New Poll: What percentage of your monthly income do you save?

by Manshu on November 29, 2010

in Thrift

Yesterday I asked for poll ideas at my Facebook page (why haven’t you liked it yet?), and reader Raja Panda suggested the following question:

About what percentage of salary(net) people save at what income level.

I have simplified this a little bit by removing the income level because it’s easier to conduct the poll that way, and also because your standard of living increases as you start earning more, so while you may think that you will save more at a higher salary, in reality that is not the case.

So, here is the question for the new poll:

What percentage of your monthly annual income do you save?

  • I don’t save anything currently
  • Between 1 – 5%
  • Between 6 – 10%
  • Between 11 – 15%
  • Between 16 – 20%
  • Above 20%

The poll is on the left sidebar, so feed and email readers please click through the site and vote. Also leave a comment because as you know – I use them as feedback when I prepare the poll results post, and of course it gets everyone thinking too.

Leave a comment letting everyone know the changes in your savings habit from the peak of the recession to now, and whether you think about saving more at all, or any other thoughts you may have about saving.

Let me start off by telling you that I am not a very thrifty person by nature, but when I graduated I had a student loan to pay off, which forced me to take a certain amount and keep it aside every month. With time that loan was paid off, but the habit stayed with me. It was like having a chunk of money that I didn’t have before, and luckily I had the sense to continue keeping that money aside, and that helped develop a saving habit.

Then during the great recession, I really realized the importance of having an emergency fund, and being thrifty. If you can live below your means, and have no credit card balance or EMIs you can sleep a lot better at night.

But between the recession and having to pay off that loan, I think the loan had a lot more influence on me just because it lasted so long, and forced the habit on me.

Your turn now – leave a comment about your saving habit, and any tips that you may have to develop a thrifty mindset.

Update: Raja made some recommendations, and since not many people had voted, and the emails were not sent out, I made a few changes in the options.

{ 17 comments… read them below or add one }

S November 29, 2010 at 7:31 pm

I will go with the second option i.e. between 11 % and 25% mostly except during the end of the year when expenses normally peak due to the festive season.

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Manshu November 30, 2010 at 3:58 am

Thanks S, I guess a lot of people do end up spending more during the holiday season, and based on Raja’s idea I did update the post to reflect annual savings. Your response shows that it was probably the right way to start with in any case.

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Raja November 29, 2010 at 8:46 pm

Hi,

Great! I was thinking, may be we should have made the poll for savings at annual level. The reason is, probably lot of people get annual/bi-annual/quarterly bonuses (variable pay etc…) and use that as bulk saving which adds to their annual percentage of saving significantly. So, monthly percentage won’t capture that data. Or may be you can add an explanation to help people factor that amount into their calculation.

Secondly, i think the we should capture the data in little more details like what exact percentage of income goes to saving. Is there a possibility to add a input data text box. The reason is although the poll categorizes 11-25% in one bracket, we all know there is huge difference in a 12% and 25% saving and it calls for proportionate amount of sacrifices (for lack of a better word) on the persons behalf to do that level of saving.

Thirdly it would have been great if we had some way to capture the incomes level along with saving %age. Because my main motive of the suggestion was to validate the theory that as the person’s income level goes up the %tage of salary which he can spare goes up. With the current format we can’t capture that data, as you have explained. Alas!!

Lastly am waiting for the MOIL IPO 2nd day subscription numbers from you πŸ™‚

Regards
Raja

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Manshu November 29, 2010 at 9:02 pm

Hi Raja,

I’ve made some changes based on your recommendations (not everything because that’s not possible in the tool that I use), and updated the post.

I updated The MOIL IPO subscription numbers on the old post itself as it’s just adding a new data point on the original post. I’ll probably do a small post when the final numbers are out.

Here is the link to the old post.

http://www.onemint.com/2010/11/27/moil-ipo-subscription-numbers/

more on this later….have to get to some other stuff now.

Thanks!

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Patrick November 29, 2010 at 9:42 pm

Well this was pretty easy for me to answer because I have actually increased my 401(k) contribution to 10% of annual salary and 25% of all bonuses. I raised my contribution during the summer to capture the full amount of my employer match and to basically force me to save.

I will also admit that by switching mid year I was able to kill two birds with one stone: max out my individual contribution and lower my tax bracket.

I am not saying everyone should think taxes first when it comes to saving, but it appears on all accounts that our taxes are going up over the next two years either in income tax or increased gas and power bills.

