Author Topic: What savings rate does MMM recommend?  (Read 4287 times)

SpendyMcSpend

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What savings rate does MMM recommend?
« on: July 16, 2012, 05:51:25 PM »
I saw a recent post by him that said that "only 45%" savings rate.  Is 60% the goal ?

gooki

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Re: What savings rate does MMM recommend?
« Reply #1 on: July 16, 2012, 06:09:42 PM »
It's very much specific to your situation and your goals.

arebelspy

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Re: What savings rate does MMM recommend?
« Reply #2 on: July 16, 2012, 07:32:26 PM »
It's very much specific to your situation and your goals.

This.  Someone making 150k should easily be saving 70+%.

Someone making 50k might be doing good saving 50%.

Someone single versus someone married with four children will have different savings rates (and the latter will have different depending on if both husband and wife work, or only one).

Set goals for yourself, and compete with yourself to better it.  Measuring against someone else's yardstick is mostly meaningless.
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kolorado

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Re: What savings rate does MMM recommend?
« Reply #3 on: July 17, 2012, 08:36:20 AM »
It is specific to your life situation. You could try calculating a base expenses rate with the Federal Poverty Level. That should cover a basic roof over your head, simple food, thrift store clothes, insurance and healthcare and transportation. I know in my family, we've always spent just around the poverty level and that's including all the extras like gifts and travel. We don't suffer at all at that level because we enjoy being debt free(except an affordable mortgage)and are in good health living a non-consumerist lifestyle.
My household of 5, with an income that has never exceed $40K(but will finally this year),has never spent more than $30K a year. This has allowed us to save anywhere from 20-45% of gross income. Right now we're facing the challenge of moving in to a new house that is 3X the size of our last home. The taxes and utilities are much cheaper here in CO than in NJ which will help even things out. But now we live 1750 miles away from our families, greatly increasing our vacation/travel expenses. On paper our expenses should come out to be $32-36K in 2013. We spent just $28.5K last year. I'm going to rethink as much as I can and aim for spending just $30K. I'm excited to learn new ways to save. One I know for sure will be partially heating with wood instead of electric. The new property has tons of dead wood to clear and a fireplace.
I think keeping your mind open to learning and your options open for trying new things will overall be better than focusing on a specific number. You may be surprised one year, as I was, to discover you saved 40% of your gross income. :D

spider1204

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Re: What savings rate does MMM recommend?
« Reply #4 on: July 17, 2012, 10:49:35 AM »
I'm sure he would recommend the highest savings you rate you can get to while still remaining happy.  Which is again another way of saying it's specific to your life situation.  The key to this is also figuring out how to remain happy with a higher and higher savings rate and a correspondingly lower and lower spending rate.

tannybrown

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Re: What savings rate does MMM recommend?
« Reply #5 on: July 17, 2012, 11:03:40 AM »
I echo the posts above for determining your own goal for savings rates.  That said, I think 50% of your takehome is a good benchmark if you're looking for a rough comparison.  A 50% savings rate puts someone on a 17 year path to FI, assuming they start with no assets and no debt ($0 net worth).