Every year we like to post a couple articles directed inwards - we like to show, at least a few times a year, how we're actually doing with the whole Personal Finance thing. By sharing our annual savings rate and our investment performance in the actively managed part of our portfolio, we hope it allows you readers to judge if we're worth that precious spot in your RSS Feed, Twitter Feed or Inbox.
So, again, like in past year - we hope you don't see us as part of the "fake-it-'til-you-make-it" crowd; we actually practice most of the strategies we detail on this site... and not just the investment ones.
How much did you save in 2014? We're about to tell you how we did.
The PK Household Savings Rate over the Last Decade - And This Year's Results
My household's net savings rate for 2014 was 37.26%.
Remember, controversially, we do not include principal paydown in our totals. If you do include principal paydown (as many of you prefer!), my wife and I did even better: 46.21%.
We will follow up with a piece on exactly how we came up with these numbers, but in essence... it's best to do it around tax time. Make sure you add all sources of income; if whatever income number you are starting out with leaves out tax free interest, 401(k) matches/contributions, HSA, or whatever - add that back into your denominator, otherwise you will have an artificially high rate.
As for a past retrospective, I only have savings rates numbers for the last decade, sorry - that's all the information I could find by the time started caring enough about finance to be able to put this series together. Some transparency, huh?
Anyway, here it is:
|Savings Rate (Strict)||6.91%||11.02%||31.63%||27.31%||21.68%||21.47%||22.96%||23.99%||29.68%||37.26%|
How Did We Do?
Like we said last year, our results depend on what benchmark you use when evaluating our savings rate. If you simply use something like the American overall savings rate - 5.8% as of February 2015 - then we did very well.
So, too, for the calculators we made in 2013 for savings rates by age and by income. The income one is probably the most 'fair' to use (it's already adjusted for tax) if you're looking to compare, especially since a lot of the 'age' one is life cycle plus experience (and a consummate increase in earning power).
The only place where we might come up short? Self-reported savings rates at other Personal Finance sites.
So, again, how did your family do? What methodology do you use? How much do you hate our strict measurement?