Calculate Your Savings Income to Find Out How Comfortable Your Salary Will Be
When you study your salary, you are probably comparing it to your current (or future) expenses. To really get a feel for how comfortable you are, calculate how much of that income you can save.
As writer Nat Eliason explains, eligible income is what’s left of your paycheck after you’ve paid your taxes, bills, and day-to-day expenses. The more margin on what you can save, the better off you will be. You can save on the vacation you want, you can save to build your emergency fund, or you can even save enough to get off work. Best of all, your stable income depends on more than just how much you earn:
If you have a high salary but a high cost of living, then your stable income at the end of the month will be lower than the person with half your salary, but with a lower cost of living and a lower tax rate.
And if you’re trying to grow your runway to quit your job and start your own business, then you should focus on economical income.
Even if your salary is inflexible, you can adjust your saved income by cutting costs. Moving to a location with a lower monthly rent can improve your retained income in the same way as negotiating a higher salary (although both are obviously better).