The only problem is that it was taking a lot of time and I started to lose interest. I was getting the results that I had intended. All of the things that I thought I was supposed to do when it comes to personal finance.Īnd it WAS working. I was setting financial goals, setting up and monitoring progress towards future large expenses, tracking our net worth, tracking our spending, saving for retirement. I have been managing our personal finances for many years prior to discovering savings rate. 2015 was the first year that I started tracking our savings rate. Savings Rate = % of Household Income committed to savings or investmentsĪfter being introduced to the concept about 5 years ago, I started setting targets and tracking our savings rate on an annual basis. Saving in this instance simply implies that you are not spending this money during the year. If you are pursuing financial independence, I suspect that most of these dollars that you are setting aside are being invested. Now, the use of the word “saving” doesn’t mean that it has to go into a savings account.
If this is a new concept to any of you, as it was for me several years ago, savings rate is the percentage of your annual household income that you are saving. While there are many important metrics to track for financial independence, savings rate is the most important. It is still the most important metric that I pay attention to, and I’m not over-emphasizing this. Understanding savings rate has changed the way that we manage our money. And it’s amazing to look back at our financial progress, in large part due to this topic. It was something that I learned approximately 5 years ago now. But, savings rate continues to be an important part of our financial plan. I have since broadened my experience, and found new hobbies. Through all of my research, there was one topic that had a great impact on our lives. I consumed everything I could get my hands on. There was 8-9 year period of time where I obsessed over personal finances. Increase our Income through Side HustlesĪ couple of years ago when I first published this post, I wrote that one of my main hobbies was personal finances. 1: Increased our Income through Promotions.What We’ve Done to Increase Our Savings Rate.2: This Process Forces us to Push the Envelope.How We Set our Target Savings Rate Each Year.Step 3: Divide Total Savings by Total Take-Home Pay (Income).Step 1: Identify & Use Take-home Pay (Income).2: It is directly related to how early you can retire.1: Savings Rate does not Discriminate based on Income.2: The higher % of your income that you save, the earlier you can retire.1: If you save 10-15% of your income, you’re going to work at least 43 years (51 if you save only 10%).The Simple Math Behind Early Retirement.2: Simplified the Process of Managing Our Finances.1: Changed the Order of Spending & Savings.
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