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In advance in the video: Emergency fund for pensioners: This is how much you should have saved
If you want to have an emergency fund, you have to save. To reach your savings goal faster, you should use the 50-30-20 method.
Most people associate saving money with a great challenge and sacrifice. It doesn't have to be that complicated to put something aside every month. A simple yet effective method is the 50-30-20 rule.
You can find out exactly what this is about here.
50-30-20 rule: How does the savings method work?
With the 50-30-20 rule, net income is divided into three parts: A big chunk, which makes up 50 percent of your income, for things you need. A portion that makes up 30 percent for things you want. And a part, which makes up 20 percent, for saving and investing.
How high your income is doesn't matter. Whether you are a low earner, a top earner or self-employed: the 50-30-20 rule is about determining a budget that is adjusted as a percentage of your income.
As with all savings methods, you have to discipline yourself a little with the 50-30-20 rule. The advantage of the method is that you don't have to make a lot of sacrifices. It's more about a sensible allocation of your own income and routine. If you stick to it conscientiously, you can set aside enough without having to completely forego the good things in life.
50-30-20 rule: 50 percent for basic expenses
According to the 50-30-20 rule, most of the income is spent on fixed costs. This means: You should spend a maximum of 50 percent of your net income on the things you need to live. These are the basic expenses that occur every month.
Fixed costs are, for example:
- Rent
- Strom
- Water
- Heating costs
- Internettarif
- Cell phone plan
- Insurance
- Fuel costs for the car
- Groceries
- etc.
For items that are slightly variable, such as food costs, an average value is determined.
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50-30-20 rule: Reduce fixed costs to 50 percent
With rent prices constantly rising, it is not uncommon for rent alone to account for 50 percent of net income. Having enough money left over to save is extremely difficult.
The solution: You have to manage to reduce rent and other basic expenses so that they only make up 50 percent of your income. Maintaining savings is extremely difficult if you have to restrict yourself too much.
The first thing that goes away when fixed costs are too high is not the 30 percent for fun expenses, but the 20 percent that you actually wanted to save.
So that you have enough money for the finer things in lifeandIf there is anything left for saving, the basic expenses must not exceed 50 percent.
If necessary, you have to be prepared to make sacrifices for this 50 percent. That could mean a less fancy car or moving to a smaller apartment. It hurts in the short term, but in the long term you give yourself financial freedom.
By the way, the guideline for rent is that the rental costs should make up a maximum of 30 percent of the net income.
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Tip: Keep a household record of fixed costs
If you don't know your basic expenses, you can't reduce them. The first step should be to keep a household book. All expenses (amounts and purpose) are recorded there.
At the end of the month you can do a cash grab and determine exactly how high your fixed costs are and whether there is any savings potential.
Tipp:There are numerous budget accounting and financial apps such as Finanzguru. This means you can enter your expenses at any time and always keep an eye on them.
If you don't trust apps, you can easily do soDownload our PDF template here. The page is printed out once for each week, filled out and then filed in a folder.
50-30-20 rule: 30 percent for flexible spending
According to the 50-30-20 rule, 30 percent is spent on the finer things in life. These are things that you don't necessarily need to live, but you still want to have or do. However, these expenses are flexible and you could suspend them for a short time without having to lose too much quality of life.
This includes:
- Clothing
- Hobbies
- Vacation
- Restaurant or bar visits
- Entertainment
- Electronic
- etc.
Tipp:Part of the 30 percent should be set aside for larger expenses. For example, if you want to buy a new piece of furniture or expensive electronics, you can use this savings amount. This ensures that the 20 percent that you need for reserves remains unaffected by such consumer spending.
50-30-20 rule: 20 percent for wealth creation
The last part is the 20 percent that you should save and invest. The emphasis is on the word"and". It is important to both build up reserves, for example for unforeseen expenses, and to invest, for example in private pension provision.
You never know when a car repair, unemployment or uninsured loss will suddenly arise. But you never know what the future will bring, so you can't rely on one source for your retirement planning. If a way of providing for retirement breaks down, you would otherwise be left penniless. If, on the other hand, you rely on multiple sources of income, you also spread the risk.
Save assets or pay off debts first?
If you are planning a larger investment in the future, for example buying a property, you should also use this 20 percent for that. This allows you to set aside money for a down payment and pay off a loan later.
Caution:If you still have outstanding loans, you should first use the 20 percent to pay them off. First comes reducing debt and then building wealth.
Reading tips:
Savings plan, retirement provision, stock investments – have the courage and actively deal with your finances. Read up and get advice. This is how you get the most out of what you have. Your financial freedom is in your hands.
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