function calculateSavingsRate() {
var netIncomeInput = document.getElementById("monthlyNetIncome").value;
var expensesInput = document.getElementById("monthlyExpenses").value;
var preTaxInput = document.getElementById("preTaxSavings").value;
// Validation
if (netIncomeInput === "" || expensesInput === "") {
alert("Please enter both your Monthly Net Income and Monthly Expenses.");
return;
}
var netIncome = parseFloat(netIncomeInput);
var expenses = parseFloat(expensesInput);
var preTax = parseFloat(preTaxInput);
if (isNaN(preTax)) {
preTax = 0;
}
if (netIncome <= 0) {
alert("Net Income must be greater than zero.");
return;
}
// Calculation Logic
// Formula: (Net Income – Expenses + PreTaxSavings) / (Net Income + PreTaxSavings)
var liquidSavings = netIncome – expenses;
var totalSavings = liquidSavings + preTax;
var adjustedIncome = netIncome + preTax;
// Avoid division by zero
if (adjustedIncome <= 0) {
alert("Your adjusted income is invalid for this calculation.");
return;
}
var savingsRate = (totalSavings / adjustedIncome) * 100;
// Formatting Results
var resultContainer = document.getElementById("psrResult");
var rateOutput = document.getElementById("rateOutput");
var savingsAmtOutput = document.getElementById("savingsAmtOutput");
var adjustedIncomeOutput = document.getElementById("adjustedIncomeOutput");
var analysisText = document.getElementById("analysisText");
resultContainer.style.display = "block";
rateOutput.innerText = savingsRate.toFixed(2) + "%";
// Currency formatting
savingsAmtOutput.innerText = "$" + totalSavings.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
adjustedIncomeOutput.innerText = "$" + adjustedIncome.toLocaleString('en-US', {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Analysis
var msg = "";
if (savingsRate < 0) {
msg = "You are currently spending more than you earn (Deficit).";
rateOutput.style.color = "#dc3545"; // Red
} else if (savingsRate < 10) {
msg = "You are saving, but below the recommended 20% benchmark.";
rateOutput.style.color = "#ffc107"; // Yellow/Orange
} else if (savingsRate < 20) {
msg = "Good start! You are approaching the standard 20% savings goal.";
rateOutput.style.color = "#28a745"; // Green
} else if (savingsRate < 50) {
msg = "Excellent! You are saving aggressively and building wealth.";
rateOutput.style.color = "#28a745";
} else {
msg = "Outstanding! You are saving at a 'FIRE' (Financial Independence) pace.";
rateOutput.style.color = "#28a745";
}
analysisText.innerText = msg;
}
How to Calculate Personal Savings Rate
Your personal savings rate is arguably the most important metric for determining your financial health. While net worth tells you where you are today, your savings rate dictates how fast you will reach financial independence. It measures the percentage of your disposable income that you keep rather than spend.
The Personal Savings Rate Formula
To calculate your savings rate accurately, you need to account for both your liquid savings (what's left in your bank account after bills) and your pre-tax investments (like 401k or HSA contributions).
Savings Rate = (Total Savings / Total Income) × 100
Where:
Total Savings = (Net Income – Expenses) + Pre-Tax Contributions
Total Income = Net Income + Pre-Tax Contributions
Example Calculation
Let's verify the math with a realistic example used in the calculator above:
Take-Home Pay: $4,000
Monthly Expenses: $3,000
401k Contribution: $500 (automatically deducted from paycheck)
First, we calculate the money you didn't spend from your paycheck: $4,000 – $3,000 = $1,000.
Next, we add back the pre-tax savings: $1,000 + $500 = $1,500 Total Savings.
Finally, we determine your true earning base: $4,000 + $500 = $4,500 Total Income.
Many financial experts recommend a savings rate of at least 20%. However, followers of the FIRE (Financial Independence, Retire Early) movement often aim for rates of 50% or higher. The higher your savings rate, the fewer years you need to work to maintain your current lifestyle.
Tips to Increase Your Rate
Track Expenses: You cannot improve what you do not measure. Use the calculator above monthly to track progress.
Automate Savings: Set up automatic transfers so the money leaves your checking account before you can spend it.
Avoid Lifestyle Creep: When you get a raise, save the difference rather than upgrading your car or apartment.