What percentage of your income do you save?

Question

This goes to the heart of RE investment. The first step in investing is the ability to manage your money properly, so being able to save a portion of your income is key for the financial house to be in order. There is a lot of focus these days on "extreme savers": folks who save more than 50% of their income. I count myself in this category. I did some calculations recently and though I was targeting a dollar amount, I realized it amounted to about 60 % of my net. It's a personal choice, and I'm able to live comfortably, without sacrificing anything "essential." Of course "essential" to me may not be what is essential to everyone else. While I think that this is works for me, it doesn't necessarily work for everyone, and it depends on many factors such as income, financial obligations, weather or not you have a family, etc.

So in that vein, assuming you have a set amount or percentage of your income you save, how much is it? Or if you reinvest your income back into your RE business, what percentage?

Jay Y. · Answer

I'm aiming for 80% this year. I follow the extreme early retirement model. No, that doesn't mean you have to live a deprived life by any means either! For instance, I recently started biking to work and spent $0 on gas last month. Probably the best decision I've made so far this year (the financial savings were just a bonus). In general, I'm just tired of playing in the cave... so it's easy for me to reject consumer spending. That and I'm addicted to buying rental properties :)

Mark Ferguson · Answer

@Nick Leamon I have read MMM blog and I think he has some good ideas, but he is also very into not spending any money at all on anything. I believe spending money on things that make us happy is a good thing and saving money at all costs actually is a bad thing. I don't think anyone should be afraid to spend money if they are saving money, investing and taking care of their family first.

Nick Leamon · Answer

I don't know if any of yall have heard of Mr. Money Mustache, but he writes a funny, and strongly opinionated blog on this topic, and has good ideas on how to save more and spend less, i currently save about 50% and am working on raising that number but I plan on combining RE investing and MMM's ideas to enjoy life, retire early, and not have to worry about money.

Elizabeth Colegrove · Answer

Everytime my husband is transfered I lose my job. So it depends :) My income goes 100% into investment and approx. 15% of my husbands. 100% of our business profits is reinvested. Therefore when I am working we live off of 50% when I am not we live off of 85%.

Therese V. · Answer

Of my husband's salary, we put 15% in retirement and save about 25% in addition to that. That 25% is going to fund our Roth IRAs and the rest towards more rental property (we are closing on our first next week). The income from the rental property I will just save up over the next year in the account to use as reserves for that property. When we get multiple properties, I will just use that income to keep reinvesting to buy more properties. Eventually, we hope the rental properties more than replace his income and he can retire and we do the passive income thing. At least that's the goal :)

Xing Zhu · Answer

A beginning investor should save as much as he can so that he can accumulate investment capital more quickly.

Xing Zhu · Answer

The concept of "extreme savers" might not be quite useful. Saving rate is strongly correlated to the income level. Many high earners save much more than 50%. For someone who make 10K a year, it is very hard to save 30%. For J. Simons, who makes a billion a year, it is very hard for him not to save 90%.

Mark Ferguson · Answer

I should mention, even though we are buying a larger more expensive home our payments will still only be 10% of our income. No way am I approaching the 28% that banks will allow.

Harry M. · Answer

About 60-65%. We've tried 75% and hit it one or two months over the last few years, but in our opinion it isn't worth it. There is a huge difference between 65 and 75%. At 65%, we just go about our happy ways and don't worry about money too much (given, we've got a few good habits baked in), at 75% we were literally worrying about every penny. It started to feel like trading out quality of life now for quality of life in the future. It's important to find a balance - something you can maintain year in and year out without going crazy, and for us 65% is it. -H

Edwin E. · Answer

Jay Dao I've been biking to work for the last 12 months, 10 miles round trip. It feels great. Is good for my health and good for my pocket. :) I save around 50% of my combined income and this money will be invested in more properties. My plan is to purchase three more properties before the end of this year.