The area of personal finance is generally not complicated. To achieve your goals, whether they are small or ambitious, just follow these two simple rules:

• spend less than you earn
• invest the difference

The first point can be achieved by reducing consumption or increasing income. This decision is up to you. We are glad to help you with the second point. First things first, let’s have a look where can you find funds for investing.

Start with the Largest Expenses

First of all, focus on the biggest expenses in your budget - mortgage and other loans. Do you still have a mortgage with an interest rate that is exceeding 2%? Consider refinancing it, it can save you tens of euros per month. However, do not unnecessarily accumulate saved money in your current account for early repayment of the mortgage. It is not worth it, it is better to invest them.

Also, do not overlook consumer loans, credit cards and other debts. If you are repaying loans with rate exceeding 10% or 20%, consider consolidating them. Merging the loans can reduce your regular monthly payments as well as your total overpayment greatly.

If you live from pay check to pay check due to huge debts, merging old debts into a new one with a lower rate will give you tens or even hundreds of euros per month, which you can use to build up an emergency fund, so that you never find yourself in this situation ever again.

The Devil Is in the Details

Money can be also hidden behind the seemingly small, daily consumption spending. Find the time to study your bank account activity, or write down your expenses for a few months. Do not skip over small items with the justification of “it’s just a few euros per month”.

If cholesterol is considered to be a silent heart killer, regular monthly expenses are the killer of your wealth. There are numerous expenses on which you can save money: unused newspaper / magazine subscriptions and services (Spotify, Netflix, HBO GO, etc.),  bank account maintenance fees, expensive or unnecessary insurance, dining in restaurants, excessive spending on the internet, TV and mobile phone plans, gym membership that you never use, a car with high fuel consumption...

It may seem unnecessary to contemplate over € 7 for bank account maintenance fee, € 20 for TV services or € 30 for a mobile phone plan. However, the real cost of these expenditures is much higher.

The difference between the € 10 and € 30 mobile phone plan is not only € 20. You can also invest these € 20 every month. Only this one choice can earn you € 37,000. This is how much you can achieve, if you regularly invest € 20 a month in equity index funds over 30 years. This is the real cost of an expensive mobile phone plan.

Do you pay your bank 7 or 9 euros for current account maintenance? Today, you can have bank account for free. You can either qualify for an account maintenance discount in your bank or you can use the services of Internet banks such as mBank, 365.bank, German N26 or British Revolut.

If you manage to reduce or even eliminate some of the smaller expenses, you will probably find out that you are suddenly able to save tens of euros per month. In 20 or 30 years, you will not even remember these small spending cuts. Thanks to them, you can have tens or even hundreds of thousands of euros in your account and your life can look completely different.

When You Can’t Save More, Focus on Income

If you do not see any room for saving and investing, even after a thorough analysis of your spending, then you need to address the other side of the equation. Sometimes, it may be easier to achieve a pay raise at work, rather than trying to bloodily save a few euros on (really necessary?) expenses.

The evaluation interview and salary negotiation are certainly not favourite activities of most employees. Many have avoided them for a very long time. However, they are unknowingly depriving themselves of really big money.

If you negotiate a pay raise of € 100 per month and you manage to save and invest half of the “new money”, you can have more than € 30,000 in your investment account in 20 years. Isn't that uncomfortable hour with the boss worth it?

Do not delay this talk. There will probably be no better time than today. Wages are rising, the economy is doing well and there is a lack of skilled people in the labour market. For many employers, it is easier and cheaper to increase (from their point of view) the salary of employees than to seek and train a new person without prior experience.

You must learn to save a part of your income as soon as you receive it. Only investing the remaining account balance at the end of the month does not work. This way, you will never manage to get out of the vicious circle of living from paycheck to paycheck. The ideal ratio is to save 20% of income for yourself and your future. Use these savings to create an emergency fund and for the purposes of general wealth building.

If you can save even more, good for you. Start slowly. In the beginning, try saving 10% and gradually increase the amount. You will see how quickly you will get used to it and make investing a daily part of your life.

Whatever your goals may be, you can reach them faster with investing – whether you plan to build up an emergency fund, save for a nice retirement, or just invest intelligently for a better future. Finax is happy to assist you on that journey.