Savings Rate Showdown…It’s a biggie!

Did you know that as of December 2015, the average personal savings rate of Americans is 5.5%??!!  Research says that number is on the rise, however, it is still much lower than the long term average of 8.34%.  That’s seriously nutty!  So, if the average American takes home 50K a year after taxes, they only save $2750 a year?!

 OUCH!  Ouch

Now let me preface the following with a few key points:

In terms of debt – I have none.  We’ve already discussed my lack of mortgage but, to add to that, I have never held a credit card balance, I missed out on student loans by skipping college minus a few semesters at a CC, my car is old but paid off and, thankfully, I have been healthy enough to have no past medical expenses…oh, and having no kids helps with keeping my costs down.

Though my debt (or lack of it) looks pretty rockin’, I am not without my financial failures and FICO score fuck ups…but for now, that’s a story for another day.

Ok…back to the showdown…

Let’s look at my savings rate for June:

Total net income: $5,964.81 (includes my work take home pay, 401K + company match, a few Craigslist sales, and a small side hustle).

Total savings: $5,615.28 (includes 401K + company match, Employee Stock Purchase Plan, bank savings, index fund and stock purchases, and HSA).

5615.28 / 5964.81 x 100 = 94.14% which includes my 401K pretax contributions…94.14%!!! 

That’s awesome!  But, unfortunately, not totally typical.  My actual savings rates varies greatly month to month depending on a lot of different factors including yearly and semi yearly bills, Dr visits, vet bills, and car issues.  June happened to be a good month.  My actual half yearly savings rate for 2016 is currently 81.47% including 401K and 76.8% not including it…more on that HERE.  

As I posted last week, according to Mr Money Mustache, if I can keep this savings rate of 70%+ up, I will be able to retire in appx 6-7 years.  Unfortunately, many things can happen in the next 6 months to 6 years that could make my current bare bones cost of living spike with expenses.  But, dont worry,  I’m not going to worry about the what ifs just yet.  I’m am still going to take a leap of faith and declare that I will be Financially Independent within the next 7 years – this will give me some wiggle room in my calculations (including lots of travel!) and extra time to snowball my savings into the most abominable snowman ever known to man!

Folks, remember – as Paula Pant of Afford Anything recently pointed out – it isn’t always a matter of making more or spending less.  What you really need to keep an eye out for is the difference between the income and the spending.  Mind the gap, which is equal to your savings rate, and the rest will all fall into place!

So… ** Where are you at?  Have you  calculated your savings rate?  How are things looking?  What are you striving for? Feel free to add a comment about your savings rate and any problem areas you might have.  We’re all in this together! **

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