Glossary
Savings rate
Savings rate is the share of your income you did not spend, expressed as a percentage. It is calculated as income minus expenses, divided by income, over the same period.
Savings rate is the most portable personal-finance metric there is: it does not depend on your currency, your country or how much you earn, so you can compare it across time and between people.
Because it is a ratio, a raise only improves it if your spending stays flat. That is why it beats tracking savings in absolute terms.
Related terms
- Cash flowCash flow is the money that came in minus the money that went out over a period. Positive cash flow means you finished the period with more than you started; negative means you drew down savings.Read
- 50/30/20 ruleThe 50/30/20 rule splits after-tax income into 50% needs, 30% wants and 20% savings or debt repayment. It is a starting allocation, not a law, and is meant to be adjusted to your cost of living.Read
- Emergency fundAn emergency fund is money set aside to cover essential expenses if income stops. You hold it in an account you can draw on the same day, sized in months of expenses, commonly three to six.Read
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