Why earning more beats saving more
You can’t save your way below zero. The maths of €100 saved versus €500 earned, and why much of Europe keeps about half of every extra euro.
Saving has a floor#
Every budget guide tells you to cancel subscriptions and cook at home. Fine. Do it once, do it properly, and then stop reading budget guides.
The problem is the floor. If you spend €2,500 a month, the most you can ever save by cutting is €2,500. And realistically it’s much less, because rent, food and insurance don’t vanish. After the first round of optimization, each further euro costs you more comfort.
Income works the other way round. No ceiling. A raise, a better job or a side business can add more in one year than ten years of coupon hunting.
Does that make a lean budget pointless? No. It decides how much of your income becomes capital. But it’s defence. Income is offence, and nobody ever won a game by not conceding.
The maths#
Two moves. In move A you cut €100 a month and invest it. In move B you raise your net income by €500 a month and invest all of it.
Compounding doesn’t care which move you made. It multiplies whatever you feed it. The difference is the size of the input, and the input is limited by your income.
Historical market returns are not a promise. Use a lower rate if you want to be careful. The ratio between A and B stays five to one.
One warning, though. Move B only works if the extra income doesn’t disappear into a bigger car. If your spending rises as fast as your pay, you’ve got a higher salary and the same net worth. Congratulations on the car.
Why the raise feels smaller than it is#
You negotiate €500 more a month. Your payslip shows a lot less. That’s not a bug in your payroll software. That’s the system working as designed, by people who are sure they spend your money better than you do.
Guess first
OECD figure for 2025, employer contributions included. Out of one extra euro, about 27 cents arrive.
The OECD measures this every year with the tax wedge: income tax plus employee and employer social contributions, as a share of total labour costs. It runs the numbers for a single worker on the average wage, country by country. Here’s 2025:
| Country | Tax wedge on the whole salary | Tax wedge on the next euro |
|---|---|---|
| Belgium | 52.5% | 65.0% |
| Germany | 49.3% | 48.9% |
| France | 47.2% | 58.2% |
| Austria | 47.1% | 58.3% |
| Italy | 45.8% | 72.8% |
| Spain | 41.4% | 49.7% |
| Netherlands | 35.9% | 53.0% |
| Poland | 35.0% | 38.2% |
| Ireland | 32.6% | 52.4% |
| Switzerland | 23.0% | 32.4% |
| OECD average | 35.1% | 43.8% |
Both columns are shares of what the worker costs the employer, so the employer’s contributions are in there too.
Belgium takes gold among the 38 member countries, Germany silver. Medals in taking. And before someone tells you that’s still not enough redistribution: a few countries tried taking everything. The result was always a queue.
The first column is an average over the whole salary. For your decision the second one counts: what happens to the next euro? In six of these ten countries the state keeps more than half of it. In Italy it’s 72.8 cents. Even the low-tax reputation of Ireland ends at the average wage.
Look only at the employee side and the German average worker took home 61.3% of gross pay in 2025. The OECD average was 74.9%.
Now the same thing on a payslip. I’ll take Germany, because I know it best and the rates are in the law for everyone to check.
That’s my own rough calculation from the legal rates, not an official figure. Your payslip will differ with tax class, children, health fund and income level. But the order of magnitude holds: about half. The OECD’s 48.9% for Germany says the same thing from the employer’s side.
In Germany it doesn’t get friendlier further up. The marginal tax rate keeps rising with income until it reaches 42% at a taxable income of €69,879 (2026). The one bit of relief: above the contribution ceilings, €69,750 a year for health and care insurance and €101,400 for pension and unemployment insurance (2026), no further contributions are due on additional salary.
Not in Germany? Three things to look up: your marginal income tax rate at your salary, the employee’s social contribution rates, and the ceilings above which no more contributions are due. Or skip the theory and run your current salary and the new one through a net salary calculator for your country. The difference between the two results is your real raise.
So yes, earning more as an employee in a high-tax country is an uphill run with the state sitting on your back, giving directions. It’s still the bigger lever. €250 net a month, invested for 30 years at the assumed 7%, is about €292,000. No subscription audit delivers that.
Your raise is a different number? Put it in.
Four ways to raise income#
1. Negotiate. The cheapest lever. One conversation, prepared with market data and a list of what you delivered. And a raise compounds too: every later percentage increase builds on the higher base.
2. Build skills that are paid for. Not every course pays. Look for skills that are rare in your field and close to revenue. I build with AI every day, and I think the ability to get real work done with AI tools is one of those skills right now. More in What AI can and cannot do for your portfolio.
3. Switch. Internal raises are usually small steps. A move to another employer resets your price to the current market. It costs effort and carries risk, so run the numbers first.
4. Build something of your own. A side business next to your job adds a second income stream and teaches you how money is made, not just earned. The start is less dramatic than it sounds. I wrote the checklist in Your first side business next to a job.
Levers 1 to 3 raise your salary. Every euro runs through the wedge above. Lever 4 is different, which is exactly why I like it.
Why founders think about structure#
A business owner gets to decide things an employee can’t: which costs are business costs, whether profits stay in a company or are paid out, which legal form fits, and at some point where the company and the founder are based.
A German limited company pays 15% corporate tax (rate valid through 2027) plus solidarity surcharge and trade tax on profits that stay in the company. Retained profits can be reinvested before personal income tax applies. That’s a deferral, not a gift. Tax is due when you pay the money out.
Other European countries set these dials differently. That’s why founders compare structures and locations the way engineers compare architectures. It only makes sense with real substance, real profits and proper advice. For a €500 side income? Overkill.
I founded VEONIO, which works from Tallinn, Malta and Dubai, and I live between Malta, Estonia and Dubai. So yes, this topic is close to me. It’s also a topic where half-knowledge gets expensive. If your business is past the hobby stage and you want to look at this properly, that’s what Nerdy.Money is for.
What to do this week#
- Write down your net income and your savings rate. Don’t know them? Start with Know your numbers.
- Pick one lever from the list and set a date.
- Decide now what share of any future raise goes straight into your savings plan. I’d take at least half.
Level 6 of the course, Earn more, turns this into a mission with a checklist.
This article is education, not tax, legal or career advice.
Sources#
- OECD: Taxing Wages 2026, comparative tables in the OECD Data Explorer – average and marginal tax wedge 2025, single person without children at 100% of the average wage, as a share of labour costs; read on 29 September 2026
- OECD: Taxing Wages 2026, country note Germany (PDF)
- § 32a EStG: income tax tariff from 2026
- GKV-Spitzenverband: Rechengrößen und Grenzwerte im Versicherungs- und Beitragsrecht 2026 (PDF)
- Bundesregierung: Beitragsbemessungsgrenzen 2026
- § 23 KStG: corporate tax rate
Education, not advice. I don’t know your situation, and past returns promise nothing. Check my numbers, then make your own call. You’re a grown-up.