Are there fundamental, globally valid laws and rules for dealing with money? From my point of view there are. And they are pretty simple, also it ain’t simple to stick to them.

Honestly, I’m one of the best examples of how to fuck up your finances. Looking back – for example on this blog – I haven’t been able to stay on track. My overall wealth hasn’t really increased over the past years.

And again and again and again it comes to: Focus!

So please don’t take this blogpost as a “How To…” from someone who is experienced, financially well-situated or even in the position to give any advice. I’m a bad joke when it comes to focus, discipline and whatever else in life.

Maybe I was blessed with a good job. Probably I’m blessed with a sweet family. Surely I’m blessed with health. But I lack to get myself going forward in life. Therefore please understand this post here as a warning to myself. Something I have to take care about. Maybe a red-alerted reminder for myself to be aware of. And maybe something you’d get an idea of how things are running for me at the moment.

#1 Spend less than you earn

One of the most fundamental rules in personal finance is simple: spend less than you earn.

While it may sound obvious, mastering this principle is essential for building wealth and generating passive income. Whether you’re 25 or 45 or 65, this rule applies across all ages and income levels.

Why Is It So Important?

Spending less than you earn allows you to accumulate savings, which you can later invest.

Investment is the key to growing your wealth and creating streams of passive income, whether through real estate, stocks, or other financial instruments. Without savings, there is nothing to invest.

Here’s the thing: No matter how much you make, if you spend everything—or worse, more than you earn—you’ll be living paycheck to paycheck.

That’s a recipe for financial stress, not wealth. You can’t build financial security, let alone wealth, if you don’t manage your cash flow.

Think of your income as the foundation of a house. If you’re consistently taking chunks out of that foundation by overspending, it will crumble. However, if you spend less and build up your savings, you’ll have the capital to invest and grow your wealth.

The Illusion of Lifestyle Inflation

As people earn more, they often start spending more—this is called lifestyle inflation.

It’s tempting to buy a nicer car, live in a bigger house, or dine out more frequently as your income increases. But if you always match or exceed your expenses to your rising income, you’ll never break the cycle of needing to work just to sustain your lifestyle.

While there’s nothing wrong with rewarding yourself when you hit certain financial milestones, it’s critical to resist the urge to inflate your lifestyle too quickly. Every extra dollar you spend on lifestyle is a dollar that’s not being invested in your future.

Building Wealth vs. Looking Rich

It’s essential to understand that looking rich and being wealthy are two entirely different things. Many people who appear wealthy—those driving expensive cars and wearing designer clothes—may not actually have significant savings or investments. They may be burdened with debt, spending everything they make to maintain their image.

On the other hand, truly wealthy individuals often live modestly relative to their income. They understand that the money they save and invest is working for them to build a secure financial future. By spending less than they earn, they are able to generate passive income streams that provide them with financial freedom.

How to Spend Less Than You Earn

Pretty easy: Note your net income on a piece of paper, reduce 10% from it and that is, what you earn each month.

Avoid debts or pay-later-offers at any costs. You’re not able to take those offers. Every Euro you pay, which you haven’t earned before, will turn out to be a boomerang. It will come back with the special power to destroy your dreams.

Maybe this rule won’t work from the very moment on. Somestimes we have to make something like a financial audit to get an idea of where we are financially at the moment. And then work starts as we have to get to a point, where we would say “I spend less than I earn”.

Personally I know this point, but I am pretty bad at reviewing my finances or even work or a monthly statement. This is something I have to work out for myself.

For you I can only share the experience from myself: The moment you decide to work on it is there moment where things will turn around, if you take yourself seriously. No matter how big your financial problems might be – if you focus on them and work on an improvement, the curve will rise.

#2 Track Your Expenses

On the journey to financial independence and wealth creation, tracking your expenses is one of the most important habits you can develop. It doesn’t matter how much you earn—if you don’t know where your money is going, it’s almost impossible to manage it effectively. Tracking your expenses gives you clarity and control, two critical factors for building wealth.

At its core, tracking your expenses is about awareness. You can’t control what you don’t measure.

Many people think they have a good idea of where their money goes, but when they start writing it down, they’re often shocked at how much is spent on small, seemingly insignificant items like coffee, subscriptions, or eating out. These little expenses, when added up, can have a big impact on your financial health.

By tracking your expenses, you get a clear picture of your spending habits. You become aware of patterns—both good and bad—and can make more informed decisions. If you’re serious about building wealth or generating passive income, this habit is non-negotiable.

How to Track Your Expenses

Now that you understand the importance of tracking your expenses, let’s talk about how to do it. Luckily, there are many ways to track your spending, and it doesn’t have to be a time-consuming process.

