How to compute my savings rate in Switzerland? (and why it's the key figure of the FIRE movement)

Last updated: April 18, 2020

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After years of talking about my goal of achieving financial independence in Switzerland by 40 on this blog, I realize that some basics are not clear to the readers who joined my adventure along the way.

Starting with one of the most important variables of the FIRE movement for any true Mustachian: the savings rate.

As with all elements of personal finance, Switzerland comes with its own set of specifics on how to calculate your savings rate.

So here’s the magic formula:

Savings rate = ((Income - Expenses) / Income ) x 100

Or in other words:
Savings rate = Savings / Income x 100

What to include and exclude in the calculation of your savings rate as a Swiss?

Personal finance being what it is, i.e. personal, there are different opinions on what to include and what to exclude when calculating your savings rate.
After many iterations and discussions with the members of the Team MP, I think I have arrived at a formula that is the most used in our Swiss FIRE community.

“Income” category
I include:

And I exclude:

**“Expenses” category **
I include:

And I exclude:

My savings rate calculation, month after month

Why is the savings rate the keystone of the FIRE movement?

If you’re new to the blog, you might wonder why we have fun calculating the savings rate. Are we just math nerds?

Nothing like that!

We love the savings rate in the FIRE community because it’s a magic number. It’s the one that predicts (in a scientifically proven way) how many years are left before you can retire early:

Savings rateYears until retirement
0%90
10%51.4
20%36.7
30%28
40%21.6
50%16.6
60%12.4
70%8.8
80%5.6
90%2.7
100%0

I detail the math and economic reasoning behind this table in this article.

So that’s why we’re all getting crazy in the Team MP to increase this savings rate to the maximum!

And you, how do you calculate your savings rate as a Swiss?


PS: a big thank you to the new patron @Célien for your blog sponsorship via Patreon. I am very grateful.

#savings rate #Switzerland #FIRE movement #financial independence #early retirement
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