Every family faces the challenge of managing monthly expenses. How difficult this can be depends on household income, the cost of living and the economic conditions in each country or region.
According to OECD data from 2016, average household disposable income varies considerably across countries. Average disposable income (ADI) takes into account income from employment and capital, as well as government transfers, taxes and social security contributions. Figures adjusted using purchasing power parity (PPP) also account for differences in the cost of living between countries.
In other words, disposable income represents the money households have available to spend on goods and services or put aside as savings.
According to the OECD figures cited here, average disposable income per household across OECD countries was €19,355, converted from US dollars at an exchange rate of USD 1 = EUR 0.84 for ease of comparison. Portugal's figure was €12,828, well below the average, while Spain (€18,143) and Italy (€19,113) were closer to it.
Above the OECD average were France (€21,546), Germany (€22,400) and Belgium (€24,371). Switzerland (€30,542) and Luxembourg (€34,620) were among the European countries with the highest figures.
1. Save First, Then Spend
We recommend setting aside at least 10% of your disposable income for savings. If you find this difficult or cannot see how to achieve it, you may need to reconsider your approach to managing money.
As Warren Buffett is often quoted as saying: “Do not save what is left after spending, but spend what is left after saving.”
The principle is simple: set aside your savings at the beginning of the month, then plan your spending around the money that remains.
2. Take the 10-Month Savings Challenge
Talk to your family and put this principle into practice. If you save 10% of your disposable income every month for ten months, you will accumulate the equivalent of one month's disposable income.
Give it a try. Over time, you may discover that this simple habit makes a meaningful difference to your financial resilience.
According to the historical data available for 2018, household saving rates had fallen in several countries since 2000. In Spain, the average household saving rate decreased from 6.6% in 2000 to 1.7% in 2018. In Belgium, it fell from 11.45% to 4.8% over the same period.
Portugal faced a particularly challenging situation, with lower disposable income and some households, especially those on lower incomes, unable to save or experiencing negative saving rates.
France, by contrast, maintained a relatively stable saving rate, moving from 8.7% in 2000 to 8.4% in 2018. In Germany, the rate increased from 9.3% to 11%, while Luxembourg saw a rise from 9.3% to 16%.
Explore the OECD's Society at a Glance 2019 report to learn more about household saving patterns. What is your family's saving rate?
3. Create a Household Budget and Spending Plan
There is little point in saving a portion of your income if you then lose track of how you spend the remaining 90%. Effective household budgeting starts with a clear understanding of where your money goes.
The OECD report Under Pressure: The Squeezed Middle Class (2019) found that housing accounted for 31% of middle-class household spending. For this analysis, the middle class includes households earning between 75% and 200% of the national average income. The share of spending allocated to housing tends to decrease as income increases.
Food and non-alcoholic drinks accounted for approximately 24% of expenditure, transport for 12%, leisure for 12% and health for 4%. The remaining 17% covered other categories, including education.
Every household has different needs and financial constraints. In cities such as Lisbon and Madrid, for example, rent can account for more than 50% of household disposable income, making it considerably harder to balance a budget.
Understanding your spending patterns is the first step towards identifying where adjustments may be possible.
4. Rethink Your Housing Costs
Managing a household budget sometimes requires difficult decisions that can lead to significant lifestyle changes. If you can no longer afford rent in the city where you live, moving to a more affordable area may be one option. Planning ahead can help you explore alternatives before financial pressure becomes overwhelming.
Housing is one of the largest expenses for many families. Ask yourself whether you need to live in the city centre. Could remote work give you greater flexibility over where you live? In some countries and regions, moving away from major urban centres can significantly reduce living costs and potentially improve quality of life.
Do not let monthly expenses compromise your financial wellbeing. Plan your housing costs carefully and adjust your lifestyle when necessary.
If you live in Belgium, Brazil, Italy, Portugal or Spain, you can also consult consumer organisations for independent guidance on purchasing everyday products at better prices. Their product tests and comparative reports can help households make more informed purchasing decisions and identify potential savings. According to the original estimates cited here, such savings can reach up to €1,000 a year on household purchases.
5. Avoid Unnecessary Loans and High-Interest Debt
Avoid borrowing to finance shopping and other non-essential purchases, particularly when interest rates are high. If you need to buy a computer for your children's studies or replace your car, plan the purchase in advance and consider how you will pay for it.
Failing to plan can significantly increase the total cost of a purchase. Depending on the interest rate, fees and repayment period, consumer credit can add substantially to the original price.
