Your savings rate is more predictive of financial success than your income level. Learn how to calculate it correctly, what savings rates mean for your financial independence timeline, and how to improve it.
Your savings rate — the percentage of income you save and invest — is more predictive of financial success than your income level. A high earner with a 5% savings rate builds less wealth than a moderate earner with a 30% savings rate.
Savings Rate = (Total Saved + Invested) / Gross Income x 100
Include in savings:
- Emergency fund contributions
- Investment account contributions
- Retirement account contributions
- Any goal-specific savings
- Extra debt payments beyond minimums
Do not include:
- Regular debt minimum payments (these are obligations, not savings)
- Tax payments
Example:
Gross monthly income: $7,000
Tax payments: $1,750 (25%)
Savings and investments: $1,400
Savings rate: $1,400 / $7,000 = 20%
5% savings rate: ~66 years to FI
10% savings rate: ~43 years to FI
20% savings rate: ~37 years to FI
30% savings rate: ~28 years to FI
50% savings rate: ~17 years to FI
70% savings rate: ~8.5 years to FI
Assumes 7% investment return and consistent savings.
Freelancers have two unique levers employees lack: the ability to increase income rapidly through rate changes and the ability to deduct business expenses from taxable income. Use both.
Free to start. No bank connection needed. 150+ currencies, tax estimates for 20 countries.
Try FlowFund Free →💬 Join the FlowFund Community →