Savings rate race to 40%

[zee dot]

*edited based on the excellent feedback below

New formula:

(Gross - Taxes - 401k - Expenses) / (Gross - Taxes - 401k)

Savings / Gross Income = 29%

Above is the formula I am using to calculate my current savings rate.

I have some work to do on getting my expenses down so this will hopefully help me keep track of progress.

Pick your own formula and join the race!

[JLee]

Why are you counting mortgage principal payments as savings but not 401k?

[zee dot]

Wait...isn't that double counting the 401k $?  Should I just not include it in my formula?

[JLee]

https://forum.mrmoneymustache.com/welcome-to-the-forum/correct-way-to-calculate-savings-rate/

[zee dot]

Thanks - looks like there are a lot of opinions.
I'm going to take the 401k out since it's already included in my gross pay and I don't get a match.

[RWD]

In your formula the mortgage payments come out of thin air. If your taxes and expenses were somehow $0 then your savings formula would be more than your gross income! Clearly that is absurd.

If you want to exclude your 401k (which is silly because then you could increase your savings rate by contributing less to your 401k) the correct way to do it would be: (Gross - Taxes - 401k - Expenses) / (Gross - Taxes - 401k). That formula is the percentage of your net paycheck you are saving. Useful for cashflow purposes but not as useful for predicting net worth growth.

[zee dot]

Thank you!  using your formula my rate is 29%

[zee dot]

Spent almost nothing in January so savings rate was 85%.