Every good blogger, financial adviser and “money” person will tell you that saving more will increase your wealth, it’s easy, spend less and save more. The one thing I have noticed is that everyone calculates their savings differently. I want to be frugal but given the life expectancy in my family genes, I want to have a good time while I save. If I could live off peanut butter and jelly for the next two years and then retire I might try to save 90%, but realistically until I have no mortgage or we make 300% more it’s not happening before I’m 50.
Here’s a recap of how I calculate savings and how much we added to savings last year, we had an emergency fund already so notice I didn’t add anything to “cash” accounts.
In 2015 we added the following amounts to Savings:
$17,080.85 401K
$5,500 IRA
$6,500 After-tax investment account
$2025.00 Employer Stock (I receive a 10% discount from my fortune 500 employer)
We don’t count the 3% employer match we receive; it just increases our net worth.
Total Savings $31,105.85
Gross Pay $96,894.80
Based on Gross only, we saved 32% of our gross income.
If we add the extra payments on the mortgage:
Extra principle payments $4,948.16
Savings increased to $36,054.01 (with mortgage)
New savings rate 37.21% (this could be better)
We calculate our savings rate based on how much we save with retirement accounts, stock accounts and extra principal payments (because we could just as easily add that to our after tax stock accounts)
Our goal for 2016 is to try and reach 45% in savings this way. I will be calculating it monthly and adding it to the blog.
How do you calculate your savings rate?