What is a good savings rate? Most financial advisors and experts say 10-15% of your income is a great amount to save. But that’s for a normal retirement age of 65 and we aren’t normal, are we? Our goal is to be financially independent by age 40 (if not earlier). I read many other personal finance and early retirement blogs and they run the gamut from 30-85% savings rate. 85%?! Holy cow! For full disclosure (or as much disclosure as I currently feel comfortable sharing), I wanted to take a minute to go over our current savings rate.
We currently contribute to Mr. Bug’s and my 401K, my Roth IRA, and our joint taxable accounts with Vanguard. We max out Mr. Bug’s 401K because he has a better employer match, we put 10% in my 401K, and we max out my Roth IRA. The amount that goes into the taxable accounts varies per month depending on that month’s spending and income.
So how much do we save and are we saving enough? For 2014 we averaged a savings rate of approximately 40% gross per year (pre-tax). While I think this is a great start, our goal for 2015 is to increase this to at least 50%.
We plan to buckle down on our spending in 2015 so we can funnel more into our savings. Areas we need to cut back on spending are food, shopping, and miscellaneous stuff. My goal for 2015 is to share more of our spending and savings rates in order to hold us accountable.
2015 savings goals are as follows:
- Save at least 50% of our gross income
- Open a Roth IRA for Mr. Bug
- Max out Mr. Bug’s Roth IRA
- Increase Mrs. Bug’s 401K contribution to 15%
These are some pretty lofty goals but attainable if we get our spending in check. Stay tuned for an update on our progress!
Good luck with your savings goal! I think you can do it 🙂
Thanks so much for the vote of confidence!
Good on you for the increased savings goal. Between my wife and I, we’re saving about 70% of our combined income through 401ks, IRAs and our brokerage account, and find that it is very easy to live on that kind of savings rate. You probably will too once you hit 50%. It’s all in your lifestyle – once your lifestyle is adjusted, everything else just seems to fall right into place.
Good luck!
Wow, 70%? That’s awesome, congrats! Yes we still have some work to do but I’m confident that we can increase our savings if we stay focused with our eye on the prize.
Good Luck! My undergraduate degree was in Finance, so I think about these goals a ton. (Unfortunately, for us, traveling so much definitely makes it more difficult to increase those saving goals – but not impossible)! I hope you’ll update us on how it goes!
Thanks! My undergraduate was Finance as well so it is definitely something I enjoy. I feel the exact same way, it is very hard to find a balance between saving and not restricting travel since it is our passion. I will definitely keep you all updated on our progress!