About the numbers
At SavingsRateWars we use a very simple math equation to help you empower yourself on your path to financial independence. The math used to calculate your savings rate is very simple, however, there are different ways of doing it. The equation we use at SavingsRateWars was inspired by Mr. Money Mustache, who has an excellent explaination on his blog. To summarize, the equation looks like this:
Savings rate =
(Take home pay – spending) ÷ (take home pay)
We subtract spending from take home pay and divide it by take home pay. This is pretty simple, right? You might be asking yourself how we calculate take home pay and spending.
Take home pay =
Gross Pay + Employer 401(k) match – taxes and fees
We add gross pay with the employer retirement plan match and subtract taxes.
Everything left that doesn't make it to a fund
At SavingsRateWars.com we take a very harsh view of spending. That means we calculate spending as all use of money that doesn't directly go towards your designated financial independence accounts.