Savings rate
By Jude Wallis
Savings rate is the share of income saved rather than spent, written as a percent. The answer depends on whether the base is gross pay or take-home pay.
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The number is only meaningful once the base is stated. The same money saved against gross pay produces a smaller percent than against net pay, and the difference is large enough that two people quoting savings rates are often not measuring the same thing.
The numerator has the same problem. Retirement contributions, an employer match, debt principal repaid and cash left in a savings account are all defensible inclusions, and each one moves the figure. Pick a definition and keep it, because the trend over months is what the number is for.
A savings rate is the input that decides how quickly a target arrives, which is why it drives Coast FIRE more than investment returns do in the early years. The savings rate calculator is the percent, how budgeting works is where the money is found, and how savings goals work turns the rate into a date.