ERE in Germany

Fabian · Post by **Fabian** » Thu Jul 22, 2010 10:09 am

Hi Jacob and all,
of course, I am interested in ERE. But I don't see a way on how to achieve it. I live in a major city in Germany where rent is expensive. The average person earns 1.500 € after taxes.
My minimum expenses are:
Rent: 518 € (it's higher but I am renting out 1 room)

Health insurance: 256 € (It's expensive here in Germany and this will go up yearly!)

Food: 100 €

Other insurances: 16 €

Dog: 40 € (includes food and yearly check-up/vaccination)

Hair cut: 20 €

Other: 50 €
Sum: 1.000 €
Thats's the minimum and doesn't include going out, doing my (expensive) sport or any other entertainment. But it is ok for me as a goal as I can earn a bit on the side to support these things. By earning on the side I mean doing something that doesn't feel like work. Work is not the goal of ERE...

So if I understand it correctly, I need 1.000€ x 300 = 300.000 €
Right?
The average person here earns 1.500 € so even if they save 70% = 1.050 € monthly (It would be impossible to live here on 450 € ...) they get nowhere near ERE in the next few years.
If I were one of the average it would take myself about 24 years (without interest)...
Any ideas, hints or suggestions are welcome

Fabian
P.S. My net worth at the moment is 0 € (but no debt...). I am 35.

hanekomu · Post by **hanekomu** » Thu Jul 22, 2010 11:07 am

Hi,
in Austria (where I live), the net income has health insurance already deducted. Is that different in Germany?
I think achieving ERE (or even ER) is not a breeze; you have to actively set your mind on achieving it and be prepared to alter your lifestyle. So if you want to live in an expensive apartment or practice an expensive sport, then fine - but I guess achieving financial independence demands sacrifices.
Also, that factor 300 (= 25 * 12 on a safe withdrawal rate of 4%) - that's designed to basically last you forever. However, if you get a state pension, you only need that much until your retirement age, so you might get by with less savings. Viewed another way, your pension contributions are already a way of saving.
Marcel

Fabian · Post by **Fabian** » Thu Jul 22, 2010 11:21 am

Hi Marcel,
I am self-employed so health insurance is NOT included and I get NO pension.
518 € for my apartment is very cheap - at least in my city. I could move to a cheaper city, yes! And I didn't include my sport in the calculation - so that doesn't count...
If the factor 300 is to last forever how much would I then need to last until death?
Fabian

Post by **jacob** » Thu Jul 22, 2010 5:10 pm

The 4% rate historically lasted 30+ years in all periods of US stock market history. 1/0.04*12 months = 300. A 3% rate has historically lasted forever. No matter what you invested in, 3% real returns has been possible throughout human history(!) with one exception. The period known as the dark ages.

Post by **jacob** » Thu Jul 22, 2010 5:15 pm

I haven't paid for a haircut since I was 18. Paid for some clippers back then.
Your only problem is health insurance and housing. I don't know whether that's the lower limit in Germany. When I lived in Switzerland, I paid 120CHF or so for health insurance.
With housing you often gotta look hard. The cheaper places are often underadvertised. In the midwest we lived in the same city while looking at $600 apartments (and rejecting them). Shortly before we moved, we discovered a $400 place which wasn't listed in any of the search engines/catalogs. The best method is to ask around.

Britz · Post by **Britz** » Fri Jul 23, 2010 4:57 am

Hi,
I am a bit shocked at those numbers, particularly the high expensive health insurance (is it really 256€ per month?!) and the low average monthly income (1500€; is it really that low?!).
A few suggestions:
1. Can you shop around for cheaper health insurance?

2. Cook your own food and bulk-shop cheap rice, potatoes etc; 50€ per month on food is more than enough for a good diet.

3. Cut your own hair

4. I would get rid of the dog, or not get a new one when this one dies, but that's just my own personal preference, of course, hehe

This is all small savings though; if you want to save more at the cost of the comfort, then you can usually find cheap rooms in any big city, for instance by sharing an apartment with a bunch of students (I lived in a garden shed in London at one point); and you can try to find more work.
I hope any of this is useful to you!

Post by **jacob** » Fri Jul 23, 2010 5:17 am

Getting rid of a dog is kinda like getting rid of a child. It can't be a financial decision --- at least I don't think it can. (We have a dog, incidentally. I may be biased.) One has to consider the dog and how it handles it (sometimes not that well). In general, if you have a dog, it stays with you.

Britz · Post by **Britz** » Fri Jul 23, 2010 6:09 am

Yeah, I was kidding - I wouldn't get rid of a dog either.
I wouldn't get one in the first place either, but that's my personal preference and not universally sensible; I can certainly understand how getting one would be a happy thing, and happiness, or lack of undue unhappiness, is what ERE is all about. Call the dog an investment, and live 10 years longer too, if I remember the stats correctly.

Fabian · Post by **Fabian** » Fri Jul 23, 2010 7:54 am

Getting rid of my dog is no option, of course. I've taken a responsibility here...!
Having a dog makes it hard to find a new apartment. 90% of the market is closed if you have a dog. Sad but true. What I could do is rent out another room occasionally. If I do this 3 months per year I am able to lower my rent to 418€ per month. I could also move somewhere else but at this point I don't want to leave my friends behind.
I talked with my health insurance. I can change my contract and save about 20€ per month.
So I can come down to 880€.
From my point of view working on the income side is more effective...
Fabian

Concojones · Post by **Concojones** » Fri Jul 23, 2010 8:01 am

Fabian,
I've heard your question before. Newbie reads about ERE, wants to get there but it seems impossible, at first sight.
Key here is "at first sight." If you're dedicated, you will keep your eyes open and brain active, and you'll develop a number of useful ideas. That's what happened to me, and I'm in a similar situation (Belgium). Even if I think you need to do your own thinking, maybe I can give you some inspiration:
- Net income needs to go up. First try to increase your income in your current job, change to a better-paying job (e.g. employees get free health insurance), work more hours, or work in a low-tax country (I met a German last week who is doing exactly that. He used to make 1600 net in Germany).

- Congrats on the idea of renting out a room! I think you can reduce your rent by half by renting a place where you can rent out an unused room or create one.

- 100 euro on food is already quite low, but maybe you can do better by baking your own bread.
Wrapping this up, cut your costs to 500 a month (250 rent + 100 food + 50 dog + 50 other + 50 fun money to reward yourself). Increase your income to 2000. Monthly savings 1500, yearly 18000. ERE in 7 years, assuming a bit of return on your investments.

Q · Post by Q » Fri Jul 23, 2010 8:42 am

Doesn't Germany have like 4 or 5 top listed cities to retire to? I remember reading an article a few years back and couldn't believe it. Maybe it was longevity too?

jmed · Post by **jmed** » Thu Apr 07, 2011 8:44 pm

Is high-deductible health insurance not available in Germany?

sky · Post by **sky** » Fri Apr 08, 2011 11:22 am

I do not think that it is a safe assumption that any person with an average salary can ERE. Part of the ERE strategy is to maximize your income.
The only way a person with an average or low salary can ERE is by cutting monthly expenses. In areas where you cannot escape a high cost of living by finding "alternative" housing, a person with a low rate of pay is not going to be able to make much progress.