Servus from Germany!

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Servus from Germany!

Post by er_93 »

Hi all,

I'm a 24-year-old (turning 25 in around 2 months) from southern Germany and discovered the concept of FI as well as ERE specifically somewhere around 2014-2015. Therefore, I was able to reach a savings rate of around 50-60% consistently since I started full-time work in IT since mid-2015.

After re-reading Jacob's book in the last few weeks while travelling, I re-gained some focus I probably lost during the last years - even though I continued saving and investing in various areas since the biggest part of it is automated, I think there are some more opportunities for further optimization leading me to a mid-term goal of a SR between 65 and 70% by reducing expenses and increasing income.

Nevertheless, I'm still happy with the progress I made so far: With expenses of 1.390€ (used a fixed budget after automatic transfers for investments, so no specific tracking which I'd like to start now to reduce this) and a current NW of around 110K€, I'm at a WR of around 15,4%.

Apart from full-time work, I'm currently doing a Master's degree on the side which I started after 2 years of work, as it's paid by my company and I'm generally enjoying some more academic input. In the remaining free time, I enjoy sports (football, strength training), reading and also want (and need to ;-) ) find enough time to spend with my girlfriend - living together at least makes this doable.

I'm looking forward to sharing my experiences (probably by starting a journal as soon as I find the time to put some more structure in my thoughts) and learning from the more experienced forum members.

I'm also especially interested in Germany-specific views and already noticed some German members and journals as a long-term reader of the forum. Even though we're facing some additional difficulties here compared to the US (for example very high taxes + social security payments leading to comparatively low after-tax salaries), Germany is in my opinion still a quite good place for RE and also ERE compared to most other countries.

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Re: Servus from Germany!

Post by DutchGirl »

I indeed think that Germany is pretty good. For example, healthcare is quite nice compared to the US.

As someone from the Netherlands (Hi, neighbor!) a lot of Germany-specific stuff I do not know. I understood that some Germans automatically pay a part of their pretax income to the church that they're registered at (often from birth). Are you doing that too? Do you agree with that? And if not, can you switch that off?

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Re: Servus from Germany!

Post by wolf »

Servus, too ;) Welcome!

It is great to have you as another member in the (German) ERE community.

Your setup (young age, well educated, high SR and NW) sounds very promising. Well done!

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Re: Servus from Germany!

Post by er_93 »

DutchGirl: That's correct, I just have the feeling that the accumulation part of the process is a bit more difficult than in the US - also when I compare salaries in my field. I still appreciate a lot of the benefits a life in Europe / Germany has and health care during a possible early retirement is certainly one of them. All in all, I really like the combination of high salaries, reasonable working hours and a lot of paid leave (30 days in addition to public holidays is quite common) in international comparison.

Concerning the church tax - yes, I'm still paying this - 8% of the paid income tax in southern states. However, there is a possibility to opt-out by declaring that you're not practicing your specific religion anymore. The automatic collection from the pre-tax income has historic reasons and I'm not sure whether this should still be the case. The way how this money is spent is also often discussed controversially. The main reason I didn't opt out so far is probably "social pressure" from family. Sounds worse than it is, it's just not common in my family / where I grew up and also a possible church wedding gets more difficult which is a quite common tradition here. I also wouldn't save the full amount of this church tax, as the expense is tax deductible.

Wolf: Thank you!
I already saw your journal and your progress and especially expense level is amazing! For me, the biggest parts of my monthly expenses which are hard to eliminate in the short-term are still rent and a car. As it's a company car, there is also no possibility to get rid off it until the lease expires or I switch companies. Right now, I'm using it a lot, so at least a big part of the 350€ I'm paying effectively after taxes can be justified.

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Re: Servus from Germany!

Post by niemand »

Welcome to the forums er_93. I am German, too, but 13 years older than you. You are young and if you're truly aiming for ERE the next few years will be your major accumulation years.

Have you considered geoarbitrage? Working overseas for a few years in a country with higher income than Germany, such as Switzerland or Australia could speed up tour accumulation process significantly if you, once you've made your money, go back to Germany to ERE. All the best to you!

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Re: Servus from Germany!

Post by Lenticularis »

Hi er_93, fellow German here. I agree that early retirement, in particular ERE style, is quite doable in Germany. I second niemand's hint at geoarbitrage, though. While Switzerland is said not to be particularly welcoming to Germans, it seems reasonably simple to get a job there and financials should be around 2x better during the accumulation phase. If I hadn't just quit my job, I would give that idea some serious consideration. The UK might also be a good option if it weren't for Brexit.

