Am I figuring savings rates properly?

[reader2580]

My take home pay is around $54,000.  Is this the right number to be using for calculating savings rate, or should I be using gross pay?  I am pretty sure I'll never save 75% of my take home pay as that leaves $13,500 to live on. 

[SwordGuy]

I subtract taxes, but not insurance and 401k.  I add in my employer 401k contribution.

[nereo]

My take home pay is around $54,000.  Is this the right number to be using for calculating savings rate, or should I be using gross pay? 

There is not "right" or "wrong" way to calculate savings rate.  There is only your way.  Savings rate is simply a broad and imperfect personal finance metric.  Windfalls, promotions, job loss and emergency expenses can shift savings rates, often to comical proportions.  Ultimately what matters is the absolute $ amount that you save, and the absolute $ amount that you plan to spend per year.
In other words, don't loose sight of the forest ($ savings) for all the trees (% savings).

Personally, when I do check on my savings rate (which isn't often) I use gross pay but I do include the equity portion of my mortgage payments in addition to other contributions.  I use gross income because 1) it's more strict and 2) to a large extent I can control how much I pay in taxes each year by utilizing tax-advantaged accounts.
But whatever works for you.

I am pretty sure I'll never save 75% of my take home pay as that leaves $13,500 to live on.

$13.5k would certainly be a very frugal lifestyle, but plenty of people do exactly this, either by choice or necessity. It's quite a bit less than I'd like to live on, but on the flip side you could start from $0 and be FI in 6-8 years
http://earlyretirementextreme.com/

[arebelspy]

There is not "right" or "wrong" way to calculate savings rate.  There is only your way.

+1

We've had dozens of threads about it, and just as many, or more, ways people prefer to calculate it.

[reader2580]

I am pretty sure I'll never save 75% of my take home pay as that leaves $13,500 to live on.

$13.5k would certainly be a very frugal lifestyle, but plenty of people do exactly this, either by choice or necessity. It's quite a bit less than I'd like to live on, but on the flip side you could start from $0 and be FI in 6-8 years
http://earlyretirementextreme.com/

I could see $13,500 being doable if your own your a house outright and live in an area where you don't need to drive anywhere.

My goal is not necessarily to retire early.  I simply want to pay off my debt, , have enough money for emergencies, and actually be able to retire at a normal retirement age.  I basically owe as much on my house as it is worth so I can't realistically sell it and move to a place where my expenses would be less.  I don't think the 10% going to my 401K is enough to be able to retire even at drastically reduced expenses.

I could easily leave on 25,000 or less per year without debt payments or a mortgage.  I could easily save at least 50% if I had no mortgage.

[nereo]

I am pretty sure I'll never save 75% of my take home pay as that leaves $13,500 to live on.

$13.5k would certainly be a very frugal lifestyle, but plenty of people do exactly this, either by choice or necessity. It's quite a bit less than I'd like to live on, but on the flip side you could start from $0 and be FI in 6-8 years
http://earlyretirementextreme.com/

I could see $13,500 being doable if your own your a house outright and live in an area where you don't need to drive anywhere.

My goal is not necessarily to retire early.  I simply want to pay off my debt, , have enough money for emergencies, and actually be able to retire at a normal retirement age.  I basically owe as much on my house as it is worth so I can't realistically sell it and move to a place where my expenses would be less.  I don't think the 10% going to my 401K is enough to be able to retire even at drastically reduced expenses.

I could easily leave on 25,000 or less per year without debt payments or a mortgage.  I could easily save at least 50% if I had no mortgage.

I wasn't implying that you should live on $13.5k/year, merely that it is possible.  I agree that driving frequently would make that goal extremely difficult, as car use is expensive.  As for a place to hang your hat, there are options beyond owning your own place or renting of course.  Just sayin'.

If you are equity-neutral on your current home and have a cash surplus I do not see what keeps you from moving should you want to.  In fact, if you are like the majority of people in developed nations, your home is your largest expense, so optimizing your living situation could be the single most important thing on the expense side of your ledger.

One final comment - FI doesn't necessarily mean 'retired'. Plenty of people here are FI yet continue to work.

[Dezrah]

I'll share my method, not because it is the right way, but because it makes sense to me.  Perhaps it'll make sense to you too.

My total income = Gross Salary + Employer Match + Employer HSA Contributions

Then I say that everything from that amount goes into one of three categories: Taxes, Savings, or Living.

Taxes = FIT + SS & Medicare Tax + State Income Tax

Savings = My IRA Contributions + My 401k Contributions + Employer 401k Match + Employer HSA Contributions (this is a fudge, since I max it out but also spend some of it over the year) + Taxable Long Term Savings ($0 right now)

Living = Rent + My Share of Employee Benefits + Short Term Savings Contributions + Everything Else

(Taxes + Savings + Living)/My Total Income = 100%

This useful because sometimes I'll see how increasing my savings into the 401k reduces both my Living% and the Taxes%.

[reader2580]

If you are equity-neutral on your current home and have a cash surplus I do not see what keeps you from moving should you want to.  In fact, if you are like the majority of people in developed nations, your home is your largest expense, so optimizing your living situation could be the single most important thing on the expense side of your ledger.

I have basically almost zero cash right now beyond my 401K.  I moved a bit over a year ago to a house that lowered my housing expense, but some of the savings is going to increased commuting costs.  I am going to start taking the bus starting Jan 4th.  I missed the deadline to sign up for the company subsidized bus pass for December.  The bus pass costs about $1.25 per work day compared to driving 60 miles round trip.  ( I still have to go 10 miles each way to the bus.)  I am trying to find a safe route to bike to the bus.  (I am not riding a bike on a 60 MPH road with no shoulders.)

My debt has really low interest rates where it makes sense to put some cash towards emergency fund instead of all to debt.