By Frido · Updated: 10 September 2026 · 6 min read

Reduce Fixed Costs: The Lever That Works Every Month

Most saving attempts start with the coffee and end three weeks later. Not because the maths is wrong, but because it has to be decided again every day. Fixed costs work the other way round: you decide once, and the decision holds by itself.

What counts as fixed costs

Fixed costs are not the “important” expenses and variable costs are not the “unimportant” ones. The only criterion is regularity:

Two of these regularly surprise people who moved to Germany: the Rundfunkbeitrag, the broadcasting fee charged per household whether or not you watch German TV, and Nebenkosten, the service charges on top of the base rent, which are settled once a year and can bring a back-payment. Both belong in the fixed-cost block from day one.

The block that is forgotten most reliably is the last one in the digital row: subscriptions. They do not feel like fixed costs but behave exactly like them — which is why they have their own article.

The fixed-cost ratio

The ratio is a single division:

Fixed-cost ratio = fixed costs ÷ net income × 100

With €1,200 of fixed costs and €3,000 net that is 40%. What the number tells you: four out of ten euros are committed before the month begins. The higher the ratio, the less your budget can absorb surprises — and the more your savings rate depends on nothing going wrong.

There is no universal target; it depends on rent, region and life situation. As rough orientation, the 50/30/20 rule allocates about half of net income to necessities. More important than comparing yourself with a rule of thumb is the direction: do you know your ratio at all, and is it moving?

Why fixed costs are the better lever

Put the two approaches side by side:

• Saving day to day: €3 less per day — requires around 250 conscious decisions a year.
• Fixed costs: one contract less at €25 a month — requires one decision and saves €300 a year.

Both are legitimate, and day-to-day saving has one advantage: it works immediately. But it consumes attention, and attention is the scarcest resource in any household. Fixed costs consume it once.

The order: big before small

Sort your fixed costs by amount and work from the top down. It sounds trivial, but it is the opposite of what most people do — the reflex goes to the smallest item because it is the easiest to cancel.

1. Housing is almost always the largest block. It is the hardest to change, but any change here beats everything else by a wide margin.
2. Mobility and financing come next. It is worth looking at remaining terms, and at whether an instalment still belongs to a need that exists.
3. Contracts with a term — mobile, internet, insurance — you should know before they renew. A calendar entry before the cancellation deadline is the whole job.
4. Subscriptions last, because each one is small. Together they often are not.

What you should not cut

Two items explicitly do not belong on the list:

• Essential insurance. A policy that covers damage you could never carry yourself is not a fixed cost to optimise. Which ones you need depends on your situation — that is a question for independent advice, not for an article.
• Your savings rate. It shows up in the fixed-cost calculation but is not an expense; it is a transfer to yourself. Cutting it does not reduce costs, it moves them into the future.

From fixed-cost block to free budget

Once you know your fixed costs, you have the ingredient for the genuinely interesting number: how much is really free this month. The calculation behind it is income minus fixed costs, reserve and savings — and what is left you may spend without a guilty conscience.

More on the method behind it in Flex budgeting.

Frequently asked questions

What counts as fixed costs?

Everything that goes out regularly and in largely the same amount: rent and service charges, electricity, insurance, mobile and internet, mobility such as a ticket or lease rate, loan instalments — and subscriptions. What decides is not the type of expense but its regularity.

How do I calculate my fixed-cost ratio?

Fixed costs divided by net income, times 100. With €1,200 of fixed costs and €3,000 net that is 40%. The ratio tells you how much of your income is already committed before the month even begins.

Why does cutting fixed costs beat saving day to day?

Because one decision works twelve times a year without being repeated. Day-to-day saving needs fresh discipline every week; a cancelled contract never needs it again.

Which fixed costs should I not cut?

Essential insurance and your savings rate. Cutting the savings rate does not reduce costs, it moves them into the future — and the emergency fund is the precondition for investing calmly.

Read on

• Find forgotten subscriptions
• Flex budgeting: the important things first, the rest is free
• Pay off consumer debt
• Calculate and raise your savings rate
• Personal finances at a glance

Sources

• Elizabeth Warren, Amelia Warren Tyagi: All Your Worth (origin of the 50/30/20 rule, used here as orientation for the share of necessities).