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Why is there so much month left at the end of the money? Well, without a concrete financial plan, many people probably experience this. Today, let’s take a look at what a sensible financial plan can look like, so that by the end of the month, not only do you have money left, but you can also build wealth in the long term.

The distribution of net income is crucial

With the right plan and some discipline, you can gradually build your wealth and fulfill your financial dreams. Many people make the mistake of saving improperly, keeping cash at home, which loses value due to inflation, or leaving it in their checking account, where minimal interest accrues. Most also lack a proper financial plan and simply save whatever is left at the end of the month, often irregularly, which rarely works well.

What could such a financial plan look like?

The first step is to create a plan to analyze your fixed costs and, ideally, eliminate unnecessary expenses. For most people, these account for about 58% of their net income. Based on the remaining amount, you can then create a plan for wealth accumulation.

Firstly, create a plan to analyze your fixed costs and ideally cut unnecessary expenses. For most people, these account for about 58% of their net income. Based on the remaining amount, you can then create a plan for wealth building.

• 58% Fixed Costs:

The higher the income, the higher the fixed costs usually are, as lifestyle tends to rise with financial capabilities. These include basic expenses like rent or mortgage, electricity and heating costs, various insurances, a car, and groceries.

• 16% Leisure:

The second-largest portion of your net income should be reserved for leisure activities and hobbies. It makes no sense to save your whole life and not enjoy it to the fullest. Therefore, it's wise to set a budget for leisure and pursue your hobbies in a balanced manner.

• 10% Retirement and Health Care:

Another significant part of the budget should be allocated to retirement and health care. However, there may be significant regional and individual differences in this regard.

Many countries have universal health insurance systems, providing citizens with comprehensive and equal access to medical care. Typically, this means no co-payments are necessary when visiting the doctor. Alternative health systems may rely on private health insurance or direct payment for medical services. Retirement insurance systems also vary regionally. Don't forget about inflation, which is often unpredictable. By setting aside about 10% of your monthly net income for retirement and health care, you are likely secured in most cases.

• 8% Investment:

Investing in stocks, commodities, cryptocurrencies, or other long-term capital assets offers a better opportunity to continuously increase your wealth compared to savings accounts or similar options. The risk is higher, so only use money that is not needed here.

• 5% Savings:

Around 5% of your net income should serve as a reserve that you can access anytime. This could be done through an online savings option, where you earn some interest but can also directly access the money if needed. This should serve as a safeguard for unexpected costs like household appliance repairs and short-term goals like renovating the bathroom.

It is often recommended to keep a reserve of at least three monthly net incomes readily available. This reserve should ideally be placed on your savings account as a minimum.

• 3% Education: 

Invest about 3% of your net income in your personal development. You are the most important resource, so use this share to buy books, attend courses, or participate in online seminars.

Adapting the plan to your needs

The allocation can be adjusted individually and depending on the situation. It should not be seen as the ultimate wisdom. The most important thing is that you have a plan. Without a plan, it will be difficult to build wealth.

Let's see how this can look based on various monthly net incomes through some examples.

Closing Words

With the right system, anyone can save a portion of their net income and build wealth in the long term. Please note that this article serves only as information and does not constitute financial advice.