Again: ERE in Germany impossible?

Where are you and where are you going?
Fabian
Posts: 36
Joined: Thu Jul 22, 2010 7:49 am

Post by Fabian »

Hi all,
I am still trying to figure out if I can do ERE or if it's not possible in Germany.
I need your help.
If I radically cut down costs which means I have to move to a place I don't want to live, I'll have zero entertainment budget and really just the basics covered, I'll need 800€
In Germany we have to pay 26.375% taxes on any income of savings/stocks/whatever ... So if we talk about 4% for most of you guys it's just about 3% for me as the government takes about 25% of it.
So I need 33x12 months x 800 € = 316.800€ Is my thinking right so far?
I am 35 now. If I want to retire early, let's say in 10 years, at 45 (Jacob did it in 5 years!) I need to save 316.800€.
To get to that amount I need to save 2,250€ per month. That's 270,000€ in payments, 59,698.59€ in interest and -13,689.84€ in taxes = 316,008.76€
So if I save 2.250€ per month I get about 800€ per month which I would also get from the state (as welfare) if I do nothing at all...
As I don't want to be dependent on the state I need to save the money.
So if I now already live on 800€ plus 2.250€ I need on savings that's 3.050€. To have that amount of net income as a self-employed person I need to generate 50.000€ per year (that means 13.553,58€/27.1% income taxes).
It's really hard to earn so much money. And the result is to have the same (financial) status as somebody who just takes the money of the government.
If I want to have a little fun I need at least 1.200€. This makes the calculation even worse.
So am I thinking wrong somewhere or is it just not possible...? Or may be only possible for very high earners?


jacob
Site Admin
Posts: 15907
Joined: Fri Jun 28, 2013 8:38 pm
Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 77
Contact:

Post by jacob »

The problem is in the 800EUR (roughly $1000/person). This is quite high by ERE standards. It is reasonable for ER.
Here's the budget that covered my needs in Switzerland.
Rent: 355CHF (included internet, electricity, water, shared restroom, showers, and kitchen)

Food: 150CHF (food is very expensive in Switzerland)

Health insurance: 115 CHF
(About 470EUR or 600USD). This was in the second-most expensive Swiss city.
The only thing I really spent money on beyond that was train tickets and a few books per year.


JohnnyH
Posts: 2005
Joined: Thu Jul 22, 2010 6:00 pm
Location: Rockies

Post by JohnnyH »

It is most certainly possible. Even if taxes are over 50% it is still attainable, if more difficult... Those taxes are actually lower than what I'd guess most US people on this forum pay.
Checkout "Your Money or Your Life" for an idea of how to start. Or look at akratic's excellent journal, which uses YMOYL principles.

viewtopic.php?t=85
Expenses and income aren't constant, both are something you work to improve until you're satisfied. Actively fight to lower your expenses and dependency on traditional income. At the same time, pursue ways of increasing your income.


Fabian
Posts: 36
Joined: Thu Jul 22, 2010 7:49 am

Post by Fabian »

Jacob, I have the feeling you're leaving things out. How about stuff like toothpaste or other basic things you need in life? Please don't get this wrong - I just don't understand how you did this in 5 years... And as I said, 800€ means a minimum living as somebody would get who gets welfare.
Johnny, I just read YMOYL! I will do a first journal entry after August. Then I have 2 months of data for my wall chart. I spend more than double of 800€ at the moment :-( Yes I do attack my expenses and I am looking for ways to increase my income!


jacob
Site Admin
Posts: 15907
Joined: Fri Jun 28, 2013 8:38 pm
Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 77
Contact:

Post by jacob »

Toothpaste and other household items come under food---those expenses are close to negligible. Clothes come from thrift stores. I was darning socks and underwear. My girlfriend was cutting my hair.
Consider that welfare payments are set so that someone who is not very good at handling money can survive on it. They don't indicate hardship money... they indicate an amount that the average person can learn to live on without much knowledge of how to run an thrifty household. If you put your mind to it, you can do twice as good though.
One clear signal, especially in Europe, are immigrants who get on welfare and are soon riding around on expensive bicycles, etc. so the natives complain that the immigrants get too much money. Well, they get the same as everyone else---they just spend it better.
Eventually, you'll figure out how to do it. It's as challenging for me to imagine how it's possible to spend 1600EUR per month as it may be for you to imagine how it's possible to spend the 400EUR that I do now.


