Saving rate question re: medical expenses

[FireAnt]

I'm trying to recalculate my savings rate using MMM formula. We have diverted all our HSA funds minus $1000 to VTSAX. The co-pays that we had used HSA funds is now being paid OOP and we are savings our receipts. Would you classify those co-pays as an expense then? Because with diverting these funds currently, it definitely increases our monthly spending at this time.

[catorbe]

Yes they are a qualified expense. You'll be able to use HSA funds down the road for them given you are saving receipts.

In terms of calculating savings rate, they were never NOT an expense. Whether you pay it out of one account or another doesn't change whether or not it was an expense that affects your savings rate.

[FireAnt]

Yes they are a qualified expense. You'll be able to use HSA funds down the road for them given you are saving receipts.

In terms of calculating savings rate, they were never NOT an expense. Whether you pay it out of one account or another doesn't change whether or not it was an expense that affects your savings rate.

I guess you're right about this. I never included it as an expense previously since I didn't count what I was using in my HSA fund-- it wasn't part of my budget on Mint. It's just a different way for me to think about it.

[FireAnt]

Wow I also just noticed that I did not calculate the spending part of the mortgage either. He says:

"Finer Points:
I include property taxes and sales tax, but do not count income tax or other payroll taxes.
I include all loan interest and fees, but do not count the principal portion of loan payments."

https://www.mrmoneymustache.com/2015/01/26/calculating-net-worth/

Which I don't necessarily understand why, even though I read the explanation like 5 times.

[catorbe]

Think of it like a business and how they have interest expense as a line item to get to the bottom of the income statement. Net Income. It's all essentially to calculate what they have leftover. What they do with the leftovers, whether that's profit, debt repayment, or reinvest in the business is up to them mostly. In your case the leftovers hopefully go to saving and investing instead of more spending. In the specific case of a mortgage part of your "leftovers" is required debt repayment towards principal but not really an expense against your income. Basically it's because principal payments give you equity and count towards your net worth. Hopefully I'm not making this more confusing!

These are my interpretations and could more easily be explained I'm sure!

[FireAnt]

Think of it like a business and how they have interest expense as a line item to get to the bottom of the income statement. Net Income. It's all essentially to calculate what they have leftover. What they do with the leftovers, whether that's profit, debt repayment, or reinvest in the business is up to them mostly. In your case the leftovers hopefully go to saving and investing instead of more spending. In the specific case of a mortgage part of your "leftovers" is required debt repayment towards principal but not really an expense against your income. Basically it's because principal payments give you equity and count towards your net worth. Hopefully I'm not making this more confusing!

These are my interpretations and could more easily be explained I'm sure!

This kind of makes a little bit more sense.

With the addition of medical costs and only putting our mortgages interest and taxes into the calculation, our savings rate went up to 60% ---woohoo! :)

[BTDretire]

Think of it like a business and how they have interest expense as a line item to get to the bottom of the income statement. Net Income. It's all essentially to calculate what they have leftover. What they do with the leftovers, whether that's profit, debt repayment, or reinvest in the business is up to them mostly. In your case the leftovers hopefully go to saving and investing instead of more spending. In the specific case of a mortgage part of your "leftovers" is required debt repayment towards principal but not really an expense against your income. Basically it's because principal payments give you equity and count towards your net worth. Hopefully I'm not making this more confusing!

These are my interpretations and could more easily be explained I'm sure!

  You lost me, how could you add in more expenses and have you saving rate percentage go UP?

This kind of makes a little bit more sense.

With the addition of medical costs and only putting our mortgages interest and taxes into the calculation, our savings rate went up to 60% ---woohoo! :)

[FIREstache]

I exclude income and payroll taxes in my calculation and use take home pay but include all of my expenses and include the contribution to my savings by my employer as both income and savings.  I started the year with an expensive car repair but have tightened up the spending since then.  It looks like I'm somewhere in the 75% to 80% savings rate range for this year to this point.  I exceeded 80% last year but scaled back quite a bit on my retirement plan investments this year, which has a negative effect on my savings rate, even if I'm not spending it.  I'll ratchet it way up for next year.

[FireAnt]

Think of it like a business and how they have interest expense as a line item to get to the bottom of the income statement. Net Income. It's all essentially to calculate what they have leftover. What they do with the leftovers, whether that's profit, debt repayment, or reinvest in the business is up to them mostly. In your case the leftovers hopefully go to saving and investing instead of more spending. In the specific case of a mortgage part of your "leftovers" is required debt repayment towards principal but not really an expense against your income. Basically it's because principal payments give you equity and count towards your net worth. Hopefully I'm not making this more confusing!

These are my interpretations and could more easily be explained I'm sure!

  You lost me, how could you add in more expenses and have you saving rate percentage go UP?

This kind of makes a little bit more sense.

With the addition of medical costs and only putting our mortgages interest and taxes into the calculation, our savings rate went up to 60% ---woohoo! :)

I was not clear- there were some other changes as well (that led to the recalculation). The increase in medical costs is negated by the removal of principle payments of my mortgage towards expenses.

[FireAnt]

I exclude income and payroll taxes in my calculation and use take home pay but include all of my expenses and include the contribution to my savings by my employer as both income and savings.  I started the year with an expensive car repair but have tightened up the spending since then.  It looks like I'm somewhere in the 75% to 80% savings rate range for this year to this point.  I exceeded 80% last year but scaled back quite a bit on my retirement plan investments this year, which has a negative effect on my savings rate, even if I'm not spending it.  I'll ratchet it way up for next year.

#goals 
Once my loans are forgiven in less than a year, it should go up to 63%. I don't know if I can get it any higher than that unless one of us has a big increase in income.

[Dicey]

My career was in sales. I had a great boss who said, "Percentages don't buy groceries, dollars do." This message is a gentle reminder that obsessing about one's savings rate  percentage isn't really necessary. Watching the dollars will get you there, too. As a cancer survivor, I'd also suggest that it's important to maintain a balance between living for today and saving for the future. When you're old and long past FIRE, you're going to care a lot more about the quality of life you lived than what your savings rate was.