German public health insurance is only semi FIRE friendly. Possibly better than the US weirdness, but at high income, the premium is ~800 €/month. When unemployed or self-employed, you pay ~18% of your income - including investment income and capital gains. Ouch. Then again, the minimum is ~170 €/month (~400 € when self-employed, but will change to ~200 € next year), i.e. up to ~780 €/month net income (after subtracting health insurance), you pay the minimum anyway. Not too bad for ERE, but further limits your options to change investments.
Also, at that level, you should pay around zero income tax (~10000 € plus health insurance is tax free per person per year). During accumulation, though, investment income is taxed at ~26%
Tax advantaged retirement accounts are practically non-existent. At least that's my opinion of the available vehicles.
(Disclaimer: this is just my incomplete layman's understanding. The system is complicated and it highly depends on your personal situation.)

A bonus in Germany is cheap groceries (via discounter supermarkets). It may not be cheaper than other places, but on par with countries like e.g. Romania despite otherwise quite different cost of living.

Your numbers sound pretty good, in particular for your age. Thumbs up! :-)
(Some might consider expenses to be a bit high by ERE standards?)

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Re: Servus from Germany!

Post by Kriegsspiel »

Last edited by Kriegsspiel on Tue Sep 04, 2018 4:40 pm, edited 1 time in total.

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Re: Servus from Germany!

Post by wolf »

Thanks for the update!
er_93 wrote:
Sat Sep 01, 2018 2:57 pm
As it's a company car, there is also no possibility to get rid off it until the lease expires or I switch companies. Right now, I'm using it a lot, so at least a big part of the 350€ I'm paying effectively after taxes can be justified.
Is having a company car cheaper than owning it in private, considering all cost?
How much km do you drive with it per year?
Does the company car make economically sense if you then could live in a low COL area with low rent?

regarding church: When I believed more in buddhism than in the catholic church, I opted-out, as you said. For some time there were talks within my family. But when I explained my belief, they accepted it. Of course it wasn't an easy decision for me, because I struggled at least two years with it (before&after).

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Re: Servus from Germany!

Post by Stahlmann »

eckhm... zere is life on zee east zide of Oter too... !

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Re: Servus from Germany!

Post by Dodo »

Griaß di ER_93,

you're doing an amazing job! If all goes well you will indeed be extremely (with emphasis on extremely :)) early retired or at least free to pick and chose whatever you want to do for a living regardless of monetary compensation. This is an enviable situation to be in. Glad you did the wise thing and chose a job that actually pays well, after which you will have so much more options opening up to your only slightly older self. A cousin of mine, who is also a hell of a saver, took a similar path with the slight difference that he actually wouldn't retire from IT even if when presented with the opportunity, simply because it means almsot everything to him. Instead he used the freedom to concentrate only on the projects he personally had intense interest in and developed a proprietary software solution from there on, switching from corporate job to start up entrepreneur. This also is an option that has been discussed here occasionally, always recuring to the common trope that saving/wealth offers up choices - something that is hardly to overestimate.

Compared to other countries, groceries in Germany are indeed amongst the cheapest in Europe, while many other things are somewhere in the middle or on the higher end of the spectrum (Internet is comparatively expensive for its mediocre technical level, i think? Then you also have to pay an obligatory fee for state-funded media, basically an additional tax of around 17,50 Eur (app. 20 $) per month for bullshit-entertainment, some decent documentaries, sports and crime series and lots of desinformation/propaganda. This translates to the absurd fact, that you as a "free" citizen are indeed forced to pay cohorts of hand-puppets whose primary job it is to lie to you in the service of politically influential interest-groups...brave new world, here we come! Really sweeeeet.
Medication i. e. is another one, although usually this is hardly visible for consumers due to mandatory health-insurance swallowing the bills and redistributing the costs upon a broader base of insurees. Those sky-high prices seem to have to do with the fact that big-pharma/chemical industry is traditionally strong in germany and an important economical sector with much political influence).
State wide church tax also is a strange relict from the past (although you can opt out anytime) - something that should not exist in a modern, secular society, since (at least in my eyes) it violates the constitution which clearly states that no one should be discriminated upon on the basis of his or her denomination which in turn should probihit the state to chose sides by offering exlusive services to distinct religious organisations (and not to any others, nor agnostics or atheists) which can draw upon this support without any additional costs occuring to them - not to speak of the fact that certain political parties, who installed and supported this tax-system, are ideologically and personally linked to those religious institutions, drawing upon their clientele to strengthen their own voter-base (a tit-for-tat, one could say. Or in german: "Eine Hand wäscht die andere.").
As a bavarian, i guess, you know whom i am talking about. ;)

Shakespeare once wrote: "There is something rotten in the state of Denmark".
Regrettably that not only applies to Denmark. Jacob probably would agree. :)

Anyhow, keep up the good work and good luck,

the D.

