I written a lot of articles where I used the terms savings rate, or your level of savings and I think some of you may be confused about what do I mean savings rate. What goes into the savings rate. So this article is to try and make sense of it. At the same time I will introduce 2 terms that we typically use in our articles:

1. Your Savings Rate
2. Your Spending Rate
3. Your Personal Free Cash Flow

With this, it will make my other articles more understandable. I would also go through some discussions so as to help you understand these 3 terms better.

Your Spending Rate

For the majority of you, you have a day job that you earn income. Your income is made up of the portion where you can touch and the portion that you couldn’t. The one that you couldn’t could be a mandatory government ......