Our 2016 Savings Rate
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Playa Delfines in Cancun [/caption]
Before I put 2016 in my rear-view mirror, I want to take a final look and calculate our 2016 savings rate. Every year the Mustachian Post updates its index of bloggers' savings rates. That means it's time for me to crank out a few spreadsheets for more awesome tables. First, let's take a look at what we saved in 2016; here's the recap:
[table id=79 /]
Okay, now that we know what we saved last year, let's take a look at our 2016 salary numbers. You can see in the next table that last year Edwina and I had combined salaries of $90,720. That number represents our gross pay (not net pay) from January to August of 2016. However, we also had another source of income last year, our 72t IRA distributions of $18,375. When we add that amount to our salaries, we get a total income of $109,095 for the year. (Some years we take 457 distributions for another source of income, but last year we did not take any.) Here is our total income for 2016:
[table id=77 /]
Our savings rate as a percentage of our salaries is 95.19%. As a percentage of our total income, it's 79.16%. Those are certainly good numbers to know, especially after a bad day (month or year) of work. It's a great feeling and incredible motivator to know that we saved almost 80% of our income.
When you account for benefits and taxes, our savings rate percentages look even better. To make this calculation, I first need to total up how much of our income went towards our benefits (pension plan, health-dental-vision insurance) and taxes (Social Security and Medicare). As the table below shows, we spent $15,024 on benefits and taxes in 2016.
[table id=78 /]
Sorry, that table is boring; I hope you didn't spend too much time on those numbers! Anyway, when we subtract the money spent on taxes and benefits, we get our adjusted savings rate percentages. Our adjusted savings rate as a percentage of our salaries is 114.09% while our adjusted savings rate percentage of our total income is 91.80%. (These numbers look high even to me, so I'm sure they wouldn't be approved by the Internet Retirement Police.)
[table id=80 /]
It appears that our savings rates percentages are up as compared to our 2015 percentages. Last year's percentages ranged from 64% to 105%. For 2016, our savings rates percentages range from 79% to 114%. I think the adjusted total income savings rate (91%) is the best measure of our 2016 savings. However, I wouldn't feel embarrassed with a savings rate of 79% either. Either way I'm happy with last year's numbers.
Alright people, it's your turn. Take out a piece of paper and calculate your savings rates. Feel free to post your answers in the comments below.
[table id=76 /]
Before I put 2016 in my rear-view mirror, I want to take a final look and calculate our 2016 savings rate. Every year the Mustachian Post updates its index of bloggers' savings rates. That means it's time for me to crank out a few spreadsheets for more awesome tables. First, let's take a look at what we saved in 2016; here's the recap:
[table id=79 /]
2016 Savings Rates
Okay, now that we know what we saved last year, let's take a look at our 2016 salary numbers. You can see in the next table that last year Edwina and I had combined salaries of $90,720. That number represents our gross pay (not net pay) from January to August of 2016. However, we also had another source of income last year, our 72t IRA distributions of $18,375. When we add that amount to our salaries, we get a total income of $109,095 for the year. (Some years we take 457 distributions for another source of income, but last year we did not take any.) Here is our total income for 2016:
[table id=77 /]
Our savings rate as a percentage of our salaries is 95.19%. As a percentage of our total income, it's 79.16%. Those are certainly good numbers to know, especially after a bad day (month or year) of work. It's a great feeling and incredible motivator to know that we saved almost 80% of our income.
2016 Adjusted Savings Rates
When you account for benefits and taxes, our savings rate percentages look even better. To make this calculation, I first need to total up how much of our income went towards our benefits (pension plan, health-dental-vision insurance) and taxes (Social Security and Medicare). As the table below shows, we spent $15,024 on benefits and taxes in 2016.
[table id=78 /]
Sorry, that table is boring; I hope you didn't spend too much time on those numbers! Anyway, when we subtract the money spent on taxes and benefits, we get our adjusted savings rate percentages. Our adjusted savings rate as a percentage of our salaries is 114.09% while our adjusted savings rate percentage of our total income is 91.80%. (These numbers look high even to me, so I'm sure they wouldn't be approved by the Internet Retirement Police.)
[table id=80 /]
It appears that our savings rates percentages are up as compared to our 2015 percentages. Last year's percentages ranged from 64% to 105%. For 2016, our savings rates percentages range from 79% to 114%. I think the adjusted total income savings rate (91%) is the best measure of our 2016 savings. However, I wouldn't feel embarrassed with a savings rate of 79% either. Either way I'm happy with last year's numbers.
Alright people, it's your turn. Take out a piece of paper and calculate your savings rates. Feel free to post your answers in the comments below.
