Monthly Savings Rate - Calculation
TLDR: How do i calculate my MSR
I have blogged about how Monthly Savings Rate (MSR) is a key determinant on the success of FIRE in a previous post. But I did not go into how I calculate my MSR. There is no hard and fast rule for MSR calculations but different people use different metrics for its calculation. This is mine
Salary - S (household salary - all earning members of the house)
Investment Income - II
Taxes - T
Employee contribution CPF* (Central Provident Fund) - ECPF
Employer contribution CPF - EECPF
Bonus - B (household bonus - all earning members of the house)
Investments - I
So my MSR calculation goes like this
Version 1 (My version)
MSR = I/(S *12 + B) %
Salary and Bonus is the household income combining both of our salaries and bonuses.
I prefer to use gross income and exclude investment income from calculations.
Other versions that I have seen online
Version 2
MSR = I / ((S*12+B)- ECPF *12)) %
net income after CPF deductions
Version 3
MSR = I / ((S*12+B)- (T+ ECPF *12)) %
net income after CPF deductions and taxes
Obviously version 2 and 3 will show increase in MSR as your calculation is based on net income instead of gross. But use what works for you but use the same consistent formula across years so that you know where you stand.
*For those of you who do not know. CPF is a mandatory pension like contribution required by government of Singapore for all citizens and permanent residents of Singapore. It is 20% of your salary from the employee and 17% from the employer up to the salary of 6,000 Singapore dollars a month for my age group. Anything above that is not subject to CPF (except for bonuses etc.)
So in my case 1,200 from my pay + 960 from employer for a total of 2200 goes into my CPF account every month.
