Author Topic: Check my math - savings rate  (Read 721 times)

meerkat

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Check my math - savings rate
« on: March 03, 2019, 12:46:46 PM »
I'm trying to create a formula in Excel but want to check my math. Our paychecks have several categories and I want to correctly calculate our savings rate of our gross pay rather than our take home pay since our 401k contributions should make our take home savings rate pretty small.

Here's what I've got:

=(2*(Taxes+Health Insurance)+Current Month's Expenses)
/
(2*(Gross Pay+401k+HSA)+Money not spent at the end of the month that sits in our bank account)

The 2 is for two paychecks per month, will be changed to a 3 as needed for income, I'll check to see if taxes/insurance are taken out of the third paycheck next time I'm at my work computer.

Montecarlo

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Re: Check my math - savings rate
« Reply #1 on: March 03, 2019, 02:40:28 PM »
I'm trying to create a formula in Excel but want to check my math. Our paychecks have several categories and I want to correctly calculate our savings rate of our gross pay rather than our take home pay since our 401k contributions should make our take home savings rate pretty small.

Here's what I've got:

=(2*(Taxes+Health Insurance)+Current Month's Expenses)
/
(2*(Gross Pay+401k+HSA)+Money not spent at the end of the month that sits in our bank account)

The 2 is for two paychecks per month, will be changed to a 3 as needed for income, I'll check to see if taxes/insurance are taken out of the third paycheck next time I'm at my work computer.

I would do Money Not Spent + 401K + HSA / Take home pay + 401K + HSA

I assume you get paid every two weeks, not twice a month?  Itís tough because many of your expenses are monthly and your pay is biweekly, which makes it basically impossible to get an accurate representation over a month or two, even if your spending is representative.  One thing you can do is take your paycheck *26/12.  Do this for take home, 401k, and HSA, and just use those #s instead of monthly actuals.

Even better would be to take your monthly expenses and turn them into biweekly amounts, but I donít know if any spending tracking software will report biweekly.

Iíd be careful about putting TOO much in your 401K if your plan is to FIRE.  Youíll definitely need a sizable stash to spend before you can withdraw from the 401k, and a safety net in something less volatile until youíre near FI.  IMO, that safety net becomes less and less important the closer you are to FI, and you can start pushing that into higher yielding investments.
« Last Edit: March 03, 2019, 02:42:59 PM by Montecarlo »

meerkat

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Re: Check my math - savings rate
« Reply #2 on: March 05, 2019, 09:58:52 AM »
Thanks! I'll try that *26/12 thing and see how that looks.

Iíd be careful about putting TOO much in your 401K if your plan is to FIRE.  Youíll definitely need a sizable stash to spend before you can withdraw from the 401k, and a safety net in something less volatile until youíre near FI.  IMO, that safety net becomes less and less important the closer you are to FI, and you can start pushing that into higher yielding investments.

We're a long ways away from FIRE and have a sizable safety net, so that's why we're putting as much as we can into 401ks right now.

And I just realized in re-reading that Gross Pay+401k+HSA is counting some money twice and not what I meant to say. Duh. That's what I get for posting right before bed.
« Last Edit: March 05, 2019, 10:05:43 AM by meerkat »