saving rate
Also called: savings rate
The share of income not spent on essentials or flexible spending over a period: (income − spending) ÷ income.
The saving rate shows how much of what you earn stays with you: (income − essentials − flexible spending) ÷ income, for a month or a year. It includes everything set aside, from the cushion and retirement to pots for goals you'll spend later.
It is more telling than income alone. A year with a higher income can still end with a lower saving rate if spending grows faster, and that's exactly what a yearly review should catch. Watching the rate also shows which line moved: essentials usually creep slowly, flexible spending can jump.
There's no universal right number. With rent and a child, a single-digit rate can be a real achievement; on a stable income without dependants, a higher one may be realistic. What matters is that the rate is planned, checked and kept from drifting down.
Example
Dana's year from October 2027 to September 2028:
She earned 14,400 more than planned, yet the rate fell, because flexible spending ran 13,200 (27.5%) over plan.
Common mistakes
- Judging a year by income. More income with a lower rate is not progress.
- Counting only the cushion. Retirement and goal pots are saving too.
- Copying someone else's target. Set yours from your own essentials and income.
Learn it in the course
- Case: a one-page financial plan and the yearly review · Dana's year in numbers: plan against actual, saving rate, net worth and the cushion, then a one-page personal financial plan for the next year.