How Much Did I Save in 2006?
In 2005 I was able to I was able to save 56% of my income. It now time to see how I faired in 2006.
2006 was a big year for me - I bought a second property, an engagement ring, and had a temporary assignment for work. I know I won't be setting any records, but lets see how I was able to fair given these financial challenges.
Calculating how much I save on an annual basis isn't a trivial matter. I started by figuring out what I consider income and what counts as savings:
1) I am going to say my earned income is that what my employer reports to me as pensionable earnings. I don't know if this is 100% accurate but its good enough for my calculations. Its more accurate than my Social Security earnings because it doesn't include life insurance benefits, etc.
2) Any capital gains, dividends, interest, investment returns, etc will not be counted as earned income or savings. I have done my best to exclude investment returns as any capital gains, dividends, interest are passive income and I don't want to count them as savings.
3) Gifts, rebates, freebies, gambling profits, etc will not count towards income, but maybe be counted as savings.
4) Rental income will not count as earned income or savings. 2006 was the 1st year I had a cash profit from the rental. This net cash was deducted from my savings amount as I consider this an investment return.
5) I calculated a saving rate with and without mortgage principal payoffs. I am not sure if one should necessarily count property downpayments or mortgage principal repayment as part of savings, but I know many people that use their property equity as a savings account.
SR (no MP)
*SP (No MP) = Savings Rate ignoring property equity changes
I believe this is a good approximation of my savings rate. Keep in mind its on the high side because I don't factor in gifts, freebies, rebates, gambling profits, and other unaccounted money in my income. However, I would estimate these other incomes are insignificant and at most account for 1-2% of my savings rate.
I'm a little disappointed my saving rate dipped below 50% for the first time. However its not unexpected and I know going forward it will continue to be a challenge to keep such a high savings rate given a pending wedding and everything that comes with it.
Also see my post on calculating my 2005 savings rate.
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