The Most Important Factor for Early Retirement

One of the most important and possibly THE most important factor in financial independence is Savings Rate. Essentially, this is the percentage of money you save relative to your income. Some use gross income (pre-tax income) and others use net income (post-tax income). I prefer to calculate my savings rate using Mr. Money Mustache's formula which is (Take home pay with employer match - spending) / (take home pay), X 100. I prefer post-tax because I cannot prevent paying taxes.

Last year was the first year I actually calculated my family's savings rate. We have always maxed our Roth IRAs, saved double digits-worth percentages in our 401ks, saved for kids' college, and payed extra on the mortgage and did the same last year. I was a bit nervous about what our savings rate would be considering we have a mortgage and daycare bills, but it ended up higher than expected.

In 2017, we ended up with a savings rate of 49%. And considering we have doing the same savings for the last 5-8 years, that feels pretty good. I hope to trim off some expenses in the food and beer categories which should bump up the rate. If someone can save this much for 10 to 15 years they should be good.