[table id=76 /]
Hey we had roughly 60% savings rate in 2016.
ReplyDeleteI don't think the 72t distributions need to be accounted in the calculations since it was your money to begin with, in effect you are taking money out of your right pocket and into your left (it probably also explains the over 100% savings rate).
Yaacov, 60% is an awesome number. I included the 72t distributions to give a better total income view. Last year we managed to save all of our paychecks via payroll deduction. Our combined net pay for the year was $2.08! Keep up your hardcore savings, Ed
ReplyDeleteWe have set a goal to save 50% of our income this year. We aren't sure how to get it done, but half the fun is figuring it out. Thank you for the inspiration and for your increased post volume.
ReplyDeleteBudrow,
ReplyDelete50% is ambitious, and it will speed you on your FIRE path. The posts are coming, but I don't what to get ready for Friday. It doesn't help that I'm at the end of a 4-day fast. Let's see how I feel after breakfast tomorrow.
I agree that it's ambitious but it takes ambition to become FIREd, right? 50% would double our 2016 savings rate, and I am including early payment of mortgage principle in our savings rate. I think it's doable.
ReplyDelete1) Would you ever decide to share the spreadsheets you use with us readers? Something to consider.
ReplyDelete2) Am I better off putting money into my 457 & 403b plans instead of say putting money that would have gone in my 403b into a Vanguard Target Date Fund? Wouldn't the investment money grow more over time?
Yes, that plan sounds awesome. I agree that attaining FIRE'd status often requires ambitious, unconventional thinking and maneuvers.
ReplyDeleteJonathan,
ReplyDeleteHere's a link to a spreadsheet; save a copy for yourself and have fun. As for your second questions, it depends how much you're saving. If you're saving less than $5,500, I'd say stay with your Vanguard fund (it's in an IRA, correct?). However, if you want to go full-on, crazy hardcore savings mode by maxing them all out, I say load the 457 first, then the 403b, and then your IRA. Why? The 457 could be like a savings/freedom account if you left your current employer, the 403b can only take contributions from Jan. to Dec., but the IRA can receive contributions until April 15th of the following year. At least, that' how I view it. Like I said if I were saving less than $5,500, I'd stay with just my Vanguard IRA.
Happy New Year!!!! I find that calculating your savings rate really depends on what formula you use...lol. (I found several formulas).
ReplyDeleteLet's use this one: Personal Savings Rate = Total Personal Savings / Total Income After Tax
My personal savings rate came up to 45.75% (without ER contributions) and 60.72% (with ER contributions). Compared to 2015 (29%), this is a great improvement.
This year's goal is 60% (pre ER contributions).
My high savings rate is all thanks to you, Jeremy, Justin and Pete.
Thank you for opening my mind to all the possibilities!!!!
ElleX,
ReplyDeleteI'm with you. There are many ways to look at your savings rate; that's why I have 4 posted. Your goal of 60% is awesome. I think our focus on "hardcore savings" is the most important element of our wealth building. Debt avoidance, prudent investing, and frugal living are all great, but hardcore savings grows you bottom line QUICKLY. Coupled with those other three elements, it leads to almost automatic net worth growth.
Wow, I almost wet my pants when I say myself mentioned with 3 of my FIRE heroes. Thanks for the compliment! It makes me feel good inside when people derive value from anything I post. Thanks for making my weekend. Ed
Amazing job, 91% SR is extremely high!
ReplyDeleteJust wondering, how did you survive with less than 8K spending in 2016?
Hello Mr. RIP,
ReplyDeleteWe spend more than $8k in 2016. We get $18,375 a year from 72t distributions from our IRAs. I was able to raise my savings rate by loading my HSA ($5,062) and ESA ($2,000) in January. I also put $3,000 in a Vanguard index fund that same month. Then, we had our entire paychecks sent to our 457 and 403b accounts. If we ever take another teaching job, we plan on continuing this hardcore savings method. Thanks for visiting. Ed
I thought Saving Rate is the amount you saved (not spent) of your total income:
ReplyDeleteSR = (TotalIncome-Expenses)/TotalIncome.
And not including investment earnings/appreciation.
Then you probably like the 79% number. No investment earnings or appreciation were used in my figures.
ReplyDeleteWow, those are some pretty impressive numbers! Hope to get there one day too!
ReplyDeleteWDYR?, Thanks. The truth is that once you tame your expenses and have enough money to cover them, you can go right to a 100% savings rate. The whole process was ridiculously easy. Save it all works every time! Thanks for visiting and hammer on. Ed
ReplyDelete