[...] our after tax savings rate of 30%. Back in October, I announced that we were saving around 30% of our after tax income.  I would like to keep up this trend for all of [...]

[...] October, I did a post indicating our savings rate up to that point.  I am really pleased to say that throughout 2007 we saved about 30% of our [...]

Second, I think its incredibly sad how large the focus is on your savings. Of course saving is important, everyone knows that and the fact is most people actually do save a decent amount regardless of the media hype. The bigger focus should be on increasing your income. On your salary it would be quite hard for you to save an extra $10k per year on top of what you’re already saving. But earning an extra $10k per year should be quite easy, especially if you think of it as just $5k per year each for you and your wife. I am a few years older than you but I started working much later because of graduate school. I started working when I was 26 but got into a field that pays well into the 6-figure range and now just a few years later am making over $400K. Saving money was always a given but my focus was on increasing my earnings. Now I save over 50% of my take home pay and am on track to increase my net worth by close to $300K this year. The fact of the matter is that unless you focus on increasing your earnings you will always have to live like a miser to save any respectable amount of money. I find it discomforting to read these PF blogs where the focus is on living life as cheap as possible. Is that the reason we live? To merely get by and survive???

[...] 19th, 2007 · No Comments As I previously mentioned over at Million Dollar Journey I save about 33% of my net (take home) pay when our household gross income is around $75,000. I say [...]

Saving 1/3 of your household income of $75k (Canadian Dream) with a child is much more impressive than our 50% savings with double the income and no kids.

[...] konagod wrote an interesting post today onHere’s a quick excerptOthers in this post have said that high income makes high savings rate easy (and difficult to compare), and I fully agree – this is why I feel that my savings rate is NOT truly impressive, especially compared to some of the others … [...]

I did 5.5 years at a large consulting company doing SAP implementations. I left after a promotion, and after 6 months of independent consulting bliss, this company has brought me back to work on their projects as a contractor. It is an ideal arrangement and I have been very fortunate, but also made sacrifices and took big risks to get here. The nature of contracting also means that this income level may not sustain itself beyond the current contract. If anyone is interested in further details or even advice on contracting, feel free to ask.

Others in this post have said that high income makes high savings rate easy (and difficult to compare), and I fully agree – this is why I feel that my savings rate is NOT truly impressive, especially compared to some of the others posted here. Given my situation, I see greater expected value spending time on professional skills improvement, stock research and investment strategy then trying to save dollars on packed lunches and groceries. The fact is that as income and savings rise, “active frugality” becomes less effective and will end up costing money in the long run. The mindset of frugality (”passive frugality”) still applies though, as it takes zero time to decide not to have a starbucks latte, and it is a key principle of value investing.

Good point. That tends to be forgotten some times by people.

Case in point, our total household gross pay is under $75,000/year.

Tim

We’ve been fortunate in that we haven’t had car payments in 7 years, but we also bought a new house 4 years ago which meant a LOT of furniture/appliance purchases.

But, as evidenced by Craig’s post, if you make a lot of money it is easier to have a higher savings rate – it doesn’t mean that they aren’t people who would still spend every penny of discretionary income, but it still would be easier to save.

So, with all of the factors impacting ability to save, one shouldn’t judge themselves against these posts when you don’t know what each individual’s situation is.

As mentioned my after tax rate is about 34%, although it will be dropping soon when my wife goes on Mat. leave.

I attribute our good savings habits generally to being frugal when it comes to every day expenses, living below our means when it comes to our home/cars/etc., and making saving a top priority in our lives…

I’m finding it difficult to save just 30% of my take-home, and I have no kids, a decent job, and am fairly young.

I live in a pretty expensive rent condo (1k a month) and love to eat out and go out :( I don’t know how I’ll get my savings rate up with these habits, argh.

Now that I’m a wage slave again, I’m earning less and getting taxed at the source, so I’ll post soon with my revised (and far less impressive) saving rate.

Instead, maybe I’ll go work with Craig;)

We have to stop thinking about the same posts. I’ve got one in my drafts similar to yours. *grin*

Anyway, I’m not sure exactly where I’m am for a full year yet, but I would guess I’m on target to 1/3 of my take home pay or 33%. With one kid already and the second on the way I feel really good about that amount.

Tim

One of the issues is rrsp contributions – in my case I contribute all my rrsp contributions from my gross income (with no tax taken off) so to factor in the rrsp contributions into my net savings I need to consider how much the contributions would have been if I hadn’t made the contribution and they been just income. So for $400/month of contribs at a 40% tax rate the net savings factor would be $240/month.

For someone who contributes with after tax money then they really should consider the tax rebate as part of the savings even though they won’t see it until tax time (and it might not get saved) – ie if you contribute $400 after tax then your “savings” should be $400 + $160 = $560 for that month – this doesn’t work too well since you don’t actually get the $160 until much later but only counting $400 is under reporting the savings (in my opinion).

Another issue is debt repayment – any reduction in principal of your debts should be considered savings – doesn’t matter if it’s credit card, mortgage, loan shark etc.

Just to clarify – in FT’s case if part of his $4150 of expenses include mortgage or debt payments then he should further reduce the expenses by the amount of principal repayment (for the net savings calculation).

Mike