How much do you save?

[davef]

Well, I finally ran the numbers. It's been 14 years since I started this journey below is my savings rate per year.
Calculated as Pretax investments+ post tax investments+ mortgage principle as a % of net household income.
For reference, household income was 79k in 2010 gradually rising to 149k today. We had three kids in that span starting in 2016.
We are not hardcore FIRErs, just looking to retire at 60 when the kids go off to college (2040).

2010 - 9%
2011 - 25%
2012 - 23%
2013 - 27%
2014 - 38%
2015 - 44%
2016 - 43%
2017 - 28%
2018 - 36%
2019 - 24%
2020 - 54%
2021 - 44%
2022 - 28%
2023 - 30%

[Rockies]

Including the mortgage principle is a trick I hadnt thought of before. I save around 18% annually and thought this is okay but the mortgage principle puts me closer to 25%. Is this a commonly accepted way of calculating savings rate?

[Zikoris]

We've historically saved in the 60-70% range, and have done so since I think about 2012 or 2013.

[davef]

Is this a commonly accepted way of calculating savings rate?

I'm not sure how common it is. I got that formula from someone on here and it made sense to me since principle is an investment that grows. Especially for some ppl that have a high mortgage interest rate and put a lot of extra cash toward it, it would make sense to not count that as an investment.

[mistymoney]

Including the mortgage principle is a trick I hadnt thought of before. I save around 18% annually and thought this is okay but the mortgage principle puts me closer to 25%. Is this a commonly accepted way of calculating savings rate?

chuckling ironically to myself here.....

When I first joined this board, everyone was on and on about "saving rate", their saving rate, this saving rate, that saving rate, and I was excited to see what mine was and to join in the convos. So i ask, how do you calculate a savings rate. Specifically I wondered if the savings rates people were talking about were pre or post tax, etc. Include/exclude employer match. if you do include employer match, do you put in numerator and denominator, those kinds of questions.

Nope. No equation was provided. It was all however you want, what is meaningful to you, doesn't matter how you calculate it just improve it over time, etc.

So I have lived without a savings rate. My focus is just to max out 401k and HSA, then ibonds, then put what I can into taxable, which sometimes isn't too much at all after the first 3 buckets are filled. so i just save and go about my business..

[Morning Glory]

Including the mortgage principle is a trick I hadnt thought of before. I save around 18% annually and thought this is okay but the mortgage principle puts me closer to 25%. Is this a commonly accepted way of calculating savings rate?

chuckling ironically to myself here.....

When I first joined this board, everyone was on and on about "saving rate", their saving rate, this saving rate, that saving rate, and I was excited to see what mine was and to join in the convos. So i ask, how do you calculate a savings rate. Specifically I wondered if the savings rates people were talking about were pre or post tax, etc. Include/exclude employer match. if you do include employer match, do you put in numerator and denominator, those kinds of questions.

Nope. No equation was provided. It was all however you want, what is meaningful to you, doesn't matter how you calculate it just improve it over time, etc.

So I have lived without a savings rate. My focus is just to max out 401k and HSA, then ibonds, then put what I can into taxable, which sometimes isn't too much at all after the first 3 buckets are filled. so i just save and go about my business..

There is an equation from an old mmm article:
((gross+match-taxes)-spending))/(gross+match-taxes)

*the principle part of the payment on any debt does not count as spending.  The interest does.

*only subtract taxes that are linked to your employment.  Do not subtract property or consumption based taxes that won't change if your income decreases; those count as spending. For federal and state income taxes, use the figure for actual taxes owed, not payroll deductions. Also subtract your FICA taxes and union dues or other mandatory employment costs as "less income ". Health insurance counts as spending though.

*ymoyl would have you consider other employment related expenses such as commuting or uniforms to be "less income" instead of "spending ". That is up to you.

ETA here it is:
https://www.mrmoneymustache.com/2015/01/26/calculating-net-worth/

[ixtap]

I never even thought about a savings rate until I found FIRE blogs and bogleheads. And I found those because we were saving so much it seemed a good idea to figure out what it would taken to live off of our nest egg.

The first we noticed anything close to a savings rate was because we noticed that our taxes withheld were almost identical to that year's spending. So our metric for awhile was spending: taxes:savings. Kind of funny to see more in payroll taxes than you are spending.