1. Use an App:
   Many personal finance apps make tracking expenses incredibly easy. Apps like Mint, YNAB (You Need a Budget), and PocketGuard allow you to link your bank accounts and credit cards, automatically categorizing your transactions. They provide real-time insights into where your money is going and help you stick to a budget.
2. Spreadsheet Method:
   For those who prefer a more hands-on approach, using a spreadsheet can be a powerful tool. You can create your own template or use pre-made budgeting templates available online (look on Etsy for example – there are a lot of good sheets). Each day or week, manually enter your expenses. While it takes a bit more effort, this method gives you complete control over how you organize and analyze your spending.
3. Keep a Spending Journal:
   If you prefer something simple, keeping a small journal where you write down every expense is a low-tech but effective method. At the end of the week or month, you can review your entries to spot trends and see where you can adjust.
4. Review Your Bank Statements:
   If you don’t want to manually track every single purchase, reviewing your bank and credit card statements monthly can give you a good sense of your spending. Highlight recurring charges, note impulse purchases, and look for unnecessary expenditures.

Keep Yourself Accountable – Every Month

Additionally from my point of view it is very important to do something like a monthly statement. On the one side there are your financial goals and on the other your current progress.

Especially when you break down your financial goals into annual pieces and from there into monthly goals, you can see the progress. If your goal is to create a wealth of one million Euros, there are only very tiny progress steps each month. But breaking one million down to 20 years, the anual savings rate is “only” about 42.000 Euro.

So your monthly results will have an impact, which will probably motivate you to stay on track.

#3 Save For Emergencies

On the path to financial independence, one rule that cannot be overlooked is the necessity of building an emergency fund. Life is unpredictable, and without a financial safety net, unexpected expenses can easily derail your progress.

Whether it’s a job loss, medical emergency, car breakdown, or even a divorce, having savings set aside specifically for these unforeseen events is crucial. This is often referred to as your “rainy day fund,” and it’s one of the cornerstones of financial security.

Why You Need an Emergency Fund

The reason for saving for emergencies is simple: life happens.

No matter how carefully you plan, unexpected expenses are inevitable. Imagine your car breaking down right when you’re getting ahead with your budget, or perhaps an unexpected job loss leaves you without income for months.

In these situations, people without emergency funds often resort to high-interest credit card debt or loans, which can lead to a financial downward spiral. By having a dedicated emergency fund, you avoid accumulating debt and can handle these surprises without disrupting your long-term financial goals.

How Much Should You Save Into My Rainy-Day-Fund?

A common rule of thumb is to save three to six months’ worth of living expenses. This means if your monthly expenses (rent, utilities, groceries, etc.) are for exmaple EUR 3,000, you should aim to save between EUR 9,000 and EUR 18,000.

The exact amount will depend on your personal circumstances—if you’re single and have fewer responsibilities, three months might be enough. But if you have a family, mortgage, or are self-employed, six months or more is recommended to give you additional protection.

What Does an Emergency Fund Cover?

Everything you want to cover with it. To be honest it is again pretty simple.  Calculation your expenses to above mentione 3k per month, you should exactly know, for what these 3k were mentioned. Maybe it is like: 1.5k for the rent, 250 EUR for the car, 750 EUR for food and 500 EUR for usual spendings each month.

Be honest with yourself here: I’m talking about emergencies. So this is not mentioned to save up for holidays or whatever. The money has to be there, when life is getting tough – hoping it will never be like that.

Your Emergency fund is mentioned to hold headaches and sleepless nights away, when your life breaks down. You need to focus on getting your life back on track again during that time and not on how to pay your next rent or even your next meal. Once the Emergency fund is covered, you can save money for other, more  fun-things.

Where to Keep Your Emergency Fund

Your emergency fund should be liquid and easily accessible. This means it should be in a savings account, money market account, or other accounts where you can withdraw funds quickly if needed. No stocks, no nothing.

Depending on the financial situation and market, there are chances to lock some small yields in. Currently my Emergency Fund is on a call money account at 3,50% each month. In fact I think it is okay to still keep your money for you, but always watch out, that you maybe need the money tomorrow. Therefore you should only put this fund into things which you can liquid within one day.

Building Your Emergency Fund

If you don’t have an emergency fund yet, don’t be discouraged. Start small and build your way up. Even putting aside EUR 500 to EUR 1,000 will give you some breathing room in case of smaller emergencies.

After that, work towards saving one month’s worth of expenses, and then gradually increase it until you reach your target of three to six months’ worth of expenses. It might take time, but consistency is key.

One pretty successful strategy is to automate your savings. Set up a direct deposit or automatic transfer from your checking account to a dedicated savings account each month. This way, you don’t have to think about it, and your fund will grow over time.

#4 Invest Into Passive-Income Assets

Just like in the last paragraph about the Emergency Fund I really like the idea to quiten my mind even more. I don’t want to have an Emergency Fund to cover the moment life kicks in. I’m more interested in silencing my mind about the rest.

But here you need strong assets, to cover those. Let’s get back to the example I mentioned above of eUR 3.000 monthly expenses. This might be the first goal, also the amount is very individual. Think about receiving EUR 3.000 each month from your investments?

So your longterm assets are there for make life easier. Of course you can’t start from 0-100 within one year, but working on it steadily and consistent will make life easier.

For me personally there is always the inner picture of myself sitting in a meeting where I maybe don’t want to be – for whatever reasons. And when the discussions starts to go against my inner understanding, I will have the freedom to stand up and say: “Thanks guys, wishing you luck for that one here, but I’m out” and still open the door and leave forever.

