gross. I'm using net at the moment because the Korean government doesn't give regular information on how much you've paid into the national pension plan and generally makes gross inconvenient to calculate.

Another suggestion for people who want to reduce taxes: work in another country where your home country has a a double taxation treaty. You can probably pay no income tax in your host country for at least a year and your home country probably has a foreign income exclusion that will leave you paying nothing there either. I don't know the exact numbers, but I think the USA's laws on this are fairly favorable. This won't be an option for everyone, of course, but it's another idea.

Actually, Ian's 90% is contingent upon employer-provided housing. Mine, too. So our FI calculations aren't a simple 25x annual expenses because once we retire, our expenses will go up significantly.

(Sorry for speaking for you, Ian! Just saw this and jumped in.)

No problem. Yeah, my numbers are greatly aided by free housing.

(Back on the subject of food: also lettuce. Ever since good lettuce appeared in the local market I've been eating a lot of that.)

[rpr]

This is exactly why I preferr gross pay. Taxes are under you control.
You could:
-Make better use of 401k and other tax deferred accounts
-Move somewhere with lower taxes (state taxes I am guessing)
-Have a kid/get married
-Negotiate a different pay structure from your employer (more 401k contribution in lieu of salary, stock options, etc)
-Make sure you are taking full advantage of other deductions
-I've got to be missing something.

Don't say you can't control it.


And I wouldn't bother counting employer portion of medicare and social security tax. That's both an expense and "pay," in a sense, so they kinda cancel each other out anyway.

I agree you can control your current taxes but only upto a certain point. What matters is to maximize savings which is:

(Gross pay - Total spending)

where total spending includes taxes paid.

But I am in agreement with you regarding how to calculate the savings rate. Most take gross pay into account. Taxes are an expense and it is important to minimize this expense similar to others as well.

[train_writer]

Holy moly once the ERE/FI way of thinking clicks, it hits!
My 2014 goal in 2013, was to save 35 % of our income.
On average jan-may, I am investing 30 % of income per month, paying down the mortgage principal with another 15 % = 45 % excluding retirement accounts* and this rate is growing every month!

* (to which I contribute a lot, but it is obligatory and I can only access at age 59, so I just ignore that for the time being).

This will allow us to retire to part time work in a few years; to have TRUE FU money; and pursue hobbies and interesting carreers as poets, monument evaluator et cetera ;)

[Rbuckyfuller]

My back of the envelope calculation says my wife and I are at about 55%-60% savings.  I'd like to get closer to 65%, particularly in light of our income.

Because my wife and i both have reimbursable expenses at our jobs, it is hard for us to directly calculate this as our spending seems out of whack if we are traveling for work etc.

However, here is how I do it to avoid having the inaccurate expenses enter the equation:

• Savings: (1 yr Increase in net worth [calculated by Mint/PC]) - (investment gains) = Savings
• After tax income:  Income - taxes paid = net income.
• Savings/ Net Income = savings rate.

[brooklynmoney]

I spend several thousand dollars a month for work. In Mint.com I just classify all of those expenses as Business Services and then it's very easy to see what my real spending is.  When I get the expense check back I put that against Business Services as well, so it all evens out.

My back of the envelope calculation says my wife and I are at about 55%-60% savings.  I'd like to get closer to 65%, particularly in light of our income.

Because my wife and i both have reimbursable expenses at our jobs, it is hard for us to directly calculate this as our spending seems out of whack if we are traveling for work etc.

However, here is how I do it to avoid having the inaccurate expenses enter the equation:

• Savings: (1 yr Increase in net worth [calculated by Mint/PC]) - (investment gains) = Savings
• After tax income:  Income - taxes paid = net income.
• Savings/ Net Income = savings rate.

