A savings plan for different income levels

If you want to understand how to divide your salary so that money is left for savings every month, start by estimating what amount you want and can afford to allocate for this purpose each month. In practice, this could be 10 to 20% of your salary after taxes, automatically transferred to a separate account on the day you receive it. In this way, saving becomes a regular budget item rather than a random outcome based on the principle of whatever is left over.

In brief:

• The goal of a savings system is not to get by on as little money as possible, but to clearly divide a portion of your income between everyday needs, savings and longer-term goals.

• A starting point could be a monthly saving of 10 to 20% of your net income, adjusting the amount to your expenses and obligations.

• Use an automatic transfer on the day your salary arrives so that your savings are not formed only from what is left over.

• First build a safety cushion, but money that is not needed in the near future can be considered for regular investing.

• If you want the money you have saved to generate an additional return, the investment product TWINO FLEXI with a fixed annual return and flexible withdrawal terms could be one of the options.

Why does the approach of saving whatever is left over usually not work?

Mathematically, this approach means that savings are a residual rather than a priority budget item. If your income is 2000 euros and 1980 euros have been spent by payday, only 20 euros are left for savings. If expenses reach 2000 euros the next month, there are no savings at all.

The problem is not always excessive spending; often it is the lack of a system. If savings are built only from what is left over, even higher income will not always mean higher savings.

It is smarter and more purposeful to do the opposite. On the very day your salary arrives, allocate a pre-determined amount to savings, and use the remaining part for everyday spending.

How much should you set aside from your salary for savings to be realistic?

In real life, every situation is different, so there is no universal answer here, but a good starting point could roughly be 10 to 20% of your salary after taxes. If you have large housing costs, loan obligations or dependants, it could initially be as little as 5%. If, on the other hand, your income is higher or your expenses lower, you can also allocate 20% or more to savings.

The most important thing is to choose an amount that you can repeat every month.

The key here is to create a savings plan that works over the longer term, which is why it is wiser to set a lower but realistic goal than an overly ambitious one that leads you to abandon the system after a few months.

Rich is the one who has enough

Sometimes starting to build savings is psychologically hindered by the argument that income is supposedly too low to save anything at all while maintaining a reasonably satisfactory quality of life. And in many cases this is close to the truth, but not always. The ability to assess your desires adequately and without unnecessary stress in relation to today's real possibilities could be one of the main keys to success on the path towards a financially more stable future.

How to divide a salary of 1500 euros?

If you receive 1500 euros after taxes, a realistically achievable goal would be to set aside 10%, or 150 euros a month, for savings.

An approximate budget breakdown could look like this:

• 150 euros for savings

• 500 euros for housing and utility payments.

• 350 euros for food and everyday goods.

• 120 euros for transport.

• 80 euros for communications, subscriptions and insurance.

• 150 euros for health, personal spending and unforeseen purchases.

• 150 euros for recreation, entertainment and hobbies.

Of course, this is not a universal plan, but an illustration of how savings can be included even at a relatively limited income level. If your mandatory monthly payments are higher, you should try to adjust the other items rather than abandon the idea of saving altogether.

How to divide a salary of 2000 euros?

With a net salary of 2000 euros, 300 euros could be allocated to savings, which makes up 15% of income. The remaining 1700 euros are divided between everyday needs and lifestyle.

For example, around 700 euros can be set aside for housing and utility payments, 350 euros for food, 150 euros for transport, 100 euros for communications and other regular payments, 200 euros for personal spending and health, and 200 euros for recreation and unplanned purchases.

If more money remains at the end of a month than budgeted, you can also add it to your savings or direct it towards larger purchases in the coming months.

How to divide a salary of 2500 euros?

With a net salary of 2500 euros, you could already save 400 euros, or 16% of your income. The remaining 2100 euros allow you to retain sufficient flexibility for everyday spending.

For example, around 900 euros can be allocated to housing and utility payments, 400 euros to food, 180 euros to transport, 120 euros to communications and other regular payments, 250 euros to health and personal expenses, and 250 euros to recreation.

As income grows, it is important to understand the difference between I can afford to spend and I have to spend. Yes, in such a situation you might, for example, start thinking about a larger, better home if there is such a need. But if your current one meets your needs well, this is by no means mandatory. The same applies to other existing choices regarding material things and lifestyle.

In economics, this phenomenon is referred to by the term trading up. It means that, as income grows, households gradually move to more expensive and higher quality goods. In practice, this often means that the increase in income is not reflected in savings, because spending grows alongside it.

How to save money if your income differs every month?

If your income differs from month to month, it will be more convenient to allocate a certain percentage to savings rather than a fixed amount. For example, 10% of each month's income regardless of whether you receive 500 euros or 5000 euros.

Another option is to set a minimum amount, for example 150 euros, and to add part of your additional income in better months. This helps maintain saving discipline even when income fluctuates.

Where should you direct the money you have saved?

Financial advisers usually recommend starting with building a safety cushion for unforeseen expenses, roughly in the amount of 3 to 6 months of necessary expenses. It is also important to separate this from money intended for longer-term goals. For an emergency reserve, availability and stability are more important, whereas money that will not be needed in the near future can be considered for investments.

Once that is done, but spare funds continue to accumulate in your account regularly, the next logical question is whether to let this money remain without a return for a long time.

One option is to direct part of your spare funds to regular investing. For this purpose, TWINO FLEXI offers a flexible investment solution with a fixed 6% annual return.

Example

Let us assume that you allocate 200 euros to investing every month. Over the course of a year you will have paid in 2400 euros. Since the first payment works for twelve months and the last one for only one, in a simplified calculation at a 6% annual return the interest over the year would be approximately 78 euros, so the total savings would be approximately 2478 euros.

Before you make a decision about investing, we would remind you that this calculation is illustrative, presented as a gross result and made before taxes. A fixed annual return does not guarantee a specific result, which in reality depends on many factors.

It should also be taken into account that TWINO FLEXI is not a bank deposit, it is not covered by the state deposit guarantee, and it is subject to investment risks, including the risk of losing part or all of the invested capital.

More about the safety of investing on the TWINO platform.

In conclusion

To understand how to divide your salary, you do not need a complicated financial system. The most important thing is to set a specific share of your income for savings, transfer it automatically and build the rest of your budget in line with your real resources.

If you want to direct money that is not needed for everyday spending into an investment, TWINO FLEXI is one of the options. Before making a decision, familiarise yourself with the product terms and risks.

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This material is for informational purposes and is not individual investment advice.