How to Calculate Annual/Monthly Savings Rate

[Re3iRtH]

What is your favorite way to calculate savings rate? Is there a practical way that it can be done.. that is accurate and does not take
up much time? I have had Mint for a few months, but I'm not seeing a good way to do this. Should I be linking a credit card manually, even though a checking account is linked to Mint. Or just use the same CC for 3 months, and subtract from total income? Sorry for all the seemingly noob questions!

[charis]

Track all spending and income in Mint and look at net income to calculate your savings rate.

[Re3iRtH]

Track all spending and income in Mint and look at net income to calculate your savings rate.

Thanks for your reply. I just went into Mint and didn't find it helpful. There are things like large wire transfers in and out, rental income, etc. Which just makes a bunch of green up and red down bar graphs each month.. not terribly helpful. I don't see a "net income" statement or chart :(

[Monkey Uncle]

For the numerator of the fraction, I add up all the transfers to savings that I've made for the year, plus all employee and employer contributions to my 401k.  For the denominator, I take my gross salary, add the employer contributions to my 401k, and subtract income and payroll taxes.  Divide the numerator by the denominator.  I don't consider monthly savings rate to be all that informative, but it's easy enough to divide the numerator and denominator by 12 prior to calculating the savings rate.

Takes about 5 minutes with a hand-held calculator.

[meatface]

You can either track your savings/investment directly or track your spending and subtract it from your income.

Tracking savings directly: add your 401k contributions + IRA contributions + house principal payments + other investment savings + cash savings = (e.g., $40k/year). If you make $100k/year, then your savings rate is 40%.

Tracking expenses and then subtracting: use Mint to aggregate all your expenses and it will easily tell you how much you spent over the last year. If you spent $60k, then $100k-$60k=$40k and your savings rate is the same 40%.

Better yet, use both methods to make sure they match up (like double-entry bookkeeping).

Some people use net income to calculate savings rate. I find that confusing, and it also tends to inflate your savings rate. I prefer than challenge of trying to have a high savings rate based on gross income.

[Lan Mandragoran]

It's all easy with Mint until you start adding rentals and automatic transfers.  Only way I can do it without just spending ridiculous amounts of time on it is to take the total contributed (house/401k/stocks etc) and divide that by whatever my takehome was (after taking out rental expenses). 

I suppose the better way may be to have your business expenses and business income be separate... idk.

[GenXbiker]

Most accurate way:

Savings rate = (savings including employee & employer 401K contributions) / (net income + employee & employer 401K contributions)

I personally do not include home payments or home appreciation as savings because that is NOT part of your stache.

I get slightly different savings rates depending on which method I use:

80% savings rate as % of take home pay only (retirement investments are excluded)

82% including my retirement fund contributions in savings and dividing by (net income + 401K contributions)

83% including employer partial match retirement fund contributions and adding that to my income above for calculating as shown in the formula at the top of my post.

Edit:  edited for clarification

[andy85]

=(A1+A2+A3-B1)/(A1+A2+A3)

Where:
A1 = Net Income
A2 = 401(k) Contributions
A3 = 401(k) Employer Match
B1 = Spending

[charis]

Track all spending and income in Mint and look at net income to calculate your savings rate.

Thanks for your reply. I just went into Mint and didn't find it helpful. There are things like large wire transfers in and out, rental income, etc. Which just makes a bunch of green up and red down bar graphs each month.. not terribly helpful. I don't see a "net income" statement or chart :(

It's under Trends on the left side under the column entitled Graphs.  I manually categorize transfers (which should have no effect on your savings because transfers are neutral) and other transaction as needed without issue. 

[Incandenza]

Should I be linking a credit card manually, even though a checking account is linked to Mint.

Yes, you need to manually link all your credit cards, bank accounts, investment accounts, college accounts, etc.  Then take a look at the net income section under trends.   

[Zikoris]

Spending YTD divided by net income YTD. That gives you spending rate, so whatever is left is the savings rate.

I pull all that data from Mint. If Mint is giving you unusable data, I don't think you're using it correctly.

[Re3iRtH]

Should I be linking a credit card manually, even though a checking account is linked to Mint.

Yes, you need to manually link all your credit cards, bank accounts, investment accounts, college accounts, etc.  Then take a look at the net income section under trends.   

Thank you to everyone for all the helpful feedback.

Just to clarify, I should link a credit card to Mint, even though the checking account that is autopay for the CC is already linked?

[Zikoris]

Should I be linking a credit card manually, even though a checking account is linked to Mint.

Yes, you need to manually link all your credit cards, bank accounts, investment accounts, college accounts, etc.  Then take a look at the net income section under trends.   

Thank you to everyone for all the helpful feedback.

Just to clarify, I should link a credit card to Mint, even though the checking account that is autopay for the CC is already linked?

Yes, paying off a credit card is a money transfer, not an expense. The expense is the credit card transactions themselves. How else are you going to keep track of your credit card transactions if you don't link it?

[Re3iRtH]

Should I be linking a credit card manually, even though a checking account is linked to Mint.

Yes, you need to manually link all your credit cards, bank accounts, investment accounts, college accounts, etc.  Then take a look at the net income section under trends.   

Thank you to everyone for all the helpful feedback.

Just to clarify, I should link a credit card to Mint, even though the checking account that is autopay for the CC is already linked?

Yes, paying off a credit card is a money transfer, not an expense. The expense is the credit card transactions themselves. How else are you going to keep track of your credit card transactions if you don't link it?

I figured the act of a negative withdrawal (ie. -$754.29) from a checking account would account for it. I'm probably over thinking it :P

[charis]

Should I be linking a credit card manually, even though a checking account is linked to Mint.

Yes, you need to manually link all your credit cards, bank accounts, investment accounts, college accounts, etc.  Then take a look at the net income section under trends.   

Thank you to everyone for all the helpful feedback.

Just to clarify, I should link a credit card to Mint, even though the checking account that is autopay for the CC is already linked?

Yes, paying off a credit card is a money transfer, not an expense. The expense is the credit card transactions themselves. How else are you going to keep track of your credit card transactions if you don't link it?

I figured the act of a negative withdrawal (ie. -$754.29) from a checking account would account for it. I'm probably over thinking it :P

Link everything, including credit cards. To really track your spending habits, you'll want to categorize each transaction so you know exactly how you are spending your money.