Discussion Question for those following along:
How do you calculate your savings rate? Of course the simple answer is Savings Divided by Income but there can be nuance to all of that.
Here's how I choose to measure it:
- Income = "Take Home Pay" (i.e. the total of all our paychecks throughout the year) + 401k Contributions + 401k Employer Match + Medical/Dental Premiums Withheld (which are also added as an expense) + HSA Contributions + HSA Employer Contributions + Net Income taxes refunded or owed for the the year
- Savings = 401k Contributions + 401k Employer Match + IRA Contributions + Net HSA Contributions (net of disbursements for the year) + HSA Employer Contributions + Liquid Investment contributions + Mortgage Principal Payments + The net result of my checking account for the year (or minus if this is a negative number)
I then take my total Savings and divide by my Income. Of course all of this is built into my financial spreadsheet and sounds a little more complicated when typed out. I don't include interest income or money from winning a fantasy football league or Ebates or whatever in my income figure. I put that just below the "income" line into "Misc Cash Inflows". I just like income to be the income derived from gainful employment. One other quirk that could go either way is Mortgage Principal Payments. I choose to include it in savings vs. an expense as I'm paying myself (building equity in my home). The INTEREST component of my mortgage payment is absolutely an expense though so I just divide the annual mortgage payments up accordingly.
I reconcile our finances to the penny - it's just a fun hobby to me (that happens to help us in our effort to achieve FIRE)!
I'd be very interested in hearing how others track this and what you may do differently