How to use the savings rate calculator
- Enter the income that reaches your account each month and what you spend each month, including rent, bills, food, debt payments and fun.
- If part of your pay goes into savings before it reaches you, such as a workplace retirement contribution, enter the monthly amount. It counts as both income and savings.
- Optionally enter the savings rate you want to reach.
- Read your savings rate, what you save per month and per year, and what spending would reach your goal.
Formula
Total income = income received + saved before it reaches your account
Saved = income received - spending + saved before it reaches your account
Savings rate = saved / total income x 100
Spending for a target rate = total income x (1 - target rate)
Spending above income gives a negative savings rate, which means you are drawing down savings or borrowing.
$5,000 of income and $4,000 of spending
Saving $1,000 out of $5,000 is a savings rate of 20%. That is $12,000 a year, equal to 3 months of spending saved each year. Spending is 80% of income.
If you also put $1,000 a month into a workplace plan, with $4,000 reaching your account and $3,500 spent, total income is $5,000 and saved is $1,500, a rate of 30%. And to reach a 30% rate on $5,000 of income, spending would need to be $3,500, which means cutting $500 from the $4,000 example.
Why look at a rate and not a dollar amount
A dollar amount depends on income. A rate shows how large a part of your income you keep, which is easier to compare across years and with other people. Raising income while spending grows at the same speed does not move the rate.
The rate also tells you something about time. Saving a larger share of income builds assets faster and lowers the income you need to live on later. To see what a given amount grows to, try the savings calculator or the FIRE calculator.
Getting the spending figure right
Use real totals from your bank and card statements, not an estimate from memory. Include irregular costs such as insurance, gifts and car repairs by spreading them over twelve months, which the sinking fund calculator can help with.
If you want to build a plan around the result, the budget planner lays out where each dollar goes, and the savings goal calculator works out the deposit for a specific target.
Assumptions and limits
- Income and spending are monthly amounts that you enter.
- Debt payments count as spending unless you leave them out of the spending figure on purpose.
- The target rate is only a goal you choose.
- Taxes, interest, employer matches and one-time income are not modeled. This is not financial advice.
Frequently asked questions
How do you calculate savings rate?
Subtract spending from income to get the amount saved, then divide by income. Saving $1,000 from $5,000 is 20%.
Should I use gross or take-home income?
Either works if you are consistent. This tool uses the income that reaches your account plus anything saved before that, so retirement contributions taken from your paycheck are counted.
What does a negative savings rate mean?
It means you spend more than you receive, so you are using savings or credit to cover the difference.
How do I reach a higher savings rate?
Either raise income or lower spending. The tool shows the spending that would reach the rate you enter and how much that is below your current spending.