Great video! Here is my compact summary formula as my takeaway from your video. Please let me know if you agree: InvestmentRate = ( RetirementInvestments + EmployerMatch ) / ( DiscretionaryIncome + EmployerMatch ) Where RetirementInvestments is the list you gave and DiscretionaryIncome is as you described. I plan to follow your recommendation to calculate over an annual period.
Man all of this stuff is confusing to calculate once you start getting the following. Good problem to have.. I don't know how much exactly I'm saving but it's decent. I don't always feel it, live pretty broke but net worth is climbing very steadily. Infinite banking - Most income running through whole life policy first Employee stock plan HSA 401K Debt reduction Hard money lender (note income) Real Estate flips. Got too much going on, thankful for the opportunities. Thankful for your video too, it did get me thinking! I agree with most of what you said.
Thank you! At the end of the day, your exact SR isn't important really. What is more important is that you track it in a way that is consistent over time to measure how well you are doing against yourself.
401k can be pre-tax so that shifts the percentage. Especially if we're maxing out the $19,500 limit with 25% of pre-tax income. That's even before contributing to a Roth IRA limit. 😄
I wish IRA's could have the same level of contributions as 401(k)s. Such as if you could choose between contributing to one or the other $25k for example, how great would that be!?
I include our loan repayments as part of our savings rate (not investment rate). We don’t intend to live in this house in retirement and it is an appreciating asset. It is a significant part of our net worth, though that percentage is rapidly decreasing as we invest more. In terms of investment rate, I include 401k and brokerage account transfers.
Funny you made this comment today because my new video coming out today specifically talks about what counts towards your "savings rate" and one of those things is "principal loan repayments". If you plan on selling your home and not living in it in retirement, then I would not have it be a significant portion of my net worth. But then again, it also depends on your time frame to retirement (the longer you have until retirement, the less of an issue this is).
@@OnCashFlow So part of my thinking when I bought the house, which was a stretch 5 years ago, was that interest rates would go down and that housing was going to go up with inflation. With that in mind, I bought as much house as I could afford. Exactly the opposite of typical FIRE advice, but there was a method to my madness. It's older, on a larger lot, so the bulk went into buying the location and land, not into new construction. It's an established neighborhood with a great school district. As it has turned out, with high inflation, the dollar value is increasing faster than the mortgage outflows - so every cent spent on mortgage interest is more than offset by capital appreciation... but it means FIRE is at 55, not 40. That's a lot of additional years spent working.
@@philistineau Well I'm glad it worked out for you so far. That kind of strategy wouldn't fit me because it relies on one asset too much for my tastes.
Good video, but I have a question. I have money in a non-interest bearing checking account (to pay bills) and I occasionally transfer money from this account into a brokerage account (when I feel comfortable that I have enough in here to pay monthly bills with something left over). How would you count this checking account? Does the amount going into the brokerage account count towards the numerator and the rest as the denominator?
Count the checking account as net worth, but not as part of your savings rate. All of your income is counted when it is received. If the money is already in your checking account and you transfer it into an investment account, it does not create new income, so you don't count it as income again. You can count it as savings once it gets invested.
@@OnCashFlow one other quick question, if I have an emergency fund set up in a basic savings account would you factor that in somehow or would emergency money be excluded?
@@ngee4925 I personally wouldn't count it towards my "FI" savings rate because it is not meant to bepart of your investments that get drawn down for FIRE. Some people do like to count it though and it doesn't really make much of a difference either way, as long as you consistently count or don't count it along your joruney :)
Great video! Here is my compact summary formula as my takeaway from your video. Please let me know if you agree:
InvestmentRate = ( RetirementInvestments + EmployerMatch ) / ( DiscretionaryIncome + EmployerMatch )
Where RetirementInvestments is the list you gave and DiscretionaryIncome is as you described. I plan to follow your recommendation to calculate over an annual period.
