Calculate Your Total Savings Rate to Measure Your Financial Health
When it comes to planning your financial future, it’s common to look at how much your investment is bringing in or what kind of payoffs your employer is making. One number can give you a general idea of your situation: your personal savings rate.
Simply put, your personal savings rate is the percentage of your income that goes towards your savings / investment rather than spent. Calculating your savings rate can quickly tell you what you need to prioritize. If you are saving 2% of your income and can no longer afford it, you may need to either cut costs or find a better paying job. If you’re saving 4% but spending 12% on entertainment, it might be time to rebalance. As the personal finance blog DQYDJ (Don’t Quit Your Day Job) explains:
More correctly, I like to tell people the savings rates by age group and the savings rates by income . These calculators provide a (still rough, but more accurate) estimate of how others in your demographics are saving. If you are 30 years old, then it is better, for example, to compare yourself with 30 years old than with 65 years old – you have completely different goals. The same goes for people with very different incomes.
Obviously, your personal savings rate isn’t the only piece of information you should be looking at. But this may be more important than other numbers that receive more attention . How much you save is the foundation on which all of your long-term financial health is built.
Why should you track your savings rate? | DQYDJ via Rockstar Finance