Since downshifting, we don't even track that. I only track expenses to make sure we are still FI.

[RWD]

I've been tracking our savings rate (based on the MMM formula, net income) since 2012 as part of my retirement progress tracking spreadsheet.

2012: 50%
2013: 52%
2014: 57%
2015: 60%
2016: 71%
2017: 77%
2018: 71%
2019: 72%
2020: 73%
2021: 75%
2022: 66%
2023:   8%  (some lifestyle inflation, some one-off expenses...)

[Dicey]

Instead of "paying yourself first", I always saved to get the full match from my employer and to fund my Roth annually. After that, the game was to live well on as little as possible, and save the rest. I live in a HCOLA, and have my entire adult life. I personally think including mortgage principal is BS and never did that even when my mortgage payment was 50% of my take-home pay.

I'm a naturally frugal person. I quite enjoy gaming the system. Also, I used to have a boss who liked to say, "You can't buy a loaf of bread with percentages." The percent you save isn't as important as the number of dollars you save and invest.

I believe I only maxed out my 401k once in my career. And yet I made it to FIRE anyway. Don't get too wrapped up in maximizing your savings rate. Live smart, live well, save as much as you can and invest it wisely. Things will all work out.

[Zikoris]

I've always used the inverse of the MMM formula - meaning I calculate my spending rate instead of my savings rate. It's simpler if you have accurate records of your spending, which I do.

(total spending) / (net income + pre-tax investment contributions) = spending rate, and the inverse of that is naturally your savings rate. In my case I rent, so there's no mortgage to factor in, but if you wanted to include that then the formula would be (total spending - mortgage principal payments) / (net income + pre-tax investment contributions) = spending rate.

[mistymoney]

Including the mortgage principle is a trick I hadnt thought of before. I save around 18% annually and thought this is okay but the mortgage principle puts me closer to 25%. Is this a commonly accepted way of calculating savings rate?

chuckling ironically to myself here.....

When I first joined this board, everyone was on and on about "saving rate", their saving rate, this saving rate, that saving rate, and I was excited to see what mine was and to join in the convos. So i ask, how do you calculate a savings rate. Specifically I wondered if the savings rates people were talking about were pre or post tax, etc. Include/exclude employer match. if you do include employer match, do you put in numerator and denominator, those kinds of questions.

Nope. No equation was provided. It was all however you want, what is meaningful to you, doesn't matter how you calculate it just improve it over time, etc.

So I have lived without a savings rate. My focus is just to max out 401k and HSA, then ibonds, then put what I can into taxable, which sometimes isn't too much at all after the first 3 buckets are filled. so i just save and go about my business..

There is an equation from an old mmm article:
((gross+match-taxes)-spending))/(gross+match-taxes)

*the principle part of the payment on any debt does not count as spending.  The interest does.

*only subtract taxes that are linked to your employment.  Do not subtract property or consumption based taxes that won't change if your income decreases; those count as spending. For federal and state income taxes, use the figure for actual taxes owed, not payroll deductions. Also subtract your FICA taxes and union dues or other mandatory employment costs as "less income ". Health insurance counts as spending though.

*ymoyl would have you consider other employment related expenses such as commuting or uniforms to be "less income" instead of "spending ". That is up to you.

ETA here it is:
https://www.mrmoneymustache.com/2015/01/26/calculating-net-worth/

thanks! will check it out!

[Freedomin5]

We save approximately 85% of our take home pay. It helps that we don’t pay for housing, private school tuition, and healthcare.

[GilesMM]

As long as you saving as much as you comfortably can, that is all you can do, regardless of what anyone else is doing. 


We had years overseas where a small local currency stipend was all we spent since housing and transportation were provided and the entire US paycheck went into savings.  When all the overseas benefits were added on top of wages(+bonus+stock), the savings rate was like 150%.  We had colleagues who, on the other hand, spent like fiends and were constantly shifting US dollars from home to fund their exploits abroad.  It was cheaper than in the US so if you wanted to spill your cash you would really live the high life - people rented out entire restaurants or clubs for parties, splashed out at fancy resorts on weekends, hired all sorts of domestic staff (cleaner, driver, cook, bartender, nanny) etc.