Wages in Switzerland are high compared to other countries, but you shouldn’t forget the cost of living. If you don’t budget properly, you might not have much left at the end of the month.
In cooperation with Budgetberatung Schweiz, an umbrella organisation offering budgetary advice, we’ve created a budget calculator so that you can see at a glance what you need to watch out for in your monthly spending. And Andrea Schmid-Fischer, president of Budgetberatung Schweiz, answers the most important questions on budget planning.
How we spend our money is determined, among other things, on our background, personal values and individual priorities, Although average values can provide initial indications, they’re not individual enough and have only limited relevance to everyday financial life in Switzerland.With a tailor-made budget, it’s much easier to reconcile all the items of your budget in Switzerland and the obligations in your home country with your financial possibilities. For irregular expenses such as extra running costs for your home and the deductibles and copayments you pay on your health insurance it’s a good idea to build up reserves and keep these separate from your savings.
Where you live also has a significant influence on the cost of living. For example, rents are highest in Zug, Zurich and Schwyz, while the lowest average rents on apartments are to be found in Glarus, Neuchâtel and Jura. And the the tax rates also differ widely from municipality to municipality (only in German). For example, tax is high in the municipality of Hundwil in the canton of Appenzell Ausserrhoden, where municipal tax corresponds to 470% of the income. In comparison, there are tax advantages in the municipality of Genthod in the canton of Geneva, where the municipal tax rate is 25%.
Net pay is calculated by deducting social security contributions from gross pay. If you want to know more about the social security contributions on your pay slip, The government’s factsheets are a good source of information. You can also ask your employer to explain the wage deductions. The most important items on your pay slip are:
Retirement provisions in Switzerland are based on a three-pillar system.
Please note that in most cases, the 1st and 2nd pillars aren’t sufficient to cover your living expenses in old age to the manner you are accustomed. Those who can should therefore make additional provision for their old age under the 3rd pillar. Even with small, well invested amounts, you can save a considerable amount over many years. You can also deduct 3rd pillar savings from your tax. If you are subject to withholding tax, you can access the tax refund application online on the website of the cantonal tax office. If you’re not subject to withholding tax (i.e. tax deducted directly from your pay), you can make the deduction from your taxable income directly in your tax return.
As a foreign worker you are subject to withholding tax (i.e. your tax is deducted directly from your pay) – unless you have a residence permit C. If you have a B permit and are married to a Swiss citizen or resident, withholding tax is also not applicable. If you split from your Swiss partner, you will be subject to withholding tax again on 31 December of the year in question.
Depending on your country of origin, withholding tax may be nothing new for you: Your employer deducts the taxes directly from your gross pay and transfers them to the local authority. The advantage for you is that you don’t have to plan long-term and put aside money for tax. If you’re no longer subject to withholding tax because your residence status changes, this involves a high degree of personal responsibility, as your tax is no longer deducted directly from your pay. Instead you must complete a tax return at the beginning of the year. You will then receive a tax invoice from the tax office, which you must pay. Find out more from your tax office or use the cantonal tax calculator. In this way you can determine how much tax you will have to pay. It’s a good idea to include your taxes in your monthly budget. In some cantons you can also transfer your taxes directly to the tax office in monthly instalments.
What taxes will I have to pay in Switzerland?
You can expect to pay 15 to 20% of your net income. If you are not subject to withholding tax, it’s a good idea to complete your tax return electronically so that you are automatically notified of most deductions.
Budgetberatung Schweiz recommends the following rule of thumb to calculate a good salary to rent ratio: Housing costs should not exceed 25% of your net income. The lower the family income, the more important it is to spend even less on rent. With a high income and depending on the size of the household, housing costs can also be around 33% of net income. Calculating your budget will help you to balance your housing costs with your other expenses. This allows you to weigh up what really has room in the overall budget. Affordable living space is scarce in Switzerland and – as in other countries – costs are subject to major regional variations. So it’s a good idea to also take the tax burden into account before you decide where to live. You’ll find various comparative tables on rental prices and the tax burden online. Or perhaps you’d consider alternative forms of housing, such as a shared flat?
Car and public transport
Both cars and public transport are expensive. However, a 2nd class annual rail pass with the SBB (Swiss Federal Railways) is cheaper than a small car, which can quickly lead to costs of around CHF 500 a month. It’s therefore advisable to think carefully before buying a car.
For example: could you manage without a car? Would car sharing be an option for you? Or perhaps you could take the healthy option of walking or cycling to work or the shops. And maybe think about this when you’re searching for accommodation. In Switzerland, it’s often possible to live close enough to work so you don’t need a car. If you really can’t manage without a car: wherever possible, avoid leasing. In the long term it leads to high fixed costs. This means, of course, that you need to have savings with which to pay for a car. The first major costs are incurred when buying a car. The full costs of a car include:
And don’t forget about depreciation. Once you’ve bought a car you already have to start thinking about buying the next one.
Families and money
Children are great! Nevertheless, many couples wonder how an additional family member will affect their finances. Mums and dads have their own ideas, values and priorities when it comes to the question of splitting working and childcare. And these attitudes may change over time and as the kids get older.
When starting a family, most couples decide that the one who earns the most should keep working. That makes sense. However, it has long-term consequences for the career development opportunities of the primary caregiver, which also need to be taken into account. As the children grow up, parents have greater freedom, but usually also higher costs.
In the beginning, the focus is on one-off purchases, such as a pram. Then you have recurring costs such as childcare, health insurance, energy, household costs (e.g. nappies, baby care products). Other items may decline or remain modest, such as taxes, particularly due to the child allowance.
Depending on family habits, the cost of drinking and eating out may also fall because you eat more at home, or perhaps because evenings out are replaced by picnics in the park, a walk along the lake or a trip to the local farm. Spending on clothes and shoes for children may also remain modest for a long time if families pass these things on to each other cheaply or for free. The older the children get, the more new expenses such as playgroup, leisure activities and education add up. It’s a good idea to draw up a budget before each new phase of your life in order to get an overview of what you’re facing and how you can cope with the situation.