The easiest way to measure how much money you’re saving (and then saving as much as you can!) is to track your savings rate. Your savings rate is the total percentage of your income you’re saving in all of your accounts (retirement, savings, etc.).
There is a direct correlation between your savings rate and the years it will take you to retire early. The savings rate math is simple. No matter how much money you’re making, here’s how long you have to work to save 1 year of living expenses.
Working Years To Save 1 Year of Living Expenses Depending on Savings Rates:
- 10% savings rate: 9 years of work (1-0.1)/0.1
- 25% savings rate: 3 years of work (1-0.25)/0.25
- 50% savings rate: 1 year of work (1-0.5)/0.5
- 75% savings rate: 1/3 of a year of work (1-0.75)/0.75
During my own financial independence journey my saving rate started at 40% and went as high as 82% some months. That might sound crazy, but it’s easier than you think.
I like to track my savings rate in both dollars and percentages. This is really easy to do using this savings rate calculator.