[Grande]

Question: does paying off mortgage early (extra principal) count as savings?[/i][/b]

I personally count extra payment to principal as savings. You are building an asset after all. Furthermore   I consider the portion of my regular monthly mortgage payment that goes principal. The ~$700/month that goes to my principal is growing my total net worth.[/size][/size][/size]

[lizzzi]

I'm having to spend on out-of-pocket health care expenses for DH…I pre-paid the kind of funeral he would want (anti-Mustachian, sigh), and am going to private-pay for some aide hours. He is on Hospice now, at home, and has a whole boatload of services and medical equipment that is all 100% billed to his Medicare. So it's not too bad financially. I didn't save in May because of the funeral expenses, but I saved 20% for June…not as good as usual, but I think I'm going to be able to get it up to the high 40s or 50ish again. I am ER and FI, and want to make sure I can keep it that way later on when I am alone!

[Workinghard]

So sorry to hear about your dh. Hope you can find some help. It would be nice if you could avoid the middle man by going through an agency but at least they do background checks. When my mom was under hospice, we prepaid for funeral arrangements too. Some of her wishes were challenging. I told my dh I want to be cremated, but he could do whatever was easiest with my remains other than keeping them around!

Anyway, back to the topic.  I wouldn't worry about your savings rate. You have enough going on!

I'm having to spend on out-of-pocket health care expenses for DH…I pre-paid the kind of funeral he would want (anti-Mustachian, sigh), and am going to private-pay for some aide hours. He is on Hospice now, at home, and has a whole boatload of services and medical equipment that is all 100% billed to his Medicare. So it's not too bad financially. I didn't save in May because of the funeral expenses, but I saved 20% for June…not as good as usual, but I think I'm going to be able to get it up to the high 40s or 50ish again. I am ER and FI, and want to make sure I can keep it that way later on when I am alone!

[Rbuckyfuller]

I spend several thousand dollars a month for work. In Mint.com I just classify all of those expenses as Business Services and then it's very easy to see what my real spending is.  When I get the expense check back I put that against Business Services as well, so it all evens out.

My back of the envelope calculation says my wife and I are at about 55%-60% savings.  I'd like to get closer to 65%, particularly in light of our income.

Because my wife and i both have reimbursable expenses at our jobs, it is hard for us to directly calculate this as our spending seems out of whack if we are traveling for work etc.

However, here is how I do it to avoid having the inaccurate expenses enter the equation:

• Savings: (1 yr Increase in net worth [calculated by Mint/PC]) - (investment gains [calculated in the individual accounts, as Mint sucks at this]) = Savings
• After tax income:  Income - taxes paid = net income.
• Savings/ Net Income = savings rate.

But then you have to classify each travel expense as Business Services, and we are too lazy to do this, so I do it the way I put above.

[SpareChange]

Great thread. For the first half of the year, rate was 67.6%. However, it was 61.5% for June. I expect it'll be between 60-65% in the second half due to lower income.

[tomita]

My goals are 50% savings from gross
however: I am at
28% from gross income saving rate
and another 28% from gross income SL repayment

once I'm done with SL hopefully in 2015 will bump up the saving rate to over 50%

[Ian]

My June is essentially over, so barring some kind of accident on the way home, I can say I've had a good month. 95% saved.

[rpr]

My June is essentially over, so barring some kind of accident on the way home, I can say I've had a good month. 95% saved.

Awesome. I assume this is ratio of savings/(net income). Keep it up. If you can maintain this level of income and savings you should be able to be FIRE in the next couple years.

[Ian]

I assume this is ratio of savings/(net income). Keep it up. If you can maintain this level of income and savings you should be able to be FIRE in the next couple years.

Sadly, my current job makes both my expenses and savings rate abnormal. My employer gives free rent and I can't rely on always being in a country with a sane medical system. Also, after roughly one more year I'll lose my tax exempt status, so that will cut into my salary as well (right now I only pay national medical insurance and pension).

Due to all the variables, it's hard to predict what my future expenses will be, so I'll just be saving and investing without a clear goal until I'm in a position to create a better estimate. But I do think I should be able to maintain a relatively low level of expenses simply due to my disposition: I would pay money to avoid the kinds of things many people seem eager to spend money on.

[FIreDrill]

This month turned out alright, we were able to hit the 50% mark.  Should be interesting to see how next month plays out with vacations and unexpected car repairs that need to be done.


