Saving-To-Income Ratio

**ScrimpAndSave** · 10-03-2008, 08:01 AM

I agree.

I'm in the position where I am renting from my dad cheap and saving a lot of money. I make about $50,000 a year, and I save $2,000 a month plus 7.5% is put away in my pension.

**Joan.of.the.Arch** · 10-03-2008, 08:12 AM

Originally posted by tmvijai View Post

If you can control and keep check on your spending, you should be easily able save 15-20% including retirement, kids education and short term.

I think how easy that is can depend too on things like how much income you have. Low earners will have a much harder time saving any percentage, as little of their income may be available for anything beyond month to month survival.

**notallboutmoney** · 10-03-2008, 08:13 AM

Totally depends on your situation.. I have 4 kids a mortgage... and a wife! Saving is very difficult.

**tmvijai** · 10-03-2008, 08:28 AM

Originally posted by Joan.of.the.Arch View Post

I think how easy that is can depend too on things like how much income you have. Low earners will have a much harder time saving any percentage, as little of their income may be available for anything beyond month to month survival.

Joan, I mentioned in my initial entry. It depends on everybody income and situation. As you said, for many people who live out on pay-check to pay-check. they can't think of savings at all.

But, everybody can save to a smaller extent. You don' t have to put away $100 from your check to be saving. Even $5 per month put away can be $60 a year with 4% - $64. You can use it at christmas to get some gifts.. So any saving is a saving whether simple or big..

**Pitman** · 10-03-2008, 08:55 AM

Saving is saving. I would love to be able to put away 80% of my income into my savings account, but I can't. At the moment, I do put away 34%, and when I pay off this CC, and student loan, that percentage will increase.

**tmvijai** · 10-03-2008, 08:58 AM

Wow!! 34% is a great one and not everybody can make to that figure unless you have very less debt ratio.

**tripods68** · 10-03-2008, 09:01 AM

I never heard of savings to income ratio calculation. But I supposed if we want to know how much we are truely saving on the monthly basis both pretax and after tax this makes sense.

Here's where mine stand on savings:

Pretax I saved 13% towards retirement that includes 457 + Pension contributions. I saved another 14% after tax savings ROTH and joint money money account. My combined savings rate income ratio is 27%.

DW's stands on savings:
DW Pretax 10% (403b). After tax she saved another 9% goes towards her IRA, joint MMA, and our kids 529. DW combined rate 19%.

That gives us total percentage savings rate of 46% or $68,080.00 this year based on $148K combined income. Not too bad.

BTW: Our net income this year $90,396.00 and our total expenses $71,627.40.

**Caoineag** · 10-03-2008, 09:08 AM

Hmm...current ratio of saving to income is 43% of take home pay (ignores 401(k) money since I don't know our gross income at the moment), will go to 22% after we buy our house and up the 401(k) contribution to max (again not included).

As to the real saving ratio, that will have to wait until I do taxes. Half of DH's income is commission so my budget is only ever done from minimum take home pay and this is the first year of the commission so I don't even have a guess.

**disneysteve** · 10-03-2008, 10:03 AM

I save 19% of my gross. My wife has 50% of her gross go to her 401k.

In reality, we save more than that, though. As we discussed in a recent thread, I don't count things like vacation spending or other short-term stuff as part of that 19%. The real number is probably closer to 30% when you add everything in.

**MonkeyMama** · 10-03-2008, 10:22 AM

It really depends.

We have no pre-tax savings options really. & little benefits with my job so we save a lot for short-term. About 20% gross goes to expenses within the year (a lot medical and such).

We also pay for everything we can annually (instead of monthly or quarterly installments) for the discount. So I think that exaggerates greatly the savings we have to do to pay our annual bills.

We put away almost 10% to cash savings for longer term expenses. We have no debts, we prefer to pay cash for everything. But since we have no debts (outside mortgage), this is easy enough to save.

We put away 12% to retirement, today.

Technically our monthly savings is 42% of gross then. But I Would say we are doing okay, but not great.

However, before kids, when my spouse worked, we saved 50% easy. Piece of cake. We did not have a lot of expenses. Our health and dental was covered. We didn't have so much insurance (life, disability, umbrella, etc.). We had 2 less mouths to feed. Etc., etc., etc. Most of that 50% actually went to retirement and to mortgage pre-payments. So, things change. We could have saved a lot less back then and been a lot further ahead since we needed less short-term savings. Likewise, 50% of 2 incomes was a much larger amount of savings.

I am happy enough with our savings, but would prefer 15% to retirement, minimum, for the long haul.

**Pitman** · 10-03-2008, 10:31 AM

Originally posted by tmvijai View Post

Wow!! 34% is a great one and not everybody can make to that figure unless you have very less debt ratio.

Thanks, I try to keep my debt at a minimum, and curbing my once expensive spending habits. I owe it all to will power.

**noppenbd** · 10-03-2008, 10:52 AM

Originally posted by tripods68 View Post

I never heard of savings to income ratio calculation. But I supposed if we want to know how much we are truely saving on the monthly basis both pretax and after tax this makes sense.

Here's where mine stand on savings:

Pretax I saved 13% towards retirement that includes 457 + Pension contributions. I saved another 14% after tax savings ROTH and joint money money account. My combined savings rate income ratio is 27%.

DW's stands on savings:
DW Pretax 10% (403b). After tax she saved another 9% goes towards her IRA, joint MMA, and our kids 529. DW combined rate 19%.

That gives us total percentage savings rate of 46% or $68,080.00 this year based on $148K combined income. Not too bad.

BTW: Our net income this year $90,396.00 and our total expenses $71,627.40.

One person saving 27% with a spouse saving 19% does not equal 46% total savings. Depending on how much each person makes it is somewhere between 19 and 27% (weighted average).

**tripods68** · 10-03-2008, 11:13 AM

Let me break it down both Pre Tax and After Tax:

Pre-tax Gross Savings combined: 23%
After-tax Net Savings combined: 23%

46% is the total combined percentages we are savings both Pretax and After tax monthly on $148K income this year.

I'm not sure what is the practical purpose of weighted average for this purpose? I'm confused?

I guess the better question to ask, does it matter what's the weighted average if we are saving a combined $68,080.00 a year?

**JinCO** · 10-03-2008, 11:33 AM

We are only saving about 17 - 18% of gross earnings currently, but we are also paying somewhere between 7 - 10% on accelerating our debt pay-off. At some point this should become savings.

Saving-To-Income Ratio