Budget

A budget is a plan that sets out what you spend your money on each month – the foundation of any healthy financial planning.

The 50-30-20 rule (the simplest budget):

• 50% for fixed costs: rent, insurance, electricity, internet, subscriptions
• 30% for leisure: eating out, shopping, hobbies, holidays
• 20% for saving/investing: ETF savings plan, emergency fund, paying off debt

Example with €2,500 net:

• Fixed costs: max. €1,250
• Leisure: €750
• Saving: €500

How do you create a budget?

• Step 1: list all income
• Step 2: list all fixed costs (check your bank statements from the last 3 months!)
• Step 3: analyse variable costs from the last 3 months
• Step 4: set your savings rate (pay yourself first!)
• Step 5: review and adjust monthly

Budget methods:

• Envelope method: cash in labelled envelopes (groceries, leisure, etc.)
• Multi-account model: separate accounts for different purposes
• Apps: Finanzguru, MoneyMoney, YNAB

Fact: only 22% of Germans keep a regular budget. The other 78% often don't know exactly where their money goes.