Month      Savings      Income      Savings Rate   

January      2,988.21   7,048.30   42.4%   
February   2,813.00   5,939.84   47.4%   
March      7,664.15   10,284.87   74.5%   
April        3,070.99   6,142.88   50.0%
May         2,226.20   6,064.82   36.7%
June        3,787.78    6,601.99   57.4%

YTD         22,550.33   42,082.70   53.59%   

[mobilisinmobili]

I'm at about 30% of gross, not including company match. Looking to bring that up a bit.

[Ottawa]

2014 Savings rate at 70.56% to end of June.

[NinetyFour]

Nicely done, Ottawa!

[samburger]

Oy. This month tanked my average.

My savings rate over the last two pay periods (four weeks, which is how I do my "months"), was 8%. We paid my wife's fall semester tuition.

Jan - 71% or $3,621
Feb - 11% or $561 (We furnished our apartment and paid first/last--I was surprised we weren't negative this month, actually!)
March - 49% or $2500
April - 59% or $2992
May - 53% or $2,693
June - 56% or $2,850
July - 8% or $427

This month brings us down to 44%, with a goal of 50% for the year. We need a couple good months to recover, but really, if we're able to pay tuition in full while saving 44%, I can't really complain, eh?

[jaizan]

Over the last 5 years. I've averaged a savings ratio of 64.9% of my net income.
In 2014, it should be similar.

Of the 35.1% that I spend, around 1/3rd goes on overseas holidays which total about 6 weeks a year.
I'm just going to carry on taking those holidays, as that's what I want to do.

[FIreDrill]

July was a little low because of a 2 week vacation that added to our expenses but I'm pretty happy with how the month turned out.


2,512.28/6,163.75 = 40.8% Savings Rate


Month      Savings      Income      Savings Rate   

January      2,988.21   7,048.30   42.4%   
February   2,813.00   5,939.84   47.4%   
March      7,664.15   10,284.87   74.5%   
April      3,070.99   6,142.88   50.0%
May       2,226.20   6,064.82   36.7%
June      3,787.78    6,601.99   57.4%
July      2,512.28    6,163.75   40.8%

YTD         25,062.61   48,246.45   51.95%

[Ian]

July was a solid 91%.

[samburger]

This four-week period was a little lower than average, but not too bad.

Jan - 71% or $3,621
Feb - 11% or $561
March - 49% or $2500
April - 59% or $2992
May - 53% or $2,693
June - 56% or $2,850
July - 8% or $427
August - 47% or $2,383

That brings me to 44.25% for the year, with a goal of 50%.

[Ottawa]

Savings rate to end of July is 71%.  The last 5 months of the year are typically lower spending (no taxes/summer camps/insurance etc).  We're going to see if we can hit 75% by year end...

[Paulie]

Wow, I'm impressed by these saving ratios! I did 37% in 2013 and will try to reach 50% in 2014. This will however require quite some willpower!

Just updated my spreadsheet and realized that I'm up to a SR of 52% middled over the year, with which I'm really happy! Didn't think it I could do it!

[FIreDrill]

This months was pretty lame on the expenses side.  I'm in the middle of a car repair and it added 2k of expense to the August budget.  Luckily we also had a good amount of income for this month but its still tanked our savings rate below 50% for the year.  I think we will be able to get it back over 50% by years end if we don't have any additional unexpected large expenses come up.  Anyways, here are the numbers for August!


2,935.35/8,078.32 = 36.3% Savings Rate


Month      Savings      Income      Savings Rate   

January      2,988.21   7,048.30   42.4%   
February    2,813.00   5,939.84   47.4%   
March        7,664.15   10,284.87   74.5%   
April          3,070.99   6,142.88   50.0%
May           2,226.20   6,064.82   36.7%
June          3,787.78    6,601.99   57.4%
July           2,512.28    6,163.75   40.8%
August      2,935.35   8,078.32   36.3%


YTD         27,997.96   56,324.77   49.7%

[Ian]

August had slightly higher expenses than normal (mostly unavoidable), but I got my bonus for signing a second contract, so my savings rate was 96%.