Fabian
Posts: 36
Joined: Thu Jul 22, 2010 7:49 am

Post by Fabian »

Thanks for your reply, Jacob. I'll think about it intensely...


jacob
Site Admin
Posts: 15907
Joined: Fri Jun 28, 2013 8:38 pm
Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 77
Contact:

Post by jacob »

LOL ... I'm just trying to say that. Well, it often happens that someone discovers the blog and the "5 years" and plugs in their own numbers and see no way they could possibly save that much or live on so little. Reducing expenses usually turns out to be much easier than previously believed and by doing that, the savings target drops really fast. For each $1 you can spend less per month, your target drops by 300--400. Reduce spending by $200/month and you just dropped by 60,000-80,000 in your savings needs.
We're generally full of good ideas on how to reduce expenses. It usually comes down to whether people "want" to or not.


NYC ERE
Posts: 433
Joined: Mon Aug 02, 2010 8:03 pm

Post by NYC ERE »

@jacob re: immigrants--One of my ERE inspirations is the NYC immigrant cab driver. I obviously don't take cabs anymore, given my goals, but when I used to, I would often chat them up and talk about the economics of cabs. One guy who had worked his way up to owning his own SUV cab told me that immigrant cabbies usually spend $1,000 per month on their living expenses and earn $4,000+ per month (working 80+ hours a week). It's safe to say that no one with my background--middle-class, born and raised in a major American city--lives on $1,000 a month in NYC, but this knowledge is something I refer back to as I economize. In <90 days I will reach the ~$1,000/mo. budget milestone, and probably won't go beneath it until I retire--barring a successful food garden/change in diet/free housing.


AlexOliver
Posts: 461
Joined: Tue Aug 03, 2010 7:25 pm

Post by AlexOliver »

@NYC: Would you be willing to share your budget?


Matthew
Posts: 391
Joined: Thu Jul 22, 2010 6:58 pm

Post by Matthew »

I think the secret to most ERE stories will be to share living costs with roomates. This is huge.


jacob
Site Admin
Posts: 15907
Joined: Fri Jun 28, 2013 8:38 pm
Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 77
Contact:

Post by jacob »

There are various degrees of room mates. The first place I lived in in the US, the only thing I shared was the front door and the washing machine. I had the entire top floor for myself (included kitchen and bath) for $400/month. Much later, I found a 1bd/1bath apartment complex in the same city for $400/month.


Matthew
Posts: 391
Joined: Thu Jul 22, 2010 6:58 pm

Post by Matthew »

True. But any way you spin it, it helps to have a room mate. It doesn't matter if that is a wife, parents, girlfriend, friend, or stranger (beyond me). You can still cut the payment by at least half.


jacob
Site Admin
Posts: 15907
Joined: Fri Jun 28, 2013 8:38 pm
Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 77
Contact:

Post by jacob »

Yes, to put it in general terms. It helps to substantially cut the usual large expenses which are: housing, transportation, and food (eating out). This is also where most people are most resistive.
And room mates (or whichever sort) is certainly one way to cut down on housing.


NYC ERE
Posts: 433
Joined: Mon Aug 02, 2010 8:03 pm

Post by NYC ERE »

@AlexOliver


Q
Posts: 348
Joined: Thu Jul 22, 2010 8:58 pm

Post by Q »

Yes, roommates help. It's how I can afford to stay where I am at...granted I guess eventually we might go to the next level of SO-ness and the math changes, but that's far away (I think)


Leo
Posts: 7
Joined: Mon Aug 16, 2010 12:57 pm
Contact:

Post by Leo »

@ Fab:

You can also increase the average interest/passive income you receive.
One possibility is to buy tax-free dividend stocks such as Deutsche Telekom (yields more than 7%) or Deutsche Euroshop (more than 4%) - both free of "Abgeltungssteuer" and "Soli".
See this post and discussion.
For a longer list of tax-free German dividend stocks see mydividends.de.
I intend to realize ER in Austria - I think ER or even ERE is also doable in Germany.


