![]() ![]() The basic equation for calculating your savings rate is: So just how do you calculate your savings rate, anyway? How to Calculate Your Savings Rate I personally know people who are rocking the 70% – 80% range! But if you want additional choices, then you should be targeting something in the 40% – 60% range. This should secure you a comfortable, normal-age retirement. If you’re just starting out, absolutely be sure to hit at least 10%. Money Mustache’s article on the shockingly simple math behind early retirement.īasically, there’s a direct and exponentially-beneficial connection between your savings rate and your ability to retire early (or do anything else with that money). Without this information, how will you know if you’re on the right track?Īs a side note, as your net worth climbs higher, you will start to notice that your investment returns have more impact on your net worth than your savings rate, but in the early days, it’s all about the savings rate.Īnd for further reading on why it’s important to calculate your savings rate, check out Mr. ![]() In other words, your savings rate is like the speedometer in your car, showing you how quickly you are moving towards your desired destination. ![]() Your savings rate is a major factor in determining how fast you are accelerating your net worth, building emergency savings, establishing your pot of “FU Money” (that’s “Fun Unlimited”… right?), and moving deeper into the land of choice. And there’s a pretty simple calculation that serves as a good measuring stick of your overall current and future financial health: Your savings rate. This week, I would like to build on this concept of healthy spending and saving. You could stop work entirely, or travel the world, or fight for injustice. Specifically, on slide 28, I provided a simple example of how healthy spending and savings patterns can open up many life choices. In late October I had the opportunity speak about how early retirement is more achievable than you might think, provided you take appropriate actions and make wise financial choices. ![]()
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