Month: June 2019

Posted on by — Leave a comment

85% Savings Rate In May!

Largest savings rate of any month to date! The F.I.R.E. is spreading and I am enjoying every minute of the journey. The continuous growth of my Instagram channel and seeing a few people here and there reading some of my articles is keeping me fired up and wanting to continue documenting my journey. In my last article, I detailed out how to calculate your savings rate. In this article I will detail out some details of my May Savings Rate.

So here is a breakdown of how I was able to save 85% of my take home pay!

Total Breakout of Expenses:

  • Entertainment: $920
  • Home/Utilities: $846
  • Food: $95
  • Total Expenses: $1,861

I haven’t been able to figure out sub bullet points in Wix yet (help if you know how to haha) so here is a little context for my expenses.

Major expenses in the Entertainment bucket:

  1. Purchased a 2 year website contract with Wix to get my blog up and going on the new platform, $324
  2. Took my roommates out golfing as a thank you for, $125
  3. Had a few nights out eating a drinking with friends accounting for $145

Major expenses in Home/Utilities:

  1. My AC unit went out and had to be serviced. When the summer time and humidity comes back around in Orlando, condensation builds up in the pipes and has to be cleaned out. I have had this happen a few times now so I went ahead and paid to have someone come out and service the unit twice a year for $205
  2. I also learned my AC unit was set, for some reason, to suck air from outside to cool off inside. I know, not good. Probably why my electric bill was $189 last in May!

I didn’t have many food expenses because I travel for work and when I am home I went out to eat with friends. I categorize those in the Entertainment bucket of my expenses.

Total Take Home Income:

  • Rental Bedroom #1: $1,000
  • Rental Bedroom #2: $1,000
  • Rental Side Flex Room: $300
  • W2 Income: $10,185
  • Total: $12,485

Now time to calculate my Savings Rate for May!

Savings Rate = ($12,485 – $1,861) / $12,485 = 85%

There were two main things contributing to my huge Savings Rate in May.

  1. First, I was able to rent out the flex room in my home for an additional $300 last month to increase the income part of the equation!
  2. Secondly, I was able to rent out my second bedroom the entire month through Airbnb. This was a big win and I just got a tenant in the room for $1,100 per month for the summer. He is visiting for an internship so he will be staying at my place for 3 months
  3. I continue to be very money conscious and choose to not drink when I travel for work. Believe it or not, but this is one of the hardest temptations to prevent myself from doing. People don’t realize how easy it is to spend a lot of money on alcohol when you are on the road for work all the time.

Excited to continue to see if I can beat the 85% Savings Rate in June! Off to a little of a bumpy start as I went out to LA to watch the Champions League finals with a few friends. Will see if I can real it in and prevent myself from spending a lot the rest of the month!

Posted on by — Leave a comment

How to Calculate Your Savings Rate

Surprisingly, this is something that I had gotten away from looking at monthly this year; however, it is time to start keeping score on my savings rate again! Can’t make progress towards a goal if you don’t have a compelling scorecard and if you are not keeping track.

What is a Savings Rate?

A Savings Rate is the percentage of your total take home income you save and/or invest versus spend.

How to Calculate Your Savings Rate?

I want to preface this by saying there are hundreds of ways you can calculate your Savings Rate. I am going to detail out to you how I determine mine, but this is not to say it is the only way to calculate it. To calculate your Savings Rate properly, there are two pieces of information you need.

  1. Take Home Pay
  2. Expenses

How to Calculate Take Home Pay?

To calculate how much money you take home after taxes, the right way IMO, first determine on what frequency you are paid. If you are paid every two weeks then you need to find out how much money you make per day. This is important as each month of the year has varying number of days. To get a true percentage, you need to take your total income on your pay stub and divide it by the number of days in the billing cycle.

For example, if you make $1000 every two weeks, you make $71.42/day.

A few key things to ensure you are using the correct take home pay number. If you contribute to any tax advantaged accounts like a 401(k), IRA, HSA, etc. you will want to add that to your total income. Only do this if this money is taken automatically out of your check and you don’t the money hit your bank account.

How to Calculate Expenses?

There are also many ways and platforms you can use to help you do this. A very common platform used by many people who track their Expenses is Mint. I currently go old school and use an Excel sheet for all my expenses to track what kind of expense they are as I use my personal cards for work travel so a lot of my expenses are mingled together.

Housing will typically be the largest expense for an individual. I am in a unique scenario where I house hack. My mortgage payment is $1,777 per month and I currently bring in $2,300 per month renting out three of the rooms in my home. Because I cover my entire mortgage payment with rental income, I don’t put down any expense for my mortgage. This is a big reason why my savings rate will naturally be much higher than most.

Finally, how to calculate your Savings Rate?

Now that you have both your total take home pay and your expenses, you are ready to calculate your Savings Rate. To do this use the below equation:

Savings Rate = (Total Take Home Pay – Expenses) / Total Take Home Pay * 100

For example, if:

  • Total Expenses = $1,500
  • Total Take Home = $5,000
  • Savings Rate = ($5,000 – $1,500) / $5,000 * 100 = 70%

Why is your Savings Rate important?

The F.I.R.E. community talks a ton about savings rates and how to maximize them as much as possible. The bottom line is this, the higher your savings rate, the less time it will take you to retire. So take the leap and figure out what your current savings rate is!

In the next post I will talk about what my actual Savings Rate was for the month of May!

What is your savings rate? Any questions still on how to