Sounds about right! The problem with savings rates is that everyone might be calculating them differently!!! :O
Man all of this stuff is confusing to calculate once you start getting the following. Good problem to have.. I don't know how much exactly I'm saving but it's decent. I don't always feel it, live pretty broke but net worth is climbing very steadily.
Infinite banking - Most income running through whole life policy first
Employee stock plan
HSA
401K
Debt reduction
Hard money lender (note income)
Real Estate flips.
Got too much going on, thankful for the opportunities. Thankful for your video too, it did get me thinking! I agree with most of what you said.
Thank you! At the end of the day, your exact SR isn't important really. What is more important is that you track it in a way that is consistent over time to measure how well you are doing against yourself.
401k can be pre-tax so that shifts the percentage. Especially if we're maxing out the $19,500 limit with 25% of pre-tax income. That's even before contributing to a Roth IRA limit. 😄
I wish IRA's could have the same level of contributions as 401(k)s. Such as if you could choose between contributing to one or the other $25k for example, how great would that be!?
@@OnCashFlow pretty damn fantastic. I could imagine paying no income taxes in retirement. 😉
@@JosephDickson bonus points if you live in a no income tax state too ;)
@@OnCashFlow Minus points as I live in California. 🤣
@@JosephDickson Ahh I recently moved away from California to Tennessee for geo-arbitrage.
I include our loan repayments as part of our savings rate (not investment rate). We don’t intend to live in this house in retirement and it is an appreciating asset. It is a significant part of our net worth, though that percentage is rapidly decreasing as we invest more. In terms of investment rate, I include 401k and brokerage account transfers.
Funny you made this comment today because my new video coming out today specifically talks about what counts towards your "savings rate" and one of those things is "principal loan repayments". If you plan on selling your home and not living in it in retirement, then I would not have it be a significant portion of my net worth. But then again, it also depends on your time frame to retirement (the longer you have until retirement, the less of an issue this is).
@@OnCashFlow So part of my thinking when I bought the house, which was a stretch 5 years ago, was that interest rates would go down and that housing was going to go up with inflation. With that in mind, I bought as much house as I could afford. Exactly the opposite of typical FIRE advice, but there was a method to my madness. It's older, on a larger lot, so the bulk went into buying the location and land, not into new construction. It's an established neighborhood with a great school district. As it has turned out, with high inflation, the dollar value is increasing faster than the mortgage outflows - so every cent spent on mortgage interest is more than offset by capital appreciation... but it means FIRE is at 55, not 40. That's a lot of additional years spent working.
@@philistineau Well I'm glad it worked out for you so far. That kind of strategy wouldn't fit me because it relies on one asset too much for my tastes.
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Investment rate, love that name
Me too it makes so much more sense than just saving!
This really helped me see that I wasn't saving as much I thought
That's okay, you will get there!
Great info 😊
Glad you think so!
thank you
No, thank you for watching :)
Gracias!!
No, thank you for watching! :)
Another winning video
Thank you!
Good video, but I have a question. I have money in a non-interest bearing checking account (to pay bills) and I occasionally transfer money from this account into a brokerage account (when I feel comfortable that I have enough in here to pay monthly bills with something left over). How would you count this checking account? Does the amount going into the brokerage account count towards the numerator and the rest as the denominator?
Count the checking account as net worth, but not as part of your savings rate. All of your income is counted when it is received. If the money is already in your checking account and you transfer it into an investment account, it does not create new income, so you don't count it as income again. You can count it as savings once it gets invested.
@@OnCashFlow that makes sense, thank you so much!
@@OnCashFlow one other quick question, if I have an emergency fund set up in a basic savings account would you factor that in somehow or would emergency money be excluded?
@@ngee4925 I personally wouldn't count it towards my "FI" savings rate because it is not meant to bepart of your investments that get drawn down for FIRE. Some people do like to count it though and it doesn't really make much of a difference either way, as long as you consistently count or don't count it along your joruney :)
@@OnCashFlow thank you, that totally makes sense! Also really like your channel, please keep up the great work!
Count pension contributions towards savings rate?
Yes, I would