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How Much Do YOU Save?
Old 01-04-2006, 08:38 PM   #1
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How Much Do YOU Save?

I just finished compling my end-of-year financial number. I found that in 2005, I saved 42% of my pre-tax income and 52% of my post-tax earned income. Add in unearned income (dividends, interest and capital gains), and I find that the numbers are 70% and 61%. The post-tax numbers are an estimate as I have not finalized my taxes for 2005.

I have the advantage of having a tight-wad working wife in a professional position and only one child, and live in one of the cheapest major metropolitian areas in the country.

Interestingly, this makes me want to spend a little more money, as I think that perhaps I am not spending enought of my income, given that we most likely will not retire until my childs enter college in 6.5 years.

So, for those of you in the accumulation phase, what do you save? Do you find your savings rate to be constant, declining or increasing with time? Mine has definitely increased with time, though I must admit solely as a result of an increasing income, not a decrease in spending.
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Re: How Much Do YOU Save?
Old 01-04-2006, 09:06 PM   #2
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Re: How Much Do YOU Save?

We're in the accumulation phase. We saved 30% of pre-tax W2 income, paid 22% in income, FICA and medicare taxes and spent 48%. So we save 38% of post-tax W2 income. If we add in unearned income, then we saved 153% of our income.

Our savings rate is about the same over the last few years. Our absolute spending has gone up every year for awhile. I have a professional wife as well and 2 kids.
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Re: How Much Do YOU Save?
Old 01-04-2006, 10:21 PM   #3
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Re: How Much Do YOU Save?

All I could afford to save was 10% in a combo of pre and after tax dollars. I'm 22, starting a new business, so $$ is tight.

But this year's budget allows for about 18%.
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Re: How Much Do YOU Save?
Old 01-04-2006, 10:52 PM   #4
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Re: How Much Do YOU Save?

I'm in the " it's not what you save, .. it's what you don't spend " phase. FIREing in a few months . Before that savings were equal to about 30% of earnings.

Christopher
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Re: How Much Do YOU Save?
Old 01-05-2006, 07:59 AM   #5
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Re: How Much Do YOU Save?

Here's a comment on saving, SWR and unearned income. If your investments return 8% to 12% a year and the SWR is about 4%, then your "saving" from unearned income should be at least 2 to 3 times your annual expenses when you are getting close to early retirement.
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Re: How Much Do YOU Save?
Old 01-05-2006, 09:36 AM   #6
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Re: How Much Do YOU Save?

Around 40% pre-tax and 60% post-tax + another 5-10% here or there in dividends, distribution, interest, etc...
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Re: How Much Do YOU Save?
Old 01-05-2006, 10:58 AM   #7
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Re: How Much Do YOU Save?

Here we go again.

The anal-retentive faction here should set some basic rules on what should be considered in Savings.

Since this board likes a lot of ground rules to these kinds of discussions...maybe we need some here too.

Savings=?

Are dividends and interest savings; or are they passive income?

Are gains on funds or equities income or savings?

It the dollar equivalent of a pension savings if you can't get to the whole amount to cash it in?

It the equity in your home savings if you still own the home or is it an unrealized gain?

Is an FSA account savings since you lose what you don't spend?

Are Social Security contributions savings?

Are life insurance proceeds savings?

Are other insurance payouts for loss savings?

Are any other items typically considered as passive income or capital gains savings?

My favorite...if you buy an item for less than the regular price, is the money you did not spend on the item due to the reduced price savings?

It is that any income or gain not spent would be considered savings?


Just felt like being a bit of a PITA this morning. I am sure it will pass. 8)
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Re: How Much Do YOU Save?
Old 01-05-2006, 11:05 AM   #8
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Re: How Much Do YOU Save?

Quote:
Originally Posted by SteveR

Are Social Security contributions savings?*
Payments you make to Social Security are a tax and therefore an expense, not savings.

I'm too lazy to get into each one, so I'll just pick this one. I guess if each person pick one item, they will all get answered eventually.
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Re: How Much Do YOU Save?
Old 01-05-2006, 11:11 AM   #9
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Re: How Much Do YOU Save?

Quote:
Originally Posted by retire@40
Payments you make to Social Security are a tax and therefore an expense, not savings.

I'm too lazy to get into each one, so I'll just pick this one.* I guess if each person pick one item, they will all get answered eventually.
If you live to collect on SS does it then become savings instead of a tax?
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Re: How Much Do YOU Save?
Old 01-05-2006, 11:13 AM   #10
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Re: How Much Do YOU Save?

Quote:
Originally Posted by SteveR
If you live to collect on SS does it then become savings instead of a tax?
I think it will just be income unless you save some of it.

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Re: How Much Do YOU Save?
Old 01-05-2006, 12:12 PM   #11
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Re: How Much Do YOU Save?

Quote:
Originally Posted by REWahoo!
I think it will just be income unless you save some of it.
You took the words right out of my mouth.
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Re: How Much Do YOU Save?
Old 01-05-2006, 04:56 PM   #12
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Re: How Much Do YOU Save?

100.0% Gross Wage Income (ignoring investment income)
33.9% Medicare/SS/Federal/State Taxes
8.5% Expenditures
57.6% Net Additions to investments

Disclaimer: Still making use of my parents house as my living quarters, since they're away 8 months/year (and I'd have to look after the place/pick them up anyway). The good news is that I'm getting ever-so-closer to FIRE status, and I'm working on a relationship with a special someone that seems to have almost the same fiscal habits that I do (along with all of those other oh-so-important non-financial qualities ).
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Re: How Much Do YOU Save?
Old 01-05-2006, 05:13 PM   #13
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Re: How Much Do YOU Save?

Pre-FIRE savings was maxing out the 401k (13%) and and additional 10% in an employee stock plan. 23% total.

Not counting real estate investments/donations to keep the business running. What's noteworthy is that the real estate appreciation exceeded my annual pre-tax working income for the last 5 working years. Could not have FIRE'd without that bump.
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Re: How Much Do YOU Save?
Old 01-05-2006, 05:19 PM   #14
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Re: How Much Do YOU Save?

About 25% last year, about 10% projected this year - life happens . But I did pay down home debt by about 10% over the last 12 months.
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Re: How Much Do YOU Save?
Old 01-05-2006, 06:40 PM   #15
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Re: How Much Do YOU Save?

45% of gross income (excluding investment gains) 70% of after tax income (excluding investment gains). Incidentally, if I paid no taxes my savings would be 80% higher.
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Re: How Much Do YOU Save?
Old 01-06-2006, 01:53 PM   #16
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Re: How Much Do YOU Save?

^&%*, I am not doing as good as I thought. I guess I am going to have to go back and tighten the budget. Maybe I am too competitive !

I liked my wife's observation after I presented my analysis results: "I am happy with how much we are saving, but it scares me how much we are spending!" I have to agree. Where the heck does the money go? We drive old cars, live in a cheap house, don't eat out much, and the money still flies away.
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Re: How Much Do YOU Save?
Old 01-06-2006, 05:15 PM   #17
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Re: How Much Do YOU Save?

guessing about 40%!

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Re: How Much Do YOU Save?
Old 01-06-2006, 05:18 PM   #18
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Re: How Much Do YOU Save?

~20%
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