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Glossary

Budgeting

Savings rate

Savings rate is the percentage of your take-home income that you don't spend and instead put toward saving, investing or paying down debt.

Formula: Savings rate = (income − expenses) / income

It's the variable that most shortens the path to financial independence, because it both increases what you accumulate and reduces the capital you'll need to live on.

A 20% rate is a reasonable target; above 40% the timeline shortens dramatically.

Put it into practice

Related terms

  • 50/30/20 rule — The 50/30/20 rule splits monthly take-home income into 50% for needs, 30% for wants, and 20% for savings and debt repayment.
  • Budget — A budget is the advance allocation of your income to spending and saving categories, with later tracking of the differences.
  • Financial independence — Financial independence is the point at which income from your invested net worth covers your expenses, so working stops being mandatory.

Bring it to your own numbers

netclariq applies these concepts to your real accounts, debts and investments, with simplified double-entry bookkeeping and without asking for your bank credentials.

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Educational content. netclariq does not provide financial, investment, tax or legal advice.