---
aliases: ["Savings Rate"]
Is A: Measure
Belongs to: "[[responsibility-personal-finance]]"
Unit: "percent"
---
# Savings Rate

Savings rate measures the percentage of after-tax income that is saved or invested each month. It is the most actionable metric within [[responsibility-personal-finance]] because, unlike market returns or income growth, it is directly controllable through spending decisions. A consistently high savings rate is the primary driver of long-term [[measure-net-worth]] growth and provides the financial buffer necessary to take entrepreneurial risks.

For an indie business owner with variable income, savings rate is also a resilience metric. Maintaining discipline during high-income months builds the runway needed to weather slower periods without anxiety.

## How it's tracked

Calculated monthly as: (income - expenses) / income x 100. Income includes business salary/distributions and any side income. Expenses include all personal and household spending. Business expenses are excluded (they reduce income before it reaches the personal layer). Logged during the [[procedure-monthly-portfolio-review]] and reviewed in detail during [[procedure-quarterly-financial-planning]].

## Targets

- **Minimum**: 20%. Below this for more than two consecutive months indicates either a spending issue or an income problem that needs attention.
- **Target**: 30-40%. This range balances quality of life with aggressive wealth building. At this rate, meaningful investment contributions happen every month.
- **Stretch**: 50%+. Achievable in high-revenue months (e.g., when annual sponsor contracts are paid upfront). Not sustainable year-round but should be the norm in peak months.

## Notes

- Savings rate is highly seasonal for indie businesses. Months with large sponsor payments can push the rate above 60%, while months between contracts may dip below 20%. The annual average matters more than any single month.
- Automate savings where possible. A fixed monthly transfer to investment accounts on the 1st of each month ensures baseline savings regardless of spending temptations.
- Housing and travel are the two largest expense categories. Optimizing either one has an outsized impact on annual savings rate.
- Track savings rate alongside [[measure-sponsorship-mrr]] to understand the relationship between business revenue and personal wealth building. Revenue growth without corresponding savings discipline is a vanity metric.
- Review annually during [[procedure-quarterly-financial-planning]] to adjust target ranges based on income trajectory and life goals.
