Fixed vs. variable costs

The difference between fixed and variable costs is fundamental to any financial planning.

Fixed costs (constant, hard to change):

• Rent incl. service charges: the largest item (~30–35% of income)
• Insurance: liability, health, occupational disability, car
• Electricity/gas: monthly instalment
• Internet/mobile: contract fees
• Subscriptions: Netflix, Spotify, gym, newspapers
• Loan instalments: car, mortgage
• Childcare: daycare, after-school care

Variable costs (fluctuating, easier to adjust):

• Groceries: €300–800/month depending on the family
• Clothing: varies greatly
• Leisure/restaurants: flexible
• Petrol: depending on driving habits
• Gifts: seasonal

The 50-30-20 rule as a guide:

• 50% for fixed costs (must-haves)
• 30% for variable costs and leisure (wants)
• 20% for saving and investing

Warning signs:

• Fixed costs over 50%: you are financially inflexible
• Fixed costs over 70%: acute danger if you lose income
• Subscription trap: the average German spends €30–50/month on forgotten subscriptions

Cutting fixed costs – the biggest levers:

• Rent: move or take a room in a shared flat (largest single item)
• Insurance: compare annually (often 20–30% savings)
• Electricity/gas: switch provider (€200–500/year)
• Mobile: prepaid or a cheaper plan (€10 instead of €40/month)
• Go through subscriptions: check each one individually ("Do I really use this?")