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Re: Servus from Germany!

Post by er_93 »

Thank you all for welcoming me!

niemand: Geoarbitrage is something I'm certainly considering. As soon as I finish my on-the-side graduate degree around late summer next year, I'll look more actively for possible opportunities. I think the first three (then four) years professionally were spent quite good here, as I was able and lucky to build expertise in a small topic which is currently (and still will be in the foreseeable future) in high demand which should give me a good basis for the search. In terms of countries, I mainly see two obvious possibilities: Switzerland as pointed out by Lenticularis and working for a tech company in the US with the downside of quite high COL in Silicon Valley as the most likely area.
Alternatively, self-employment would also be an interesting path. The daily rates in my field should give the possibility to reach at least 200K€ annual earnings, but to do this I still need to build more reputation or do this with a more experienced colleague.

wolf: Yes, all in all, a company car is cheaper than a similar privately owned car. In the ~350€ I'm effectively paying, all costs are included (depreciation, gas, insurance, possible repairs, tires...). I had a used, very fuel-efficient private car before that I bought when it was 4 years old, and came out at around the same monthly costs, if depreciation is included. Back then, I drove 20k km privately (including way to work), now it's more in the area of 25k km, as there is no financial incentive to drive less anymore. I like the flexibility, as my schedule is quite tight due to the on-the-side degree, but it would be certainly possible in my area to go car-free in the future.
I would probably need around 100€ for public transit in that case, so savings would be around 250€ monthly.
In terms of living in a low COL area because you can drive a longer distance with a company car - that's only working if the distance is not too high and if compared with living car-free it's probably not economical at all. The reason is that one considerable part of the company car taxation in Germany is based on the distance from your workplace multiplied by 0.03% of the list price of the car before taxes - this adds up quickly.

Lenticularis: I have a similar view on most of your points. Public health insurance is good in case of a lower income during early retirement, but quite expensive for the service you're getting in the accumulation phase when paying the maximum contribution.

In terms of expenses, I fully agree - quite high for ERE. Actually, I didn't feel like my current lifestyle is extreme at all during the last 3 years, as I'm still driving a way too nice car and I'm living in a nice and even a bit too large appartment. Sharing costs with someone (never lived alone) makes this quite easy. With some improvements like going car-free (which is unfortunately not possible before end of 2020) and cutting back on the rest of the expenses after mobility and rent, I could get to around 1.000€ monthly, which wouldn't be too bad in my point of view and would allow me to still lead a quite "normal" life as seen by others.
It's also quite hard to forecast / plan future expenses, as they will highly depend on major life decisions: How does the current long-term relationship I'm leading turn out, will kids be part of the long-term plan and so on. Still, independent from all decisions, I feel like the direction I'm heading into gives me a lot of freedom for different plans, which certainly is a good thing.

Dodo: Thank you very much! However, I'm not Bavarian as you probably expected based on the title of this post, but grew up and still live in your western neighbor state. But I still understand very well who you're talking about ;)

I think I have to start a journal to get a bit more structure in all those topics, as I'm also for example not completely happy with my current asset allocation.

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Re: Servus from Germany!

Post by frommi »

If you have an opportunity to go self employed, i would do that. Thats the only way to legally get around the social security system in germany. I did it 20 years ago and got FI without doing the ERE style expense control. With 7000-10000€ in expenses every year i would have been FI in 4-5 years, but i didn`t know ERE or MMM back than, so i drove a fancy BMW and lived in a big penthouse apartment.

As a self employed you save the costs for Rentenversicherung of 13000€ and the Arbeitslosenversicherung of 2100€ pretax. Additional you can get private health insurance for a fraction of the cost of public health insurance. I started with roughly 100€ for health insurance and now pay around 280€, but i get 2 months of premiums back if i don`t have medical expenses (which is the norm, so avg expenses for health care are 230€). This comes down to around 6% inflation in healthcare costs, some of it was due to political changes with the Pflegeversicherung. If you have kids the public system is probably cheaper in the long run.
But when you compare it to the cost for the public heatlh insurance of 700€ it is easy to see that the singles in germany subsidize the families by a large degree.

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