[mpbaker22]

Got to about 70% this year.  Aiming for 50% this year.  I plan on potentially being 'unemployed' for a few months.  Additionally, moving jobs might have some immediate expenses involved, and I plan on getting my own apartment which will increase expenses by about 10% over last year.

Well I'm at -96% right now, and I actually expect that to be worse by years end.  I quit my job, so I only have about 3 more weeks of income to receive.  I bought a house, with cash.  So, I've spent about $54K so far this year, the vast majority on the house.

[Ottawa]

So far:
January 2014   90.00%
Feb 2014          49.77%
March 2014      52.77%
April 2014           79.49%
May 2014           67.76%
June 2014         62.06%
July 2014           95.85%
August 2014   74.24%

Overall = 70.3%

This is based on NET and does not include Pension deductions (which are essentially savings). 

[FIreDrill]

Dang you all are killing it!

[NinetyFour]

I am at 79% for 2014, so far.

My income went way up this year, for a variety of reasons, but my spending didn't.  Guess I just don't know how to spend a lot of money!

[Frugal_Red]

I've been keeping track for a few years.  It gives me motivation! :-D

2008 - 23.59%
2009 - 70.50%
2010 - 69.01%
2011 - 57.93%
2012 - 42.92% <- Unemployed for 6 months during my move from one city to another with a little side trip to China for a month. :-P
2013 - 63.34%
2014 - 68.02% <- So far this year.  I am aiming to beat my savings rate from 2010 and get at least 70% of net income!

[fb132]

I am starting the savings goal. Starting october, my goal is to save 40% of my net income (I don't count gross, because in Quebec we are heavily taxed and that would easily discourage me :P ). in the past, I suspect, I would average 15-20% of my net income, but I can't tell for sure since I didn't calculate it every month.

However, now I have YNAB to keep track of everything and so far I have budgeted october for 40% savings which includes EF, TFSA (Tax free savings account) and RRSP (Registered Retirement Savings Plan for canadians).

My goal is to reach 50% on average in 2015. it is doable since I have two extra paychecks during the year + Christmas Bonus + Tax Refund...and not to forget, I will be getting a raise this november.

[Ottawa]

So far:
January 2014   90.00%
Feb 2014          49.77%
March 2014      52.77%
April 2014           79.49%
May 2014           67.76%
June 2014         62.06%
July 2014           95.85%
August 2014   74.24%

Overall = 70.3%

This is based on NET and does not include Pension deductions (which are essentially savings).

September 2014 82.41%

Revised overall for 2014 is 66% due to 16,000 dollars going to 2014 installment taxes.  Boo.

[rpr]

So far:
January 201490.00%
Feb 2014       49.77%
March 2014   52.77%
April 2014        79.49%
May 2014        67.76%
June 2014      62.06%
July 2014        95.85%
August 201474.24%

Overall = 70.3%

This is based on NET and does not include Pension deductions (which are essentially savings).

September 2014 82.41%

Revised overall for 2014 is 66% due to 16,000 dollars going to 2014 installment taxes.  Boo.

Great job. Just one question: How do you calculate net?

[Ottawa]

Great job. Just one question: How do you calculate net?

Net cash in - is what hits my bank account after all deductions.  This includes income tax, union dues, unemployment insurance, Canada pension plan, and my work pension plan.  Savings rate would obviously be higher if I included the work pension plan.  I don't...Rather, in FIRE planning I know what we will receive at the age of 60 (obviously, we will be retired for some time before we start collecting pension!) based on number of years worked, etc etc. 

Spending = all expenses (not including investment allocations - this is savings...obviously).  We are mortgage free, so nothing to deal with there. 

[rpr]

Thanks. Good on knocking the mortgage off. Our mortgage has another 25+ years to go. It is quite cheap at 3.5%. No hurry to pay it off. My retirement plan at work gives me 3+% guaranteed interest.

Our situation is slightly different. A huge fraction of our savings goes into work tax deferred plans. Our take home is there only a small fraction of the gross income. Almost all of it goes into expenses.