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It’s all about the savings rate

Data science · Data Visualization · R Shiny · Money tools

Investing talk is dominated by returns. And which stocks to pick or markets to invest in. And profits relative to expectations.

The reality is, what matters most is your savings rate. Without money saved, there can be no money invested (assuming you are not investing on margin). And being able to increase your monthly savings rate allows you deploy more capital regularly. Only at this point, once you know how much you have to invest, is it worth debating where money should be allocated.

This calculator built in R with shiny allows you to compare the effect of three different savings rates. Enter your income and effective tax rate (easily determined online or from a recent pay stub), select three hypothetical savings rates, and adjust for fees and inflation (or don’t if you want to see the value in today’s dollars), and see the impact on your account values. The interest rate earned is assumed to be the same for all three saving rate scenarios. It also assumes that you make, on average, the monthly (or yearly, if you prefer to not dollar-cost average) savings target. Launch it on a desktop browser for easier use.

Outcomes

A small change in savings rate, even just a few percent, can compound into long-term wealth. Use this calculator as a tool - not financial advice - to help inform your savings goals.