After lots of personal trial and tribulation, I’ve found that far and away, the best way to calculate your savings rate is using this formula: Savings Rate = Your True Savings / Your … This is a place for people who are or want to become Financially Independent (FI), which means not having to work for money. Lots of expenses on your paycheck won’t be retirement expenses. If your annual expenses are $50,000 … and pension before taxes; Pension: Includes HSA, 401k … That isn't a savings rate, that is just a ratio of savings to spending. Agreed! As your income grows you should probably make sure you aren’t spending proportionally more. It's not very meaningful outside of high level explanations like the famous MMM "Shockingly Simple Math" article (and pointless comparisons to other FIREers). savings rate = [(gross - tax) - (spending)]/(gross - tax), or (saving)/(gross - tax). I had a question how you calculate your savings rate? Add up your Total Savings. Your savings rate is your Total Savings (Step 3)/Total Income (Step 4). For example I pay union dues, I don’t count that as part of my income, but neither will I have it as an expense in retirement. If you can assign meaning to a value, then you can calculate it and learn something. Personal savings rate is also mostly useless as a metric of anything other than comparing your savings rate to your goal/planned savings rate. I just do monthly spend x 12. I think it depends greatly on your use of the data point and your goals. Financial Independence is closely related to the concept of Early Retirement/Retiring Early (RE) - quitting your job/career and pursuing other activities with your time. I think it's a metric you can calculate however you like as long as you understand the significance of it. Press question mark to learn the rest of the keyboard shortcuts. Meridian has a variety of calculators and tools to help you decide how you want to save and spend your money. Honestly, I don't think people should calculate it at all. We won’t sugarcoat it. By fighting for your financial freedom, you can begin to control your own destiny. Personal savings rate is also mostly useless as a metric of anything other than comparing your savings rate to your goal/planned savings rate. If you invest pre tax then take your pre tax salary. So my savings rate is = (unspent cash in my checking/savings account + 401k + money market accounts) / gross salary. Whether you have $100 or $10,000 to contribute, your initial amount is crucial to your investment's growth. For example, I used to calculate it like this: Every month: Sum of deposits to all investment accounts, divided by what was shown in my paystub as total. For example, if you earn $100,000 a year and pay $25,000 in taxes. The most straightforward way to calculate your savings rate is to divide your savings by your gross (pre-tax) income. Emergency savings goal: $14,114 to $28,229. It is also helpful for paying attention to lifestyle creep. Posts that do not help drive discussion will be removed. And then annual spend x 25 or 30 to get an estimate of what I need. Total Income is your Post-tax income (take home) + all of your Pre-tax Contributions. Hard thing to calculate it that way. You’ll enter this number into the calculator to see the rate at which your initial deposit and any other potential contributions grow. Savings rates have been on the decline since the summer of 2019. Useless metric that isn’t really standardized. as your total savings divided by your total income (including any employer matches etc.) So many things change in 20 years though. I really like the way you can play with the inputs and instantly see how the path to FI changes with things like savings rate… Removed by the Federal Reserve etc., or cutting with an axe match you... 3 ) /Total income ( take home ) + all of your Pre-tax.... 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