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Financial tips from the professional - Part 3.2: How to divide your salary correctly

As a reminder: In the last article, Florian Märzendorfer, financial planner and CEO of FiP.S explained to us why insurance is an important component in financial planning. In total, you are dealing with five building blocks that you juggle like balls:

A guest article by Florian Märzendorfer

The five juggling balls to split your salary

  • Fixed costs for living, eating & Co.
  • medium term goals (House, big trips and other things you want to afford in the next ten years)
  • Fun budget for anything you want to do in your free time
  • retirement provision: the money that gives you financial security in old age
  • personal protection - all your insurance

Invest money: secure your salary for later!

Florian Märzendorfer, CEO of fip-s.at

A long-term investment is that most important savingsthat you can do - that goes for everyone, no matter how much you make. Not your temporary liquidity pot, whether you are saving for your own home in ten years, or your daily savings account interest are decisive. Your long-term investment - yours - has the greatest impact on your financial fitness retirement provision. It's like your physical fitness. What will have the greatest influence will be what you long term do. If you go running every day for three months and then no more, it doesn't have much of an impact.

Let's stay with the juggling example from above: The pension ball is very often in the corner and didn't even manage to play along. But the earlier it is in the game, the easier it is and the easier you can juggle it. The longer it lies in the corner, dusty, the more difficult it is to bring it into play properly. It gets heavier from year to year until you can no longer juggle it.

Why does time play such a crucial role when it comes to old-age provision? This is due to compound interest. Simply defined, the compound interest effect means that the interest you earn is added to the existing capital and interest paid again. The slightly confusing sentence becomes clearer with an example: Let's say you invest € 1000. Every year you get 4 percent interest. In the first scenario, however, only ever to the 1000 €. In the second scenario always also on the 4 percent interest in the next year (i.e. in the second year then on 104 € and no longer 100 €).

As you can see, the second line increases exponentially. The longer you have time, the more massive the effect. What does that mean practically for you now? You should start as early as possible, a (small) part of your money to save in the long term. Forget the latest "get rich quick" scam. I have a quote from Warren Buffett for you:

"Someone’s sitting in the shade today because someone planted a tree a long time ago."

By this, Buffett means that successful investment takes time. With your personal retirement provision you have this time. You just have to use it.

Investing correctly: where will my salary really be more?

In Phases of low interest rates is there anything on the account zero point. How should one use the compound interest effect? If you are investing for the long term, this is it Account, savings book or a building society loan agreement are the wrong tools. That would be like if you plan to go on vacation to the USA, but you don't want to take the trip by plane, but want to swim across the Atlantic Ocean. Either you fail or you need a very, very long time and a lot of energy.

If you use the wrong retirement planning tool, you will feel the same. What exactly that correct instrument depends on your age and how long you still have time. No matter what tool you use, you should invest your money! If you're scared of investing, take a look at this chart Share investment at:


Almost the last 50 years are shown, always with an assessment period of 30 years. The very first bar shows the assessment from the beginning of 1971 to the end of 2000. The last bar shows the assessment from the beginning of 1988 to the end of 2017. In this case, there has not been a single 30-year investment horizon in the last 50 years with a period of less than 6 percent Return per year was achieved. Even if one had dropped out in the great crisis years of 2008 or 2009.

Of course, that doesn't mean that you have to invest 100 percent of your long-term investment in stocks. Nor does it mean that the next 50 years will be exactly the same. But what it does show is that your The risk of predisposition decreases when you have a very long time.

Financial planning made easy: this is how you split your salary correctly

So you're juggling all of the balls we mentioned above. Your fixed costs, your medium-term goals, your fun budget, your retirement provisions and your personal security. How should you now split your salary among the individual balls?

If we assume a net salary of around € 2,000, then that means ...

  • yours Fixed costs: approx. € 1,000 to € 1200, so 50 to 60 percent
  • your medium term Aims: 200 to 300 €, so 10 to 15 percent
  • your Fun budget: 200 to 300 €, so also 10 to 15 percent
  • yours Retirement provision: 160 € to 240 €, so 8 to 12 percent
  • your personal Validation: 60 to 100 €, so 3 to 5 percent

The division is of course only one Rough indicator. It is especially true if you have just finished your studies and freshly started at the job or have just finished your first years of employment. Is it bad if you save only € 120 instead of € 160 on your old-age provision? No. Should you cut your budget for fun if a mid-term goal is hugely important to you? Yes. Again, these are rough indicators. If your fixed costs are currently higher or lower, the values ​​will of course also shift. But if you moving roughly in this area, then nothing can go wrong in the long term.

In the case of salary increases, you should NOT increase your fixed costs or just your fun budget, but depending on the situation, you should also give part of them to your retirement provision and medium-term goals. Depending on the life situation (children, property acquisition, ...), the Shift values, of course. However, what should never change is that Focus on all the juggling balls of your financial life. If you don't care about one or the other fragile ball, then it will soon be completely out of the game. Because one thing should be clear: Your fun budget ball, for example, is made of rubber. If it falls down, then it is not broken, but jumps up again. This is exactly what happens with the balls Personal security and retirement provision just not, they can break.

If you want to find out more, you can download the ultimate financial planning guide for university and college graduates from FiP.S. There you can find out more about what you are about Insurance, provision, investment & Co real gotta know. And how to avoid the typical mistakes.

More tips from the financial professional

How to negotiate the optimal starting salary for yourself and why you should never reveal your current salary during an interview can be found in the first two articles in our series “Financial Tips from Professionals”.

Photo credits: shutterstock / IMDz; FiP.S