Financial planning

Have you ever heard of financial planning, or budgeting? It's simply about managing your money well—your income and your expenses. Basically, it's like creating a plan to spend wisely and save, so you can avoid problems and live more peacefully. Does it sound complicated? It's actually easier than you think, and good planning can truly make a difference in everyday life.

What is financial planning for?

Financial planning helps you take control of your finances. When you know exactly how much money will come in each month – like your salary – and how much you will need or want to spend on rent, bills, groceries, school, transport, or entertainment, you can better organize your life, control spending, and set savings goals.

With a well-prepared plan, you can build a financial cushion to calmly face unexpected expenses – such as car repairs – or treat yourself to a purchase you've been wanting for a while or even take a small trip. Planning can also help you aim for more ambitious goals, such as helping a child with education costs, buying a home, or retiring with an additional income. These things may seem far off or too costly, but they become possible if you start saving little by little and consistently.

When you're young in particular, retirement may seem so far away that it doesn't deserve attention. But starting to save early to supplement your future pension is a wise choice. For example, you might consider joining a pension fund. The earlier you start saving and investing, the more your investments can grow thanks to the compounding of returns over time.

Financial planning in five steps

1. Start by recording all your past income and expenses over a given period – like the last month or, even better, the past year. Group expenses into categories, such as by purpose (e.g., housing, leisure, transport). If you'd like some help, you can use our budget calculator.
2. Set your priorities. Analyze your past income and expenses, which may include spending on goods or services you now consider unnecessary. Separate your real needs from your wants – things you could do without. This will help you become more aware of your priorities, reduce waste, and save more.
3. Set one or more savings goals that are concrete and achievable.
   For example, you might aim to save €1,200 in a year to treat yourself to a short vacation or update your home furniture.
4. Draft your budget for a meaningful period of time, at least a few months – ideally a year – and make a forecast of all your income and expenses. Keep in mind there are:
   • monthly expenses, which occur every month – like food, transportation, fuel, mortgage instalment or rent payments;
   • low-frequency expenses, which occur once or a few times a year – like buying a new TV, a vacation, car insurance, or an annual subscription. It can be helpful to spread these out over monthly estimates, especially if your budget planning period is less than a year.

   Keep your savings goal in mind and make sure to regularly set aside money to achieve it. Also leave some room for unexpected expenses.

   For example, if your goal is to save €1,200 in a year, you can start by cutting unnecessary costs: skipping one coffee a day could save you about €400 a year.
5. Review and, if necessary, regularly update your budget items. Remember, people often underestimate expenses and overestimate income. Periodically assess whether your goals are still realistic or if your priorities have changed. It's common to plan for a specific purchase, only to later shift focus to another, more urgent need. You may need to reallocate resources in your budget and adjust your priorities.