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I'm curious to see how well people save their money in this economy. As many of you know, the US has traditionally had a very poor savings rate. We fuel our economy through rampant consumption. In fact, consumer consumptions accounts for approximately $10 trillion worth of GDP every year! That's a lot of moolah!
So that got me thinking. The average American saves about 3%. That's pretty dismal. I keep a budget like many of you. However, that doesn't tell the story in and of itself. What really matters is the percentage of your gross pay you're saving. That's the true measure of one's frugality / ability to save / whatever euphemism you want to call "saving ability".
So do me a favor. Take out your calculator.
Punch in the following: Amount Saved Per Month
Gross Pay Per Month
Remember to use gross pay and not net pay.
My results: 64.5% Yup, I've got just about 0 expenses since my company pays for literally everything.
The reason why I think this is an extremely important metric is because it measure how well one lives within one's means. Project yourself 10 years down the line. You may potentially be making twice your current income. If you expenses stay relatively fixed, you're going to be saving a LOT more than twice what you save now.
Project yourself 10 years down the line. You may potentially be making twice your current income. If you expenses stay relatively fixed, you're going to be saving a LOT more than twice what you save now.
Income doubling in 10 years? Maybe for those that are young and early in their careers. But even with that kind of income growth, the rapidy increasing basic cost of living - medical expenses, shelter/utilities, groceries, fuel, taxes, etc. are going to make it very difficult for even the most committed to maintain, much less increase their savings percentage.
I'm curious to see how well people save their money in this economy. As many of you know, the US has traditionally had a very poor savings rate. We fuel our economy through rampant consumption. In fact, consumer consumptions accounts for approximately $10 trillion worth of GDP every year! That's a lot of moolah!
So that got me thinking. The average American saves about 3%. That's pretty dismal. I keep a budget like many of you. However, that doesn't tell the story in and of itself. What really matters is the percentage of your gross pay you're saving. That's the true measure of one's frugality / ability to save / whatever euphemism you want to call "saving ability".
So do me a favor. Take out your calculator.
Punch in the following: Amount Saved Per Month
Gross Pay Per Month
Remember to use gross pay and not net pay.
My results: 64.5% Yup, I've got just about 0 expenses since my company pays for literally everything.
The reason why I think this is an extremely important metric is because it measure how well one lives within one's means. Project yourself 10 years down the line. You may potentially be making twice your current income. If you expenses stay relatively fixed, you're going to be saving a LOT more than twice what you save now.
My percentage of gross saved over the course of the year is 54%, though a chunk of it is from a year-end bonus. Net income percentage saved is a good deal higher.
I save whatever I don't need to spend that month. I don't have my saving and spending segregated. Income goes in, and expenses goes out. If saving money requires planning and will power, you need to address what is in your mind, not what is on paper.
Some months, my expenses are higher than others, like when I need to stock up on a grocery item or pay car insurance, or whether my electric bill has to include AC, or if I need to replace my shoes, or if I get a medical copay, or I decide to make a charitable donation to someone with an immediate need.
To suggest that I need to save a fixed part of my income, does that imply that what I don't save can just be squandered?
To suggest that I need to save a fixed part of my income, does that imply that what I don't save can just be squandered?
For most people, if they don't set up automatic savings at the beginning of the month, they will blow through the whole stack of dough by the end. Then there are some who are frankly too lazy to shift the 'leftovers' to their savings/investment at the end of every month.
It's easier for me (and probably more practical for those who are less disciplined) to just have the money withdrawn immediately after the paycheck drops and put into their savings/investment accounts. Emergency fund can be accessed for months where the expenses are more than expected.
Op, I put about as much money away in savings and retirement as I pay in taxes, 33% and 38% respectively.
I think some of the figures here are very high. I'm curious what folks' gross salaries are! I tried doing a google search of "average american income", but the numbers ranged from 30K - 50K. We bring in more than that, and we saved an average of 30-35%, depending on time of year (paying for heating/cooling, etc.). I personally think that's a pretty respectable figure, considering we have a mortgage and only one income.
SoloTraveler, you admit you don't have any expenses because your "company pays for literally everything". I'm curious why you aren't saving more. You could retire very early with good investments if you saved 80-90% of your salary. If you ever have to start paying for things yourself, I doubt you'll have the same savings rate unless you start slumming it.
Last edited by peppermint; 03-11-2011 at 08:15 AM..
Reason: grammar
We are saving 10% ($500) of our gross income $5,350. Using the other remaining funds so I can pay as I go for my accounting classes, doing some small budget home improvements and taking a modest out of state vacation every year.
I save at least 20%. 10% is sent to my TSP with another 5% matching. Then I save 10% to my savings account. I say at least because I usually have money left over in my checking account and I just move those over into my savings periodically.
Save 35% of a low 6-figure income, including employer match in savings rate: 25% cash savings & investments, 6% my 401k contribution, 5% in employer match.
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