How do we determine the savings percentage for the year? Turns out, that simple number is pretty complicated behind the scenes. There’s no “right way” to calculate your savings, and savings rate but here’s BillTrim’s methodology:
Calculate your annual change in liquid net worth.
Take the balances of our checking and taxable brokerage accounts on December 31, 2018, and subtract the balances as they were on January 1, 2018. It will give you a net value of your annual change in your liquid net worth.
Moreover, if you want to compare it with the previous years and see if you are going up or down in terms of liquid net worth. Just repeat this step with the previous years and calculate the percentage to get your savings rate.
Subtract any major non-salary inputs.
For us this includes investment appreciation or depreciation! and your decently sized tax refund from our 2017 taxes. This gives us how much we “saved” this year (another way to think about it is that this is the remainder of your paychecks that we didn’t spend ).
This method gives us a whole idea of the net savings for the current financial year. You can consider it as a goal to achieve and broaden as you go up.
Also Read:- 10 Ways to Trick Yourself to Save Money
Divide by your net take-home salary
The total amount of money we make every year, minus taxes and contributions). Apart from that, you can also include passive income (if any) or any profit you make from the previous investments you made.
Make sure you include all this surplus money in your net income for the current financial year. It will give you an exact idea.
There are the figures!
These Savings exclude Mortgage, Auto Loans, and Recurring bills
But what does that really mean? Well, when you budget your money, there’s a desired outcome. For some, it could be basic survival until the next paycheck rolls around while others aim to pay off debt, save for college, or buy a home.
Whatever way you take it, saving money is always a good idea. It gives you the opportunity to invest in something you could never imagine when you are in debt.
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