Savings Rate With Several Incomes: A Simple Way to Do It

Michael Chen

Michael Chen writes about personal finance fundamentals. Bay Area-based · finance enthusiast for 15 years.

Visual representation of the voice · not a photographic portrait

Quick answer: Add up all the money you earned from every source in a month, subtract the taxes you owe on it (including taxes you set aside for side income), and that is your take-home total. Then add up everything you saved, including retirement contributions and extra debt principal, and divide savings by take-home. Multiply by 100 to get your savings rate as a percentage.↗ Share on X

To calculate your savings rate with more than one income stream, add every dollar you earned from all sources into one monthly total, subtract the taxes on all of it, and divide what you saved by what is left. The formula is: savings ÷ after-tax income × 100. The hard part is not the math. It is making sure side income, irregular payments, and money you set aside for taxes are counted the same way every month, so the number actually means something.

Below is a step-by-step method, a worked example with three income streams, and the mistakes that make the number look better (or worse) than it really is.

What is a savings rate, in plain words?

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Your savings rate is the share of your income you keep instead of spend. If you bring home $4,000 and save $400, your savings rate is 10%.

It is useful because it tracks your habits, not just your balance. A bank balance can go up just because you got a bonus. A savings rate tells you whether you are keeping a steady share of what comes in, no matter how much that is.

With one paycheck, it is easy. With a job plus a side gig, a rental unit, tips, or freelance work, people get confused about three things:

1. Which income to count.

2. What to do about taxes on side income, since nobody withholds them for you.

3. What to do when income jumps around from month to month.

Step 1: How do you list every income stream?

Write down every source of money that came in during the month. Use the amount that hit your bank account or your hand, plus anything taken out before you saw it that you want to count as savings.

Common sources:

• Paycheck from a regular job (W-2 in the U.S.)
• Freelance or gig payments (1099 work, delivery apps, rideshare)
• Tips and cash payments
• Rental income from a room, unit, or property
• Small business sales
• Interest and dividends
• Child support, alimony, or regular family support

Do not count: money moving between your own accounts, loans, credit card cash advances, or a refund for something you returned. Those are not income.

Step 2: How do you handle taxes on side income?

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This is where most people get the number wrong.

Your main job usually withholds income tax from your paycheck. Side income usually does not. If you count a $1,000 gig payment as $1,000 of take-home money, your savings rate will look too low later, when you pay taxes out of "savings."

The cleaner approach:

1. Decide on a tax set-aside percentage for side income. Many self-employed people set aside somewhere around a quarter to a third of their profit, but the right amount depends on your total income, your state, and your deductions. A tax preparer can tell you the right number for your situation.

2. Move that money to a separate account as soon as you get paid.

3. Treat it as taxes, not savings. It does not count in either the income total or the savings total. You will use it to pay the IRS.

For rental or business income, use profit, not gross sales. If a rental brings in $1,200 and you paid $300 for repairs and fees, count $900 before taxes.

Step 3: What counts as savings?

Count money you put aside for the future and did not spend:

• Transfers to a savings account or emergency fund
• Retirement contributions (401(k), IRA, or similar), including the ones taken from your paycheck before you see them
• Employer match, if you choose to count it (see below)
• Extra payments on debt principal, beyond the minimum
• Money invested in a brokerage account

Do not count: money set aside for a planned expense in the next few months, like holiday gifts or car registration. That is a sinking fund for spending, not savings. Also do not count your tax set-aside.

About pre-tax retirement contributions: if $300 goes into your 401(k) before your paycheck lands, add that $300 back to your income and count it as savings. Otherwise you are leaving out money you earned and saved.

A worked example with three income streams

Meet Dana. In one month, Dana had:

Step-by-step:

1. Job: $3,100 take-home + $250 401(k) = $3,350

2. Delivery app: Dana sets aside 25% for taxes. $900 × 0.25 = $225 to the tax account. After-tax: $675

3. Room rental: $700 − $100 costs = $600 profit. Dana sets aside 20% for taxes: $120. After-tax: $480

4. Total after-tax income: $3,350 + $675 + $480 = $4,505

Now savings:

Savings rate: $800 ÷ $4,505 = 0.1776 → about 17.8%

If Dana had ignored taxes on the side income and counted $1,600 gross, the income would have been $4,950 and the rate about 16.2%. A small gap now, but it hides the real picture: that tax money was never Dana's to save.

What if your income changes a lot month to month?

Gig work, tips, and seasonal jobs make one month look great and the next look terrible. Two simple fixes:

Option A: Use a rolling 3-month total.

Add up income and savings for the last three months, then divide. This smooths out spikes. Update it every month by dropping the oldest month and adding the newest.

Option B: Pay yourself a "salary."

Send all side income into one holding account. Each month, move a fixed amount from that account to your spending account, as if it were a paycheck. Calculate your savings rate on the fixed amount. Anything that builds up in the holding account beyond a buffer can be moved to savings later.

Option B takes a bit more setup but makes budgeting much calmer, because you always know what you have to live on.

Should you count your employer match?

There is no single rule. Two honest ways:

• Count it: add the match to both income and savings. This shows your total wealth-building.
• Leave it out: only count money you chose to save. This shows your personal habit.

Pick one and stick with it. Switching back and forth makes your month-to-month comparisons useless. Write your choice at the top of your spreadsheet so you remember.

What are the most common mistakes?

1. Using gross income for the job but net for side gigs (or the other way around). Be consistent: use after-tax for everything.

2. Forgetting pre-tax retirement money. It is income you earned and savings you made.

3. Counting the tax set-aside as savings. It leaves your account in April.

4. Counting sinking funds as savings. Money for next month's car repair is spending you planned.

5. Calculating only in good months. Track every month, including the slow ones. The slow months tell you the most.

6. Using gross rental or business revenue. Use profit after costs.

How do you track it without a lot of work?

A simple spreadsheet with these columns is enough:

In the last column, use the formula `=C2/B2` and format it as a percentage. Fill one row per month. After six months, you will see your real pattern.

If you use a budgeting app, check that it does not count your tax set-aside account as savings. Many apps treat any transfer to a savings account as "saved." You may need to label that account differently or exclude it.

When should you get professional help?

A savings rate is a tracking tool, not tax advice. Talk to a tax professional or a certified financial planner if:

• you are not sure how much to set aside for self-employment taxes,
• you owe quarterly estimated taxes and have never paid them,
• you have rental property and are unsure what costs you can deduct,
• your side income is now large compared to your job income.

Getting the tax part wrong can turn a healthy-looking savings rate into a surprise bill.

Your next step

Open a blank spreadsheet today and list every income source you had last month, with the amount and whether taxes were already taken out. Set a tax percentage for side income (ask a tax preparer if you are unsure), then fill in your savings. Calculate one number. Do the same next month. Two months of honest numbers will teach you more about your money than any budget template.

FAQ

Should I use gross or net income for my savings rate?

Use after-tax income for every source, and add back pre-tax retirement contributions. Mixing gross and net between your job and side income makes the number misleading.

Is money I set aside for taxes part of my savings?

No. Tax set-asides for side income are money you owe. Leave them out of both income and savings so your rate reflects what is really yours to keep.

How do I calculate a savings rate if my income is irregular?

Use a rolling three-month total of income and savings, or route side income into a holding account and pay yourself a fixed monthly amount. Both smooth out big swings.

Do extra debt payments count as savings?

Payments above the minimum that reduce principal can be counted, because they improve your net worth. Minimum payments are a regular expense, not savings.

Educational content, not personalized financial advice. Sources cited where applicable.