Where did my 50% savings rate go?

I’ve been bad. I’ve been calculating my savings and net income always including my bonuses, which totally inflates my savings rate since I save 100% of those. My savings rate based solely on my net pay for this year is hovering closer to 40%.  I don’t think that there is any way I’m going to make up the difference at this point in the year, so I decided to start focusing on next year’s spending plan. I’m also giving myself a pass for this year considering that how much I spent on moving would get me pretty close to a 50% savings rate for the year and I’m pretty hopeful that I won’t move next year.

I’ve been working on my 2013 spending plan. So far, it looks somewhat like this:


In order to get savings up to 50%, I need to bring the expenses down by about $250/month. Then I started racking my brain because I could have sworn that earlier this year, I did have a 50% savings rate when I was renting. It turned out that my housing costs went up about about $200/month going from renting to owning (but they would have anyways had I kept renting), which covered most of the difference. My cost-of-living raise that I will hopefully get will help somewhat with the missing $250/month, but some of my categories (especially the food ones) are ceilings, which means that I don’t actually spend up to the budget. So I am reasonably confident that I’ll be able to find $250/month to hit 50% savings next year.

The scary part about the above chart is just how much housing takes out of this pie chart. About 20% of the entire pie chart is my mortgage payment alone. Every category other than housing and savings are under 10% by themselves, including non-mortgage housing.

I’m going to use my first quarter bonus next year to fill my Roth IRA for 2012 and for 2013, so the savings that you see in the spending plan is for maxing out my 401(k) at $17,500 and mortgage pre-payments. That doesn’t come near the five-year end-of-2013 mortgage balance plan, but I think I can find the extra $20,000 to be on track with the mortgage in my bonuses after filling up the Roth IRAs in the first quarter.

I’m not exactly sure what my taxes and take home pay will look like yet for 2013, so I’ll take another stab at estimating my savings for the year once I know that in late January.

I’ve also been working on my 2013 goals, which I’ll share with you guys in another couple months. I can’t believe it’s already almost November!

Readers, have you started to look ahead to 2013? What does it look like for you?


14 thoughts on “Where did my 50% savings rate go?

  1. Are you counting the part of your mortgage going to principal as savings?

    Personally I include my extra income with the regular income, but I can see arguments not to.

    And yes, we have next year all plotted out. Savings rate is going waaaay down, but because the denominator is getting cut dramatically and the numerator is staying the same. But being good up to now enables that change.

    • No, I’m not. I’m counting the entire mortgage payment as an expense, mostly because I have to pay the whole thing and so it needs to be part of the monthly nut. I can come up with a way to fidget that though for the savings rate purpose.

      I do include my extra income when I’m calculating my AGI or estimating my income/social security taxes, but I don’t want to use it to calculate my savings rate because my bonuses could be variable. The nice thing about my bonuses is that I know the number of shares I get quite a ways in advance – it makes projections quite fun :)

      It’s really awesome that you guys have the flexibility to do cut the denominator that dramatically and still be okay!

    • If I factor in the part of the mortgage payment going to principal as savings, that goes up to a projected 54% for 2013 – the principal amount was about 8% of my net income and that doesn’t even factor in the extra payments I am making that will drive that down even further (only ones that I’ve already made). Adding in bonuses…I should be able to hit a 70% savings rate overall. We’ll see how life goes!

  2. I second N&M, the principal part of your mortgage payment should definitely count as savings. The great thing about this is that, since you are making extra payments, the principal payments should be increasing nicely!

    I’ve just started looking at next year. Buying our house had been expensive and I’m ready for things to go back to normal…..or to the new normal anyway!

    Even if your savings rate stays at 40% you are still doing great!

    • I’m going to think about that, but that would definitely solve my problem, even almost for this year!

      I’m sure things will reach a new normal for you guys next year. It took a few months for me after moving, but I definitely think things will be there next year. It’s a strange feeling being far more confident that the goals I set now for next year are the ones I will actually complete.

  3. I agree with the others who say that given that your cash savings rate is over 40%, that doesn’t include any of the bonuses, and you are now paying down a mortgage, I wouldn’t become overly concerned that you are experiencing rapid lifestyle inflation. The fact is that you are STILL saving more than the Average american household makes in a year and in ~5 years when you have paid off your mortgage you will have freed up that 20% of your standard income AND all of your bonus money that was going to pay off the house, that will open up a TON of free cash flow that you will be able to pour into savings if you want.

    • If you look at flat $ amounts, I’ve spent over $37,000 as of September 30th this year. Projecting that forward puts my total 2012 spending at just under $50,000. I don’t care how much money I make, how much I save, or how long I’ve been out of college; that is definitely lifestyle inflation right there.

      I do feel fortunate that I am able to save more than the average American household income, don’t get me wrong. But a goal is a goal. If my goal is to save 50% of my standard income, I want to hit that and will be annoyed with myself for not hitting it, regardless of how much my income is or how much savings that will result in.

      I’m not quite sure what I will do with all that free cash flow once the mortgage is paid off! That is a curious thought indeed :)

      • I don’t think that some lifestyle inflation is bad, I know that I have no interest in living the same lifestyle that I did back in college (or just out of college). What matters is how rapidly that lifestyle inflates and how that compares to your overall income.

        While total spending of $50k a year makes for a very comfortable life (particularly for someone who is single), I doubt that the majority of people would consider it overly excessive particularly in comparison to your total income (of which this is only about 1/3). The majority of people would have no qualms about spending 90+% of their total income and only saving the bare minimums towards retirement.

        • Agreed! I absolutely love living by myself, having a ton of space, having a car, etc. I think that without moving I should be able to get my spending down to closer to $40k next year, but that’s still pretty comfortable for a single person.

          I definitely agree with you that it’s not really excessive in comparison to my total income, but that’s part of the societal impression I’m trying to change in the few people I reach with my blog. I’m trying to balance a comfortable life with saving a good portion of my income (50% of my regular paychecks), maxing out my retirement accounts, etc. I don’t feel like saving the bare minimums for retirement is an option. Perhaps I’m a bit of an obsessive saver though :)

  4. Also newly stumbled to your site and found myself scrolling down and reading posts from over a year ago!

    I’m currently debating quitting my second, part time job in the new year in order to get more “life” out of this work/life balancing game, but it’s not looking promising. So I have no idea what 2013 is going to bring for me just yet.

  5. Your shopping category is a thin slice of the pie. Are you planning on furnishing your new condo some more this year? That might decrease your savings rate, but may net zero if moving expenses dwindle in proportion of the pie as November and December totals get added in. My wild guess is that furnishing will be the key mover for you making/breaking your savings goal, am I right?

    • I have about $3k in a savings account to cover new furnishings and such for the condo. I probably shouldn’t really track that as an expense, oh well. I’ve been tracking furnishings under Housing, though I suppose it technically fits better under Shopping. Shopping is my Amazon Prime membership and saving up for my next cell phone, computer, and iPod. That’s why it’s such a small slice of the pie.

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