How much money do you need each month

Monthly expenses: income versus cost of living

How do you find the right balance between income and expenses? How high are your fixed costs exactly and where is there still potential for savings? Calculating the monthly expenses is actually very simple and helps you a lot with your financial planning. Read here how much life costs per month and how easy it is to draw up a budget. Are you ready for a financial perspective?

Monthly expenses: income versus cost of living
Monthly expenses: income versus cost of living

How much does life cost a month?

To make a cash fall and know how much money to spend or put aside, you should break down your monthly expenses in detail. At the beginning it is advisable to first get an overview of the fixed costs, i.e. the cost of living and other fixed expenditure items. This will take some time the first time you do this. In order to get the most exact result possible, you should also use exact amounts as a basis. That means: look at your bills and break down the amount for each month. For a first, rough overview, you can also count on rounded estimates or flat-rate values.

tip: We recommend that you use an Excel table in which you enter all the items vertically on the left and write down all the months horizontally, i.e. at the top. Of course, you can also take an A3 sheet of paper and manually record this table.

The following fixed costs occur in most German households:

  • Rental costs or loan installments for home ownership
  • Water and electricity (possibly gas if you cook with a gas stove)
  • Heating (gas, oil, pellets, wood - the easiest way is to divide the annual total by twelve months)
  • Insurance
  • Taxes and fees (e.g. garbage)
  • Mobility costs: bus or train ticket, car or bicycle insurance, parking space rental, petrol, vehicle tax, leasing costs, costs for the motorcycle
  • Media: Internet and telephone connection, mobile phone, GEZ costs, streaming services, pay TV
  • Food
  • Drugstore items and detergents
  • clothes and shoes
  • Pet (do not forget dog liability)
  • Contributions: trade unions, clubs, associations, sports studio, library card, day-care center
  • Leisure activities: cinema, restaurant visits, cultural subscriptions, magazines
  • Loan repayment of installment purchases

There are also items that are not part of the classic monthly expenses, but also arise:

  • Medication or co-payments to medical bills
  • Travel expenses for vacation
  • Gifts
  • Furniture and electrical appliances
  • Decorative items for the home
  • Hairdresser, beauty salon, barber
  • donate
  • Costs for work in the garden
  • School equipment: school books, new pencil case, notebooks, pens, new school satchel
  • Craftsman bills

You can either divide these sums by twelve months and assign a partial amount to each month, or you can only assign them to the months in which you actually spent the money.

What role does a budget play in financial planning?

Keeping a budget or household book lets you keep track of your monthly income and expenses. In this way, you can also discover items that you may not have found to be that large or extensive. There is potential for savings here: money that you can save with little effort and a little discipline and which can then be used for your financial planning. For example, to build up equity more quickly for building a house, to invest a nest egg, to save on your dream kitchen or to increase the savings rate for your home loan and savings contract. When you want to apply for a loan, the bank will put you through a credit check. In order to be prepared for this, it is worth taking a break in cash before talking to the bank advisor. Because in this way you already know in advance the amount that you can pay off monthly without having to tighten your belt too tightly. In this case, however, it is very important that you are honest. Otherwise you face personal bankruptcy sooner or later.

How do you draw up a budget?

You do not need a degree in economics or business administration to draw up a budget. The first important decision here is: How do I keep my budget book? Old school on paper, for example in a vocabulary book? In an Excel spreadsheet on the computer? Using an app? Or by means of a tool on the online banking page of your house bank? It must be easy for you to use and quickly accessible. If you quickly forget items of expenditure, an app on your smartphone or a vocabulary book is more the right way, because you can enter the amount spent there immediately after the purchase. If you still remember the coffee to go after work that you fetched with your colleagues in the afternoon, you can keep the household book on the computer from home.

And off you go: enter your income at the beginning of the month and assign an item name to the various monthly expenses. Again, it depends a bit on your personal taste. Is “warm rent” enough for you as an expense item? Or would you like to be able to check whether the recently implemented energy-saving measures have helped? Then you should break down the rent and ancillary costs separately.
Now enter the exact expenditure amount in each column. At the end of the table, your income is compared to your monthly expenses.

Some household calculators on the Internet that you can use to get an initial overview use flat-rate values. However, these are only reliable to a limited extent. In Germany, rental prices fluctuate so much from state to state that an average price does not have to match your reality. On the other hand, these household calculators give you an initial rough estimate of how you are financially. And if the calculator shows you that theoretically you still have 300 euros a month left, but you are left with two euros at the end of the month, then you know that you have to tweak your financial planning and urgently need a budget book to control your monthly expenses .

What percentage of the salary should car, rent and food account for each month?

In most households, rent, car or mobility, and food will be the top three items on the monthly expense list. But what percentage should it be at most so that there is still enough money left for everything else in life?

According to the Federal Statistical Office, living, food and clothing accounted for around 51 percent of private consumer spending in Germany in 2018. On average, that was 1,390 euros per month. The total consumption expenditure was accordingly EUR 2,704, which is 10.5 percent higher than in 2013, or 31.2 percent higher than in 1998. The second part of the monthly expenditure of families in Germany is made up of non-consumer expenditure Insurance and loan interest - these were an average of 484 euros per month.

This survey by the Federal Statistical Office provides comprehensive and representative information on private living conditions in Germany.

The monthly expenses break down on average as follows:

  • Housing: 34 percent of consumer spending
  • Food: 13 percent of consumer spending
  • Mobility: 14 percent of consumer spending
  • Clothing: 5 percent of consumer spending
  • Leisure, entertainment and culture: 11 percent of consumer spending

The remainder of monthly consumer spending is spread across communications, education, interior design, dining out, health, goods and services.

On average, households in Germany spend 61 percent of consumer spending on cars, rent and food - which is not 61 percent of income, because non-consumer spending also goes away from income. By the way, an employee in Germany earned an average of EUR 24,077 net in 2018. That makes € 2,006 net per month. So if you are a sole earner or live in a single household, the input figures are not correct for you, but statistically speaking the percentage of your income is correct.

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What is the 50-30-20 rule?

According to the 50-30-20 rule, you should split your monthly budget into three amounts: fixed costs, free time and savings.

  • 50 percent: This includes the monthly fixed expenses, the cost of living. So living, including energy and ancillary costs, mobility, insurance, maintenance payments, communication, taxes, food and clothing. Whereby the item “living” can make up around 30 percent of this 50 percent. However, this has not only been the case in the most expensive cities in Germany for a long time.
  • 30 percent: According to the rule, this percentage of your income can be used for your leisure time. Clever minds list everything that is not essential for survival in this category. For example, pay TV costs or magazine subscriptions. Although they are paid monthly and are actually fixed costs. But since you can survive without pay-TV, these costs do not necessarily have to be included in the first category and help to improve your balance sheets a little.
  • 20 percent: This part of the income is used to pay off current consumer loans, to save or to build up capital. Experts evaluate this money as a salary in itself and advise you to have this 20 percent debited immediately at the beginning of the month. According to the motto: save what is left over - as if you were paying your landlord what you have left over each month. Ideally, of this 20 percent, you can build up a nest egg on a quick-access call money account, which should be around three net monthly salaries or the amount that you personally feel comfortable with. As soon as the nest egg is filled, the 20 percent could flow into a building society loan agreement or another capital investment.

So let's take the 2,006 euros that an employee living in Germany earned on average in 2018. Accordingly, you should spend: 1,003 euros for fixed costs, 601.80 euros for leisure activities and 401.20 euros for saving.

Here you can download a blank form for listing your monthly household expenses free of charge and print it out for yourself. So you always have an overview!