ktn
Posts: 115
Joined: Wed Jul 21, 2010 10:33 pm

Post by ktn »

@jacob:

Great points about immigrants. When I lived in the US, some of my American friends were dead-sure those South Asian motel and 711 owners were running drugs or doing something illegal to be able to afford businesses so soon after immigrating. In reality it is often just loans from friends and family + frugal living + minimizing costs by running it themselves. [Some South Asian subgroups have a tradition of lending the starters money as banks won't lend to those with no income/assets/credit history]
Please share how you found that 355CHF place and where it was. Are these places relatively easy to find in Switzerland?
@Fab:

Thanks for the post. I don't live in Germany, but in Finland. In general, prices in Finland to be about 20% higher than Germany and salaries lower by about the same. I have heard that that real-estate prices here are almost double that in Germany. Capital gains tax (savings, dividends, stocks, rent, etc.) is 28% with talk of being raised to 29-30%. VAT is 23% and the progressive income-tax system means that one can easily pay 60% when efforts to increase income succeed (soon I am going to pay 55% on a bonus - gotta love it). Like you, I find it hard to bring my costs down to the levels mentioned by our amERican mates - housing is one I have not attacked yet, so I am hopeful.
Here are a few ways I reduce costs:

- getting the bf to clip my hair with a trimmer (regular haircuts here are €30 but I used to get mine for €22). One issue is that short hair makes me look 'too young' (not a plus in my job - again that may be an Europe thing), so need to work on that. :-)

- soap, toothpaste, washing powder and other such are cheap at Lidl. Also buying food when I travel helps.

- no television nor cable (tv license fees are about €200/year)

- no car (I figure this saves me at least €400/month, but public transport here does cost about €100/m). I bike everywhere half the year.

- internet, transport and mobile costs are paid/subsidized by employer. I don't have a fixed line.

- I claim a (small) tax refund for partially working from home.

- Eating at home whenever possible, avoiding eating out, no bars.
My current budget breaks down as:

- 820(housing, includes water & heating & repairs)

- 250(groceries, lunch at workplace, sundries)

- 250(travel - oops, love this though - 40% of this goes to visiting parents)

- 200(parents' medical costs)

- 100(buffer for unexpected costs)

- 25(electricity)

- 20(employer-subsidized public transport)

- 20(union dues)

- 10(home insurance)

- 5(employer-subsidized internet)

Total = 1700 :-(
Care to post your budget breakdown? Any tips for bringing mine down? Maybe that will help us both identify areas to bring expenses down in.
Income TAXES are a huge issue here (and I guess most of Europe). Maybe we should start another thread to discuss tax-minimization/income-maximization strategies in Europe.


Fabian
Posts: 36
Joined: Thu Jul 22, 2010 7:49 am

Post by Fabian »

@ktn: I will post my budget after August. I then have data for 2 months. Spending in July and August was VERY HIGH :-(
@Leo: Thanks for the insight do tax-free dividends. I'll look into it!


jacob
Site Admin
Posts: 15907
Joined: Fri Jun 28, 2013 8:38 pm
Location: USA, Zone 5b, Koppen Dfa, Elev. 620ft, Walkscore 77
Contact:

Post by jacob »

@ktn - Right here http://www.studentenhaus.ch/ I had one of the small rooms, but I could get to the patio by crawling out the window. That raised my price by 15, I think.
If you're a student, it's pretty easy. Otherwise, you may have to do the shared apartment/house thing in whichever form that may take.
The top floor I got in the US was a house that was rented out. There were three [paying less] at the ground floor sharing the kitchen and I had the top floor to myself.
Also look for in-law units (converted garages).


User avatar
fiby41
Posts: 1611
Joined: Tue Jan 13, 2015 8:09 am
Location: India
Contact:

Re: Again: ERE in Germany impossible?

Post by fiby41 »

This post is from 2010 on which Jacob comments. But it says he joined in 2013? How does that work?

Post Reply