Can you imagine this freedom?

How To Start Off?

The moment you’re done with your Emergency Fund is the moment, where you can save your money into to your financial soldiers. Maybe you read the book “The Richest Man of Babylon”. Here the author writes about “financial soldiers”, which are implemented with every coin you save and invest.

Forget about “Get Rich Quick”. This is a lasting journey, but a very joyful. Seven to eight years back I was pretty much in debt. I had to work out from there and to be honest: Investing into assets which pay me by their yield turns out to be so much motivating for me, I can’t describe the right way.

Over the months and years this feeling slid away and that is why I lost it, but I can remember it and know what I’m aiming for.

Summing the points up until here it’s all about your savings rate. Starting with the 10% I mentioned in the first part of this blogpost, it’s necessary to not stay there. Getting on the wave of financial freedom also means you have to do more that the average persons. Saving rates of 40% to 60% should be normal you.

Of course you should reward yourself from time to time. Imagine your boss and you sitting down to talk about a payrise. It works out and ou agree on whatever amount. These 100% payrise should be divided into:

• at least 50% into your longterm assets
• up to max. 50% into your monthly expenses or fun-account.

Let’s check an example

The same way your should handle one-time payments like a bonus, special reward or even a tax refund. Don’t spend all the money. Divide it between “longtermin” and “reward” and you will be better off. Over the time your savings rate will increase itself.

• 1st year: You receive EUR 3.000 each month and save a 10% from it (EUR 300).
• 2nd year: You receive a 2,5% payrise, which means you earn EUR 3.075 each month. The payrise of EUR 75 you split into 50% savings and 50% fun. From now on you EUR 337,50 each month and have EUR 37,50 for fun things every month. You savings rate increases to 337,50 from 3075 equals 10,9%
• 3rd year: You receive another 2,5% payrise. Your monthly income is not EUR 3.152. Again you split the payrise of EUR 77 into two parts. Your savings amount increases to EUR 376, which is a savings rate of 11,9%
• and so on….

#5 Escape The Debt Spiral

If there’s one thing that can hold you back from building wealth and achieving financial freedom, it’s debt. I’ve been there myself, and I know how overwhelming it can feel to see balances piling up, especially when high-interest rates are at play. But trust me, if you want to gain control of your financial future, escaping the debt spiral is absolutely necessary.

For me, the first step was recognizing that not all debt is created equal. Credit card debt, for example, tends to have ridiculously high interest rates, sometimes 15%, 20%, or even higher.

This means every month that balance sits unpaid, I’m handing over even more of my hard-earned money in interest. It’s like filling a bucket with a hole in the bottom—no matter how much I pour in, it never gets full.

Start From High To Low

Experts recommend to focus on the highest interest rate first. I made the experience myself and absolutely agree with that. Of course it all comes down to the surrounding circumstances, which you have to take into consideration, but don’t try to use excuses.

Start with the highest-interest debt first. For most people, this is credit card debt. By focusing on paying down the debt that’s costing me the most, I was able to stop the financial bleeding. It wasn’t easy, and it took time, but once I made the decision to target the most expensive debts first, the progress started to show.

It’s called the debt avalanche method—pay off debts starting with the highest interest rate while making minimum payments on everything else.

Once that first debt was gone, I took the same approach with the next highest interest rate, and then the next. Bit by bit, I chipped away at the mountain. It wasn’t instant, but over time I saw my balances shrinking and the amount I was losing in interest drop with every payment.

Never ever give yourself up

I know what you might be thinking: “But I’ve got so many different debts, where do I even begin?” Honestly, it can feel overwhelming at first, but breaking it down, debt by debt, makes it manageable.

It might seem like a slow process at first, but paying off high-interest debts first speeds up your overall progress. Less interest means more of your money goes toward reducing the principal, and before long, you start to see real progress.

One thing I learned on this journey is to not let setbacks discourage me. There were times when unexpected expenses came up or I had to divert funds to something urgent, but I stayed focused on the long game. My goal was to get debt-free, and I knew that as long as I kept moving forward, I’d surely get there.

As I worked through my debts, I felt a huge weight start to lift. With every debt payment I paid off, every loan I cleared, I was freeing myself from the chains that had been holding me back. No more minimum payments eating into my income.

Escaping the debt spiral isn’t just about numbers on a balance sheet—it’s about regaining control of your financial life. It’s a journey which is joyful in the end. But please, for those who are not in debt: Stay like it! The journey to save up for your freedom from the first moment on is even more joyful.

Basic Stuff, But Really Needed

I don’t want to create a longlasting ending here. Those 5 rules are easy to implement, but not easy to consistently follow. As I am a lover of planning, I set myself three dates into my schedule:

1. Don’t think about the current setup – just execute over the month
2. Make a monthly statement
3. Review the goals on a quarterly base (planning 🙂 )

That’s it.

I’ll keep you update here, how things are running for me. But I’d love to know about you – Do you agree? What are your rules? And of course, what are your hacks to follow those rules?