Saving money

[Broken Arrow]

That's incredible!! I wish I could get up to 25%, but even though we are mostly on the same page with stuff, DW would never go for some of the spending cuts that saving 25% would require.

Thank you for thinking so! But unlike the rest of you guys, I currently live rent-free. So, yeah, I'm cheating. Eventually, I'll have to pay rent (or mortgage) like everybody else, and then my savings rate will fall dramatically.

I guess that's why I feel the need to push so hard right now. Because I know that it won't last.

Oh yeah, and I'm with Debbie there too.

[tripods68]

I am currently at 58.8% savings of my gross.....

That's awesome Broken Arrow Keep saving while nothing stays forever


I'm able to save 33% of our gross income while my wife about 25%. When we payoff our $700 a month car payment (2 1/2yrs) we hope to increase that savings rate. But then we may have to replace our older commuter car by then and our oldest will be going to first grade school

[disneysteve]

Well DisneySteve, I too wish that I could save 25% of YOUR income, lol.

I think you are doing great. You've got to live a little too - and you've got a nice balance in your lifestyle.

LOL! Very funny, Debbie.

You're right, though. We do have a nice balance. We save a good amount but still enjoy our lifestyle - dine out at nice restaurants, travel regularly, and do other things that make us happy.

And I thought about it and realized that when DW was working full time, from 2005-2007, we WERE saving about 26% of our total gross income because 80% of her income went to savings. It is only since she switched to a part-time position that our rate dropped down, and it isn't actually 18%. It is a little higher because currently 50% of her income goes to her 401K and I'm not counting that in the 18%. We're probably more like 20%.

[Snowgirl]

Wow, some of you sure save a lot! We're aiming for a good spending/saving balance, and that is what we do now:

We save 18% pre-tax money in our tax deferred retirement accounts. With our high tax brackets, this cost us only about 11% in after-tax money.

We also sock away 10% in a saving/spending account. This money is aimed to pad our emergency fund, plus this is used to finance home renos or big ticket item purchases (appliances, furniture, a bigger/extra vacation ...) when balance is high enough. Since most of this get spend, I'm not sure it really qualifies as "savings", but it is psychologically to me.

Finally, we put away money each month for vacations to make cash flow easier at the time we incur the expense, but this is definitely not savings.

So really, I can't calculate our saving rate, but I feel we balance everything all right. We spend where we value the most (vacations, fine restaurants, ...), lead a good life, and still put money away for retirement. Even if I'd like to have a BIG saving account, I prefer right now to live comfortably and enjoy myself. Sure, we have a good income that makes it easy to do this, but from what I've seen on these board, the biggest savers are often not big earners!

[loulou]

We're currently saving 29% of our gross income. This is how it breaks down: 21% to retirement (pre and post tax accounts); 4% to HSA; 4% to ST savings.

[aida2003]

I'm not sure how to calculate percentages correctly. When you say "I'm saving 20%", does this mean pre-tax? What about investing in taxable accounts? This money is after tax, so how do I present our savings?

Wouldn't it be X% of pre-tax income to 401k and Y% of net (take home) income to taxable investments/savings?

[disneysteve]

I'm not sure how to calculate percentages correctly. When you say "I'm saving 20%", does this mean pre-tax? What about investing in taxable accounts? This money is after tax, so how do I present our savings?

Wouldn't it be X% of pre-tax income to 401k and Y% of net (take home) income to taxable investments/savings?

When I say 18% of gross, that's exactly what I mean. Some of that investment is done with after-tax dollars, but the total invested is equal to 18% of gross.

Let's say I gross $10,000. I invest 18% of that, or $1,800. Now I don't take home $10,000. After taxes, I may only take home about $7,500. But I still invest $1,800.

[Dingobiscuit]

6% of my gross base pay goes toward my 401(k) and there is a 216.7% match (100% match plus 7% gross base pay automatically goes into a retirement account). In effect, that is 19% of my gross pay.

I also have an allotment where about 27% of my net pay after deductions goes into a savings account, which is used for emergencies and to fund my Roth IRA.

[ceejay74]

This thread is inspiring! Once I get rid of all my credit card debt, I can't wait to start increasing the percentage of income we put away. Right now it's something pathetic like 5%.

[Ima saver]

Wow, some of you are really good savers. I have always saved at least 10%. This challenge has really helped me to save a lot more. I can usually put away about $2000 a month, unless we have had a big emergency. (like my car breaking down in florida for a week)

[Aleta]

I also wonder what constitutes savings that some of you are talking about. There is the savings and investing that you do for your retirement plans. There's also savings for your nontaxable accounts. There is a savings for your emergency fund. You also might be saving for a car, house, furniture, vacation, or whatever you're saving for. Do you consider all of these items as a % of your savings? I would think that vacation or holiday spending would be more based on a reoccuring expense not necessarily an expense and it's also short-term.

There is also the money that doesn't get spent everymonth. How do you look at that?

[DebbieL]

My savings was lumped together as a total when I did my calculation. Some of it is retirement, some of it is longer term savings and some is more like what you would call an emergency fund. When I calculated my percentage it was on my net income, not gross (we have relatively high payroll taxes here in Canada).

[aida2003]

OK, then I'll say that we save 18% of our combined pre-tax income in 401k.
Then I think we saved around 30% of take-home income in 2007 (RothIRA, taxable accounts, and savings).
This year I'm hoping to save something close to 2007, but starting 2009 it'll be different due to the 2nd joy (baby).

[disneysteve]

I also wonder what constitutes savings that some of you are talking about.

Good question. When I say 18%, that counts all regular long-term savings. In my case, that means fully funding Roths for each of us ($10,000 this year), DD's 529 ($300/mo.) and currently one taxable mutual fund account ($200/mo.). Once the Roths are maxed for the year, I redirect that portion of the 18% toward extra principal payments on our home equity loan. Also, DW has 50% of her income going to her 401K. That isn't included in the 18% figure.

That 18% does not include money spent on short-term things like vacations, home repairs, auto maintenance, entertainment, etc. That stuff all comes out of our everyday budget.

[Broken Arrow]

Good question indeed.

A friend of mine used to ask jokingly if saving up for vices counted? Despite his wry sense of humor, I think he had a good point that is now brought up here.

Like spending, I think what you save up for can be just as important as how you save up for it. After all, what good is saving if you ultimately plan to spend it on cheap booze, loose women, and blow?

So, as Steve has pointed out, true savings should be a skill that is applied to a good purpose or goal.