Budgeting
Actual savings rate
Whatever is not spent on needs or wants is saved by definition. Subtracting the two actual spending figures from income gives the actual amount saved, and dividing by income gives the rate.
The Formula
savings rate = (income - needs - wants) / income
Whatever is not spent on needs or wants is saved by definition. Subtracting the two actual spending figures from income gives the actual amount saved, and dividing by income gives the rate.
| Symbol | Meaning | Unit | Notes |
|---|---|---|---|
| I | Take-home pay | currency | Monthly income after tax. |
| N | Actual needs | currency | What was actually spent on needs. |
| W | Actual wants | currency | What was actually spent on wants. |
| r_s | Savings rate | percent | The share of income that was saved. |
What Each Symbol Means
Icurrency
Take-home pay
Monthly income after tax.
Ncurrency
Actual needs
What was actually spent on needs.
Wcurrency
Actual wants
What was actually spent on wants.
r_spercent
Savings rate
The share of income that was saved.
See It Worked With Real Numbers
A formula on its own does not tell you which number goes where. The how to use the 50/30/20 budget rule page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.
Where This Formula Appears
This equation is the working core of How To Use The 50/30/20 Budget Rule, filed under Finance. Every number the guide produces comes from substituting into this one line.