Example for an average savings rate.
Ie It doesn’t matter what you bring in, just what you keep.
It also doesn't matter what you do for a living.
I read recently about Doctors who earn hundreds of thousands per year, but because they ‘keep up with the Joneses’ they spend it all, and in fact on the bottom line are no better off than you and me. This was unexpected to me, but seems to make sense - they likely have expensive houses, social arrangement, golf, the ‘right’ kind of holiday, private tuition for kids etc.
So once you work out your savings rate, you can see if you save 20% and the Doctor saves 20%, in real terms you are on a par with someone on a doctor’s salary, because your expenses overall are less and with the SR to compare, you are on an equal footing!
This was a breakthrough for me, as I had always looked at the amount saved, not the ratio. I can now see that perhaps 30% is feasible for us with ‘easy’ cutbacks and lifestyle changes, maybe more if we can increase earnings some more.
So savings rate shows us a much more realistic picture, against which we can measure goals, income and what we want to achieve. I have set up a spreadsheet to keep myself accountable on this, and can see that over the past 6, 3 and 1 month this savings rate is continually improving and the more I learn the more I hope to achieve. It won’t be easy but my mindset has really changed, as to how much we were consuming, and what we really need on a daily basis. I will update here as I go, anything I learn that has helped us and that may help you out and your comments in turn will teach us all alot too.
Do you know your savings rate? Would you take measures to improve your SR if you knew this would bring your retirement forward?