Tracking Your Savings Rate

[Editor’s Note: This is an independent post written by Jack. This post discusses our savings rate and major expenses for Quarter 1 (January – March) of 2019. This post may contain affiliate links. Please read our disclosure for more info.]

One of our major goals for 2019 (discussed in our Written Financial Plan) is to save at least 40% of our gross income for the year. At TeachFI we believe in maintaining transparency with our readers, so JJ and I will each (in seperate posts) be sharing our saving rate and spending quarterly/annually. We feel this is an optimal way to get a pulse of your savings rate (since spending can vary quite a bit month-to-month) and categorical spending habits. We highly recommend you go through this exercise as well because the results can be quite enlightning for informing your current and future financial decisions. Mint and Personal Capital are both great tools that can track and categorize your spending if you don’t feel like tracking it all yourself. 

Calculating Savings Rate:

There are a number of ways to calculate your savings rate (%). Regardless of the method you choose, it is important that you remain consistent and also understand how others calculate their savings rate so you can compare apples to apples. We calculate ours by dividing our savings by our gross income (+ employer retirement contributions). Our savings calculation:

  • Includes:
    • EmployER Retirement Contributions
    • EmployEE Retirement Contributions
    • Money NOT spent (labeled as “Other Savings”).
  • Does NOT Include:
    • Mandatory Deductions (federal/state tax witholdings)
    • Optional Deductions (insurance)
    • Spending

A lot of our savings is actually generated from automatic deductions we setup with our employers that goes directly into our retirement vehicles (401k, 403b, 401a, TSP, & HSA) before the money hits our bank account. Additional savings (labeled as “Other Savings” is put toward our taxable brokerage account, college 529s, and savings for major expenses (like front-loading our IRAs each January and a downpayment for the house we are closing on in May)!

Click HERE to view a copy of the spreadsheet we use to calculate our savings rate. Feel free to make a copy of it and use/edit it to meet your needs.

Major Expense Categories:

As you can see we BARELY made our savings rate goal this quarter. Below are some of our major areas of spending for the last three months:

  • Wedding = $7671
  • Rent = $3477
  • Food/Dining = $2807
    • Groceries – $1606 
    • Restaurants/Bars – $1136
    • Fast Food – $49
    • Coffee Shops – $14
  • Disability Insurance (Annual Policy) – $1884
  • Auto = $897
    • Auto Insurance (6 Months x 2 cars) – $530
    • Fuel – $367

Unfortunately weddings aren’t cheap. Neither is disability insurance, but it’s a must have and fortunately only comes out once a year. We could probably make more of an effort to decrease our food spending, particularly because it’s just the two of us (I AM PROUD of only spending $49 on fast food); however, we do get a lot of personal joy and fulfillment cooking at home (for both ourselves and friends) and going out with friends. We do actually make an earnest effort to not eat out more than once a week and meet that goal most weeks. 

Final Thoughts:

In order to achieve Financial Independence you HAVE to save a reasonable portion of your income. If you have not read the post The Shockingly Simple Math Behind Early Retirement yet, you definitely should. I am excited about the fact that even with some major expenses in unusual areas we still maintained a 40%+ savings rate for the quarter. We have our sights set on 50-60% for the remainder of the year. We are excited about continuing to make a conscious effort to avoid lifestyle creep and save as much as we can while spending money on things that we find true value in.

What was your savings rate this quarter? What are your major expenses? Do you find true value in them? If not, what steps can you take to reduce your spending in those categories? Comment below!

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