For most families, a mortgage is a common way to finance a home purchase. Although conditions vary between countries, two considerations are particularly important.
First, assess your personal and professional circumstances. Is your job stable? Are you likely to remain in the same city for the foreseeable future? This is particularly relevant for people whose careers involve frequent relocation. Compare the costs and implications of buying a home with those of renting.
Second, account for all the costs of buying a property. Mortgage-related fees, taxes and other transaction costs can add significantly to the purchase price. Make sure you have sufficient funds for these expenses and the required down payment.
When considering your first home, assess its suitability for your needs and your long-term financial plans. Look carefully at the location, the area's development prospects, local demand and the developer's track record. Remember that property values can fall as well as rise, and a home should not be viewed as a guaranteed investment.
6. Understand Why Higher Income Does Not Always Mean More Savings
In principle, the more disposable income you have, the greater your capacity to save. However, higher earnings do not automatically translate into stronger savings habits.
As salaries increase, people may gradually increase their spending. They might move to a more expensive home, purchase luxury goods, take more holidays or eat out more frequently. While these choices may improve their lifestyle, they can also create a false sense of financial security.
The risk becomes apparent when income falls. Households may try to maintain the same standard of living despite having less money available, potentially leading to debt and financial difficulties.
One way to reduce this risk is to develop a financial contingency plan while your financial situation is comfortable. Set realistic spending limits, maintain an emergency fund and avoid allowing every pay rise to become a permanent increase in expenditure.
A useful principle in personal finance is to keep lifestyle costs manageable, even when your income increases. Doing so can help protect your financial stability when circumstances change.
7. Prepare for Unexpected Expenses
Test how resilient your household budget would be if your financial circumstances changed. How long could you cover your essential expenses if your income suddenly decreased? Could you afford an unexpected bill, a car breakdown or an urgent home repair?
The COVID-19 pandemic demonstrated how quickly circumstances can change and how important it is to have financial reserves.
Major life changes can also affect household finances. Separation or divorce, for example, may result in two households having to cover costs that were previously shared. Without adequate preparation, these changes can increase the risk of financial hardship and over-indebtedness.
Building an emergency fund and reviewing your financial commitments regularly can help you prepare for unexpected events and protect your household's financial wellbeing.
8. Seek Financial Guidance When You Need It
Do not hesitate to ask for help when managing your finances becomes difficult. Talking to a trusted relative or friend who is good at budgeting may offer a useful perspective.
You can also seek guidance from a qualified financial professional. An independent perspective may help you identify spending patterns, reassess your financial priorities and consider aspects of your household budget that you have not previously discussed.
Sometimes, improving your financial situation involves more than reducing monthly expenses. It may also require reviewing how you organise your savings, manage your available resources and plan for future needs.
9. Plan Ahead for Major Life Events
Do not wait until the last minute to prepare for expenses associated with predictable life events. The birth of a child, a child's departure to study abroad and retirement can all have a significant impact on household finances.
Planning for these changes as early as possible gives you more time to adjust your budget, build savings and consider the financial commitments involved.
According to the historical OECD figure cited in this article, retirement was associated with an average income decline of 53% across OECD countries. An inadequately planned transition can therefore have serious financial consequences. The risk of poverty among older people remains an important concern for societies.
Preparing for retirement requires a long-term perspective, taking into account future income, living expenses, healthcare needs and other potential costs. We will explore this topic further in the Health chapter.
Financial Autonomy Starts with How You Manage Money
Financial wellbeing is not just about how much money you earn, but also about how you manage and spend it.
Whether you are an entrepreneur, an investor or an employee, building consistent saving habits is an important step towards greater financial autonomy.
As a common personal finance principle suggests, financial progress often depends less on earning more and more on making thoughtful decisions with the money you already have.
Sharing practical saving strategies and financial knowledge with colleagues can also help raise awareness of financial wellbeing in the workplace. Employers can play a role by encouraging financial education and helping employees access reliable information and appropriate financial guidance.
Building financial autonomy starts with understanding your finances, planning ahead and making informed decisions — one step at a time.
On World Savings Day, celebrated on 31 October, it is worth remembering that financial wellbeing starts with informed decisions and consistent saving habits. Understanding your household budget, preparing for unexpected expenses and planning for the future are essential steps towards greater financial autonomy.
For those looking to take a more structured approach to their finances, Euroconsumers Invest offers financial advisory services that can help individuals and organisations better understand their financial needs, assess their options and make informed decisions.