If you want to buy a house, take a dream vacation, or pay for a wedding, a bit of planning goes a long way. How much of your paycheck is saved after paying your rent, food, gas, insurance, etc?
We don’t need to calculate this number to the nth decimal place. Just a ballpark number will do as a first cut.
Say you’re budgeting a $20k down payment on a house and you only have $5k in the bank. Okay, you’re $15k short. Not the end of the world. So how many months until you save up the needed $15k?
That depends on how much you can save each month, your savings rate. If you can save $1000 per month, then you should be able to save $15k in 15 months. This of course assumes that your spending and saving habits don’t change.
Not another savings or budget article
The internet is filled with this stuff. Seriously, how many times does someone feel the need to tell the world that you need a budget?
I promise, this isn’t that kind of article.
I think we all know we need a budget, yes? So why don’t people go through the exercise? Probably because it’s a big pain in the butt. And
we’re I’m a little lazy.
Anyways, this post is to share my awesome spreadsheet to help answer the following questions:
What’s my savings rate and how much am I saving per week? Per month? Per Year?
This post shares my handy tool for quickly calculating what you earn, what you spend, and ultimately what you save.
Calculating How Much You Save
There are a few options when it comes to calculating how much you save. You can go old school, go digital with some personal software or a spreadsheet, or fully web-based with an online financial tracker.
Back of the Envelope
Plenty of people prefer the old fashioned approach of just writing on a piece of
blank paper. It’s the most simple thing one can do. Just jot down your main income sources and list your major recurring expenses. Sum each category and deduct them to either arrive at a positive or negative number. If positive, you’re saving. If negative, you’re spending more than you earn.
Net Savings Calculation by Hand
- easy to do (no learning curve)
- time consuming (manual calculations)
- tedious to repeat over time
- prone to error (calculator error)
Spreadsheet or Software (Recommended)
Let’s power on the computer now. The back of the envelope approach can easily be input into a spreadsheet. No longer does one need to manually sum all their expenses. One can calculate their net savings (or spending) rate in a snap.
The spreadsheet is my preferred option. It’s flexible and can be tailored to your specific needs. Though if you don’t like spreadsheets, then there are other options. Personal finance software such as You Need A Budget (YNAB) or GnuCash allow users to track their spending and plan their finances.
Spreadsheet or Software
- Automates most calculations
- Better tracking over time
- Ability to provide an accurate and complete personal finance profile
- Requires a small learning curve to get acquainted with software
- Still requires user input for income and expenses
Throw Caution and Privacy to the Wind
The biggest gripe about using a spreadsheet or software tool is that they still require manual user input. You have to type in all of your income and all of your expenses. If you’re trying to track your finances every month, this can be a big pain.
This is where online financial trackers such as Mint come in. Sites like Mint connect to your banks so that it automatically tracks all activity going into and out of your accounts.
Hipster kid: So I don’t have to manually input any of my incomes or expenses?
Mint: Nope. We’ll pull that data for you.
Hipster kid: Sounds great! How do I get started?
Mint: Just provide me (a 3rd party) your usernames and passwords for every banking institution you want to track.
Hipster kid: Hmm, something tells me that isn’t a good idea. But I guess Google has all my information anyways, so what the hell. Sign me up!
Baby Boomer: <muttering> Dumb millennials.
I know a lot of people that use sites like Mint. Heck, I even used to. It made tracking expenses, seeing how much you saved, and setting a budget way easier. But at what cost?
Once I really considered the risk of compromising my financial bank accounts, I decided the extra convenience wasn’t worth it.
Hackers are getting more sophisticated and cracking into secure systems using brute force methods faster everyday. Consolidating all of my financial accounts, their usernames, and their passwords all on one site is just asking for trouble.
Web-based Financial Software
- All the pros of a spreadsheet
- Fully tracks earning and spending automatically without user input
- Accessible on multiple devices or anywhere you have internet
- Potential risk of compromising personal financial data
- Less customization and flexibility than a spreadsheet
My Personal Spreadsheet for Savings
Can you guess what method I use?
An Excel spreadsheet!
If you’ve been reading this far, it’s clear that I prefer the spreadsheet method. I find it flexible, fast, and I don’t compromise any of my personal information.
Call me a geek, but I also like Excel spreadsheets too.
So here’s a few snapshots of my Savings Calculator Tool. The numbers aren’t my numbers…just examples.
In a snap, this flexible tool calculates your income, expenses, and net savings.
Okay, maybe it’ll take you like 5 minutes to input your data. But then, oh baby it’s lighting fast! Hello digital age.
Whether you’re paid weekly, monthly, quarterly, or annually, the tool correctly sums it up and displays the numbers however you like (weekly, monthly, or yearly).
For example, I get paid weekly, but my wife gets paid monthly. Bills are not consistent either. Many occur monthly, but some are quarterly, bi-annually, or even weekly. This calculator can take any of these inputs and adjust accordingly. This makes life so much easier!
How I Use My Spreadsheet
First off, this tool is not intended for monthly tracking. If you want to track every single cent every month for years on end, then by all means sign up to Personal Capital, Mint, etc. They’ll glad take all of your private information.
Instead, I use this spreadsheet to quickly calculate what I’m saving, which has two added benefits.
First, it helps me make a savings goal each year. Save X amount in order to do Y or Z. With an annual estimated savings, the tool then allows me to prioritize all of the things I want to allocate that money towards. Things like maxing out my 403b (or 401k), IRA, college savings plan for my boy, down payment for a house, or anything else. If I realize there’s not enough savings to max out my retirement, then I circle back to my expenses to see where I need to shed some fat.
The second benefit is this tool also acts as savings health check mid-year. So 6 months into the year, I should have saved half of my savings goal. If not, then figure out why? Also when holidays are around the corner, this spreadsheet will remind me of what budget I have to work with in order to meet my year end savings goals.
If you want a free copy of my spreadsheet, click here to download.
Now Go Out and Save
And there you have it. Finding how much you save is a simple exercise and there are plenty of options to help you. You can go old school by writing it down on paper, use a spreadsheet like mine, or go fully web-based. Choose the option that works best for you and gets you in the habit of checking in on your finances.
Which option works for you?
Are you a pen and paper wizard, spreadsheet guru, or web-based financial technologist?