### Author Topic: Savings rate  (Read 4657 times)

#### unitsinc

• Stubble
• Posts: 188
• Age: 34
• Location: Houston/Denver
##### Savings rate
« on: May 10, 2013, 03:44:55 PM »
This is probably really simple, but how do you calculate your savings rate?

I know exactly what I save AFTER taxes, that's simple.

The tricky part is my 401k. How do I calculate that 17k into my yearly savings since it essentially comes out of a larger number than my post tax savings.

#### Spork

• Walrus Stache
• Posts: 5753
##### Re: Savings rate
« Reply #1 on: May 10, 2013, 04:58:59 PM »
I think you'll see a lot of variance and "that's not how I do it" here...

I have always used:
\$percent=(\$income - \$expense) / \$income * 100;

In other words: it's the amount of your income you keep expressed as a percentage.  In my case, I include all income: salary, bonuses, interest, dividends, capital gains, etc.  The only thing I explicitly ignore in my calculations is "found" money.  For example, gifts, etc -- I exclude those as I have no expectations of them being any kind of reoccurring event.

I actually calculate this for 30days, 90days, 365days and 5years.  (I do this for most of my calculations).  I try to spot good/bad trends and try to use the longer periods to see that they pan out.

#### marty998

• Walrus Stache
• Posts: 6371
• Location: Sydney, Oz
##### Re: Savings rate
« Reply #2 on: May 10, 2013, 05:07:21 PM »
oh no not again **groan**

see the couple of thousand other threads on this....

#### Captain and Mrs Slow

• Bristles
• Posts: 414
• Age: 59
• Location: Munich Germany
##### Re: Savings rate
« Reply #3 on: May 12, 2013, 02:25:51 PM »
Well want about a proper sticky then, it seems everyone has a different rate

#### Joet

• Guest
##### Re: Savings rate
« Reply #4 on: May 12, 2013, 03:20:35 PM »
I dont think it really matters as long as you acknowledge your assumptions with the figure. For me for instance, I think ignoring taxes is a bit disingenous if you say you have a "50% savings rate", yet that is your after tax figure.
For me personally I think you have to look at gross, and gross alone. Others disagree since theres no way to avoid taxes. Yet everyones taxation picture is different.
So I look at both figures. Salary/bonus/401k match/RSU/stock options/etc I count under "compensation", as that is what it is. I know many will include the 401k match as "savings" automatically, and not include it in the top-line [income], but whatever who cares it doesnt matter. Try to save more.

I've always felt that "save 1/3, get taxed 1/3, spend 1/3" is more than reasonable for lifetime consumption smoothing. Eg you arent sacraficing your 20s eating out of a dumpster behind walmart just to reach an artificial FI threshold 6 months sooner. Smooth out your lifetime consumption, but by all means pull in the FI date as much as you can.

That said I'm probably a poster child for the anti-MM wall of shame, so theres that.

#### Spork

• Walrus Stache
• Posts: 5753
##### Re: Savings rate
« Reply #5 on: May 12, 2013, 05:17:58 PM »

Along with Joet's point:  beyond "know your assumptions" there is also "it's damn hard to compare one to another."

Case in point:  7 years ago, I made significantly more than I did now (30% or a tad more) and I lived in a lower cost of living area.  We were also in "high times" with the economy, so dividends were way up.  There were times I'd hit 80% savings rates.

Now, I make less base rate, live in a higher CoL, I'm making smaller dividends...  I average around 40%.  Nothing has changed in my methods.  In fact, they're all automated and run daily.  So even with the same methods, bragging rights for "sometimes 80% savings" doesn't mean much.