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Raja November 29, 2010 at 9:57 pm

Hi Patrick,

One question. Does this mean you don’t save anything on your own ?
What i mean to ask is, here in India most of the people have 2 kinds of savings. One, which is part of regulations and mandatory like say PPF,Gratuity etc.. which is taken out of the salary by employer and is a kind of by default saving. The other is the part which they save/invest from their take home salary and put it in things like say mutual fund, savings a/c, term deposit account, shares etc…
If i understood correct you are talking about putting the second part of your savings (voluntary) into govt regulated schemes ? Am i right ?

Regards
Raja

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Patrick November 30, 2010 at 6:10 pm

Raja,

I do save on my own, I set up an ING savings account a few years ago that I have money transferred to automatically each month.

It started out as $25 a month, it’s now up to $100 a month. It may not seem like a lot, but in less than a year that is another $1,200 saved for a rainy day.

To me the secret is not really a secret but just plain old common sense…pay yourself first. I work way to hard for my money to not pay myself first.

As far as government schemes, well I guess everyone here in the US is forced to pay into social security but in the veil of living in a pretend world we believe that we control our 401 (k) accounts.

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Indian Thoughts November 29, 2010 at 10:23 pm

Well I have always been thrifty person to start with but then gradually turned to big time spender. From last 2-3 years I am leading a balance life. My new mantra is to enjoy what I already own, and thanks to my shopping sprees.. i own a lot.

Hence, we as a family have most basic needs, EMIs, giving and few splurges. And yes now newly added rent. Rest all goes to savings or just sits in bank. And its mostly little 20% above of our joint salary.

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Manshu November 30, 2010 at 4:05 am

That’s an important point that people swing through spending sprees and thrifty habits at different stages in their life, and even if you leaned towards spending a lot at some stage you can always get back to saving again with a little bit of discipline.

Though I think it is a bit harder to break the spending habit once you get used to it. At least I felt that way. Did you observe this too?

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Indian Thoughts November 30, 2010 at 8:30 am

Yes it was tough to start with but I had been kanjoos for a much longer time πŸ™‚

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Manshu November 30, 2010 at 8:35 am

haha πŸ™‚ I really did LOL on this one πŸ™‚

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First Gen American November 30, 2010 at 5:18 am

I think the poll is likely to be skewed just by the nature of the people who read PF blogs.

I have definitely saved a higher percentage since 2008. We have more emergency savings, we are spending less on remodeling we have paid down a crazy amount of our mortgage debt. We are in a much better position than where we were 2 years ago. At the same time, some of the things we did “HAD” to get done (like replacing our furnace and roof and fixing our sewer). It’s good to have those expenses behind us.

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Manshu November 30, 2010 at 4:19 pm

Your comment got caught in the spam filter, but luckily I found it and was able to release it.

A large number of people who arrive at the blog through search engines also vote, so that way I feel the numbers at the end of a week or so are a pretty decent sample.

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Hema November 30, 2010 at 6:18 am

Iam not sure if what we do is saving since most of our salary goes into EMI paying (2 home loans and a Car loan). Since a house can be considered an asset and most of our income goes into paying EMI for it we can consider it as saving. And the rest of the money we accumulate and goes into paying off the home loan. Here and there when a good IPO comes or for tax saving we put our money into mutual funds and IPOs. We have never considered a structured way of saving. By going through your various posts and comments I understand that people are much more structured than us and do consciously invest and save which we dont do at present. Thanks to your different posts and the comments which they have attracted Iam not seriously thinking of getting into a strcutured savings plan and implement it.

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Manshu November 30, 2010 at 7:35 am

Hi Hema,

Personally, I don’t think of a house that you live in as an asset because you’re really not earning anything out of it. Sure it represents a big amount in your life, but is it really an asset in the same way that cash or mutual funds, or gold is?

A friend of mine bought a house once, and when I congratulated him, he said I haven’t bought the house, the bank has bought the house, and I’ll be paying them off for the next 15 years.

So, this is my view.

Bringing structure in thinking about savings will definitely hold you in good stead over the long run.

Also, I think your second last line meant that you have started seriously thinking of saving this (there seems to be an extra not there).

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Hema December 2, 2010 at 12:39 am

Yes Manshu it was a typo I meant now we have started thinking of saving in a structured way. After thorough analysis of our finances we have observed that we put almost 70% of our saving into real estate which is really high. Now, since we cant sell our house even if we wanted…as you said it belongs to the bank at presnt πŸ™‚ , we have decided to make a few changes in the way we spend and divert some amount of money in other assests also. Also, we are in the process of developing an investment plan for the future. Thank you.

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Manshu December 2, 2010 at 8:16 am

It’s always good to take a step back and evaluate things. In my own case I took a look at one of my credit card bills once and was shocked to see what a large percentage constituted eating out. We have a tendency to take a lot of things for granted, but if you take the time to actually see the data and reflect on it sometimes the reality is totally different.

Thinking and planning is half the battle won! All the best to you!

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