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!