On a related note, how do you fine folks account for mortgage principal reductions? Currently I have the full mortgage payment as part of my expenses, and then include the principal reduction as part of my savings. Seems almost as if I should only include the interest payments on the expense side of things.

I'm not as concerned with what my savings rate is exactly as I am with how much longer I have to keep at the grind. To that end, and knowing my wife and I will not consider ourselves FI without paying off the mortgage, my 'time to retirement' sheet bases my target number off of current expenses less mortgage P/I. It figures savings by subtracting total expenses (including full mortage payment) from income. Ex:

Our current annual outlay is $60,400.

Of that, $8500 is mortgage P/I for minimum payments, so if the house were paid off our expenses would be $51,900.

Our income estimate is 146,000 / year.

Put it all together, slice and dice and I get the following:

We'd be FI today if we had $1,297,500 (25 X $51,900) invested

We only actually have $177,800

We are saving at an $85,600 / year rate (146,000 - 60,400)

Assuming 5% real returns, we are looking at 9.53 years to get from here to there (under ten years - hurrah!)

Any way, not the most precise way to do this possible, but good enough for us, and much more encouraging than assuming we'll be paying that mortgage forever on the end result. We're predicting the future here, so there will be some error.

I also have a 'playground' version where I can try various things - when I put in spending cuts that we've agreed to but won't go into effect for the next few months, I get only 8.33 years! I also compute the two extreme ends on the savings rate formula - mortgage P&I is 100% expense vs. mortgage P&I is 100% savings - from that I can tell our savings rate is somewhere between 58 & 65% currently, and heading to somewhere between 62 and 68%, if we don't cut the budget further than we already have planned.