Before talking about investing, stocks or real estate, there’s a more basic question almost nobody answers with real numbers in front of them: how much money do you actually have, and where does it go each month? This first level has no complicated formulas or charts: it’s the foundation everything else is built on. Skip it, and any yield calculator you use later is built on sand.
Income is any money that lands in your pocket: your salary, sure, but also freelance work, rent you collect, dividends from stocks, or any other source. The first step in this level is adding all of them up, using the net figure, not the gross one.
Marta earns €1,850 gross a month on her payslip, but after tax and social security only €1,520 net actually lands in her bank account. She also bills an average of €300 a month doing freelance design on weekends. Her real income for this exercise isn’t "€1,850", it’s €1,820 (1,520 + 300), the figure she actually has to work with.
The number that matters is the one that actually lands in your account, not the one printed on your contract. If your income is variable (freelance, commissions...), add up the last 3 months and take the average: it gives you a more realistic picture than your best or worst month.
This is where almost everyone gets lost. Most people know their income down to the cent, but have no real idea how much they actually spend each month, just a rough feeling. Split your expenses into two types: fixed (rent or mortgage, insurance, subscriptions, fees) and variable (food, entertainment, transport, shopping). The goal isn’t to make you feel guilty about spending, it’s to get the real number in front of you.
The fastest way to get it: look at your bank and card transactions from the last 2-3 months and categorize them. Most banking apps already do this automatically by category: use that, you don’t need a spreadsheet on day one.
Diego thought he spent around €1,200/month. Going through his last 2 months of transactions, he found:
€350 a month (over €4,000 a year) that didn’t show up anywhere until he went looking for it.
Your salary is not your wealth. Someone earning €5,000/month who spends €5,200 and carries debt is, financially speaking, worse off than someone earning €2,000/month who saves part of it every month. The metric that really reflects your situation is your net worth:
Net worth = Assets − Liabilities
Assets are everything you own that has value: savings, investments, the value of a home if you have one. Liabilities are everything you owe: outstanding mortgage, loans, credit card debt. Calculate yours right now, even roughly: it’s your starting point, and a year from now you’ll want to compare today’s number against it.
Ana has €8,000 in savings and a car worth €6,000 (assets: €14,000). She owes €3,000 on a credit card and has €4,000 left on a personal loan (liabilities: €7,000). Her net worth is 14,000 − 7,000 = €7,000. If she runs the numbers again next year and gets €9,500, she knows for certain she’s moving in the right direction, whatever her salary happened to do that year.
Most people manage their money in this order: get paid, spend, and save whatever’s left over (usually, nothing). Flip it around: as soon as you get paid, set your savings aside first, and live off the rest. You don’t need a heroic percentage from month one: starting at 10% and raising it gradually works better than aiming for an impossible 30% and giving up within a week.
If Diego invests the €350/month he found instead of spending it, at an average 7% annual return he’d have close to €60,000 in 10 years (try it yourself in the compound interest calculator). The money that "doesn’t feel like much" day to day is exactly the money that adds up the most over time.
That monthly savings figure is exactly the input the compound interest calculator and the Rat Race calculator ask for. Once you have your real number, plug it in there and see how much it can grow over time.
Before investing a single euro, you need a cushion for the unexpected: a car repair, a medical bill, a few months without a job. The usual reference is 3 to 6 months of essential expenses, kept somewhere accessible at any time and without risk of losing value (an interest-bearing account, not the stock market). Without this cushion, any surprise forces you to sell investments at a bad moment or go into debt to cover it.
If your essential expenses (housing, utilities, food, insurance, transport) add up to €1,100/month, your emergency fund target is between €3,300 (3 months) and €6,600 (6 months). You don’t need to save it all at once: setting aside €150-200/month for a year already gets you inside that range.
