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After Tax Savings Rate – Oct 2007

Since joining the blog world, I have discovered that we have quite the few frugal Canadian bloggers out there.  I thought I was pretty frugal, but there are others who are saving much more than me.  For example, I came across a post by The MoneyGardner and how his household after tax savings rate is 34%. Mr. Cheap keeps his living expenses at $1150/month which results in a savings rate of around 77% (unreal) , and regular reader Telly saves 50% of her income!

I was quite impressed by this and started to think about our own savings rate and how we compared.  As stated in my financial goals for 2007, we aim to save around 20% of our net (after tax) income.  Doesn't seem like much compared to other bloggers but how are we doing thus far?  Let's take a look at our household expenses.

As I've mentioned before, I use MS Money to track our household expenses.  Going through the history for 2007, I've listed our monthly expenses since January.

January: $4,100 

February: $6,500 (paid off car loan here)

March: $4,000

April: $3,400

May: $3,050

June: $8,600 (all insurances paid and new tires here)

July: $3,800

August: $2,900

= avg: $4,550/month in expenses (including RRSP contributions)

Subtracting the $400/month RRSP contribution from the expenses and using our regular 9-5 annual income (not including passive/alternative income), we currently have a NET (after tax) savings rate of approximately: 30%.  Personally, I would like to be in the 50% range however, I won't complain as I've surpassed my 20% goal.

How much do you save as a percentage of your after tax income? 

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FT About the author: FT is the founder and editor of Million Dollar Journey (est. 2006). Through various financial strategies outlined on this site, he grew his net worth from $200,000 in 2006 to $1,000,000 by 2014. You can read more about him here.

{ 24 comments… add one }
  • Craig October 10, 2007, 7:07 am

    I think your savings rate is excellent, especially when considering the negative savings rates for most households in North America.

    I’m probably an abnormal case, but here are my stats:

    my household consists of myself – I’m a Canadian doing business in Australia.

    net monthly expenses including rent/bills, food, entertainment, and “luxuries” = $2600 AUD.

    net monthly self-employment income after taxes = $28,600 AUD

    savings rate = ~91%

    This time last year, as a professional consultant with 5 years employment, my savings rate was zip, zero, nadda (as was my net worth). Reading blogs like yours has inspired me to find ways to increase my income, drop my debts, and build my net worth. I could probably drop my expenses from their current levels, however I think it is wise to spend on certain luxuries to reward hard work. In addition, time is money and being too frugal can quickly become counter-productive.

    Thanks again for the excellent blog, and good luck with your quest to hit 50%!

  • The Financial Blogger October 10, 2007, 8:48 am

    I manage to save about 20% of my after tax income but let me tell you that it becomes quit a challenge when you have kids!

    However, with a tight budget you can manage :-)

  • Telly October 10, 2007, 9:16 am

    If it makes you feel any better FT, at your age, my husband and I were probably closer to 0% savings rate!

    I think you’re doing great!

  • FrugalTrader October 10, 2007, 9:22 am

    Thanks for the input guys! Craig, that’s a ridiculous amount of money that you make! If you don’t mind me asking, what do you do?

  • FourPillars October 10, 2007, 10:36 am

    Great topic – I’ve been thinking about trying to track my savings rate – gross or net probably doesn’t matter although I think net is probably more relevant.

    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).


  • FrugalTrader October 10, 2007, 10:51 am

    FP, that’s a good point, mortgage principle payments should be considered savings. I didn’t account for that in my calculations. Yes, the savings calculations get a bit trickier with RRSP contributions, for me however, I’d rather under estimate a little.

  • Canadian Dream October 10, 2007, 12:00 pm


    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.


  • FrugalTrader October 10, 2007, 12:32 pm

    That’s a big accomplishment to save 33% of your net income and have a kid at the same time.

  • the Wealthy Canadian October 10, 2007, 7:57 pm

    Good work guys. This is something that I should track better. My income has been volatile so becomes more difficult (but perhaps more important) to track.

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

  • Mr. Cheap October 10, 2007, 9:01 pm

    Thanks for the mention! To be fair, as has been brought up when I threw those figures around before, they’re ignoring taxes (i.e. I’ll be paying taxes from the 77% “savings”)

    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.

  • DividendMan October 10, 2007, 9:55 pm

    Wow. You guys certianly do have impressive savings rates especially since you have families!

    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.

  • moneygardener October 10, 2007, 11:27 pm

    Thanks for the link.

    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…

  • Cannon_fodder October 12, 2007, 1:46 am

    For a long time, I’ve had positions with both fixed and variable based components to my compensation. I have two children and an ex-wife (translation – support payments) and when I have good years, probably achieve an after tax savings rate of 60% (counting mortgage principal payments) and when I have poor years, it is probably around 30%.

    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.

  • Canadian Dream October 12, 2007, 3:14 pm


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

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


  • John October 12, 2007, 4:37 pm

    Your income plays a huge role in how much you are able to save. If one person makes $X and one makes $2X, but their living expenses are the same, then obviously the second person is able to save a higher % of their take home pay. Currently our living expenses are about $1700/month and we are about to sock away 22% of our gross income, but if we made more we could up that significantly. The best way to compare savings plans seems to be one that takes income as well as living expesnses into account to see who’s doing “better”

  • Craig October 13, 2007, 11:41 pm

    Hi FT,

    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.

  • Telly October 16, 2007, 10:49 am

    You make a lot of good points (especailly about active frugality).
    Though my income is no where near yours, I do feel part of the reason why my husband and I have a high savings rate is not necessarily because we’re overly frugal but rather because we each have pretty good incomes and we live in a very affordable city (and in a house 1/3 the cost of most of our peers).

    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.

  • JD November 26, 2007, 1:34 am

    First, I don’t think you should include the principal payments to your house in your savings plan. If I was taking home $5k per month and paid $4k per month in principal payments you would say my savings rate is 80%??? Extremely high, but I’m probably buying a house way too expensive for me and the fact is I can’t access that money anytime I want.

    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???

  • Little Ms.Scrooge January 3, 2008, 3:12 pm

    I have been following your blog for some time and I am finding saving 20% a big challenege- while having two kids and being new to Canada can be used as reasons, I am still looking for ways to increase our savings. Thankyou for this forum where I have learned more details about everyday financial aspects of life in Canada- things that I could not ask other people. Keep up the wonderful job.

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