Author Topic: What of your income is saved? And what counts as saving?  (Read 2889 times)

davef

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What of your income is saved? And what counts as saving?
« on: August 13, 2014, 12:21:47 PM »
I am interested in seeing what percent of my income I saved so far this year since I have decided to be more frugal.
I hear a lot of people one here saying they save 50% or 60% but I'm not  sure how to calculate that.

I have 45k post tax income year to date (about 64k pre-tax)not counting my rental property income
I've added 5k to 401k and invested 6k into Funds and ETFs, I've also put 9k in extra principle into one of my homes to refinance down to 3.125 and avoid mortgage insurance (which I was paying before)

How do you account for the rental property income and money paid as principle?
What about principle on my primary mortgage?


dandarc

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Re: What of your income is saved? And what counts as saving?
« Reply #1 on: August 13, 2014, 12:38:24 PM »
I'd use take-home+ 401K + rental profit (Rent less expenses) as income - this is all the money that you have available to direct to either spending or saving.

Spending is then pretty much any outflow except for 401K (this is saving) or rental-related (these have already been taken out of income), and things like health insurance and taxes that have been already taken out of of your paycheck.  Many here split the mortgage into principal, which they count as saving, and interest / taxes / insurance which they count as spending.

Spending rate = Spending / income
Savings rate = (income - spending) / income

You could get more complicated than this, but the savings rate is more of a guideline so being super precise is not necessary - you just don't want to make plans and be off by a lot.  Thinking you're saving 60% but a more accurate accounting gives you 62% or 55% = no big deal.  Thinking 60 but actually being at 25 is a huge deal.

davef

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Re: What of your income is saved? And what counts as saving?
« Reply #2 on: August 13, 2014, 01:28:48 PM »
Using that fomula I saved 34%! Not bad for my fisrt year. Ill shoot for 50% next year.

Thegoblinchief

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Re: What of your income is saved? And what counts as saving?
« Reply #3 on: August 13, 2014, 03:36:31 PM »
I do it a bit differently. Since the simple math post is all about reaching your FIRE number, it's really about how fast your NW is increasing.

So I do it as (delta Net Worth)/income. As the stash gets bigger, this can end up with the possible absurdity of a 100%+ savings rate, but it works for me.

4alpacas

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Re: What of your income is saved? And what counts as saving?
« Reply #4 on: August 13, 2014, 03:40:45 PM »
I do it a bit differently. Since the simple math post is all about reaching your FIRE number, it's really about how fast your NW is increasing.

So I do it as (delta Net Worth)/income. As the stash gets bigger, this can end up with the possible absurdity of a 100%+ savings rate, but it works for me.

I wouldn't use this option because I might feel proud of myself for spending all of my actual income when my investments had a great month.  I like ignoring my net worth and focusing only on my income. I use (401k+other savings+match)/(total salary-taxes + match)

Michael792

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Re: What of your income is saved? And what counts as saving?
« Reply #5 on: August 13, 2014, 04:22:43 PM »
Everything I save is post-tax, so I take what goes toward anything that increases net worth (i.e. savings or debt repayment) versus what I keep to spend. I was saving 72% of my income each month, but right now I'm at about 83%.

Mrs. Frugalwoods

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Re: What of your income is saved? And what counts as saving?
« Reply #6 on: August 13, 2014, 09:05:00 PM »
Our monthly % saved calculation is pretty basic: 
Cash saved after taxes, after both maxing out our 401Ks. In other words: monthly after-tax savings / take-home pay

We vacillate between 65%-82% saved each month--I'd say we're usually in the high 70's.