Author Topic: Savings rate in EUROPE more difficult than USA  (Read 6442 times)

xxxSedgexxx

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Savings rate in EUROPE more difficult than USA
« on: October 15, 2015, 09:50:06 AM »
Hello,

Are there any families in Europe on this forum aiming for Financial Independence?

Many places in Europe would require 25% to 35% of average income to simply pay for rent. How can a family then reach such levels of savings rate as announced on this forum (60%+)?

We feel that rent/mortgage + other costs in the USA are much lower in relation to the average salaries.

My wife and I have been living in Dublin Ireland, and frugal for 10 years. I am now 32 and feel demotivated while reading these 60%, 70%, and even 80% savings rates. How is this possible? My family and I basically spend nothing that is not bare minimum and we are at 21% savings rate (1,250 per month).

Breakdown of calculation:
Total Net Income = 72K (Gross 100,000)
Total Expenses = 57K

We live and rent a very small 2 bedroom house in Dublin (Ireland) which costs 1500 per month (18K per year). School for children ends around 1pm and childcare from 1pm to 6pm costs 750 per month (9.6K per year). This leaves us with 30K of expenses for the year. This is NOT a lot for a family of 4 in an expensive European capital. Our budget for FUN (entertainement, going out, eating out, cable tv, toys, etc) is close to ZERO. We have 1 car but I carpool to work and my wife takes the bus. Our only luxury is plane tickets to go to France every year as we are French (about 1.5K per year).

I earn 65K per year gross (which is well above the average salary here). I strongly suspect that it is much easier to have a high savings rate in the US/Canada as the purchasing power is much higher.

If we were to only pay rent, childcare and food, our savings rate would be 55%. Apart from peopling earning 200K+ per year, a 80% savings rate is mathematically impossible for a family... Although it sometimes seems like this level of income is not so uncommon in the US. Advice for people living in the USA, DON'T MOVE ABROAD BEFORE REACHING NET WORTH TARGET!

Looking forward to your comments to regain motivation!

Thanks for reading,
Sedge









« Last Edit: October 15, 2015, 10:09:20 AM by xxxSedgexxx »

nereo

  • Senior Mustachian
  • ********
  • Posts: 10567
  • Location: Just south of Canada
    • Here's how you can support science today:
Re: Savings rate in EUROPE more difficult than USA
« Reply #1 on: October 15, 2015, 10:56:44 AM »
HI Sedge

Welcome to the forums.  First, I think you've succumbed to the "savings-rate envy" from the few around here who really can and do save >75% of their income.  There are a lot of us here who are saving more around the 30-60% rate. 
Also, understand that situations are extremely influenced by local conditions, and saying "in europe" vs "in the US" is way too broad.

Some responses:

Are there any families in Europe on this forum aiming for Financial Independence?

Yes, many.  Check out the Journal section.  There's even a few Londoners here - which is among the most expensive places to live anywhere.

Quote
Many places in Europe would require 25% to 35% of average income to simply pay for rent. How can a family then reach such levels of savings rate as announced on this forum (60%+)?

Be careful with the word "require".  AFAIK no town or city in the free world requires that you spend a certain percentage of your income.  Sure, some areas are expensive, and the average cost of housing might be ~30%.  This is true in the US as well.  The trick here is to udnerstand that you don't have to be average.  You can earn more, and you can live in a smaller or less 'desired' location.  It's all up to you.

Quote
We feel that rent/mortgage + other costs in the USA are much lower in relation to the average salaries.

This is highly localized.  NYC, SF, Seattle and other places have sky-high costs of living, most of all the cost of a home (you can throw Toronto and Vancouver onto that list).  Then there are other cities that offer cheap housing.  It's really non-sensical make such broad comparisons.  After all, would you expect to pay the same for a similar home in downtown London as you would in Lisburn?  Clearly not.

Quote
My wife and I have been living in Dublin Ireland, and frugal for 10 years. I am now 32 and feel demotivated while reading these 60%, 70%, and even 80% savings rates. How is this possible? My family and I basically spend nothing that is not bare minimum and we are at 21% savings rate (1,250 per month).
[long list of expenses]
Well first of all, you seem to be doing reasonably well.  You are saving more than you earn, so praise that. 
Now, as I don't live in Dublin I can't get into specifics, but I'd say if your real goal is FI than you need to carefully analyze what you are spending money on and why.  For example, the after-school care.  Crafty mustachians would come up with an alternative.  Whether that means adjusting personal schedules, relying on a rotating group of friends.... see if you can come up with a cheaper solution.  What do people do who earn half your income?
You mentioned if you include the childcare, food and rent your savings rate would be 55% - besides going to france, what else are you spending your money on?  Seems there's a lot of leakage there to go from 55% down to 21% when you have the basics covered.

I'm not trying to attack you here - just help you understand that a few of your preconcieved notions about what you must spend you money on, and how easy it must be someone else should be challanged.  In my experience there's always a family living where I do making substantially less money.  If you can figure out how they do it, you'll be most of the way towards maximizing your own living.

Jack

  • Magnum Stache
  • ******
  • Posts: 4734
  • Location: Atlanta, GA
Re: Savings rate in EUROPE more difficult than USA
« Reply #2 on: October 15, 2015, 11:29:01 AM »
Many places in Europe would require 25% to 35% of average income to simply pay for rent.

You say that, but somehow the families in Europe with below-average income are managing to not be homeless (and aren't all getting subsidized housing, either). Figure out what they're doing (e.g., renting "below-average" housing), and then do the same yourself.

We live and rent a very small 2 bedroom house in Dublin (Ireland) which costs 1500 per month (18K per year). School for children ends around 1pm and childcare from 1pm to 6pm costs 750 per month (9.6K per year). This leaves us with 30K of expenses for the year. This is NOT a lot for a family of 4 in an expensive European capital. Our budget for FUN (entertainement, going out, eating out, cable tv, toys, etc) is close to ZERO. We have 1 car but I carpool to work and my wife takes the bus. Our only luxury is plane tickets to go to France every year as we are French (about 1.5K per year).

If you mentally replaced the s with $s (without even changing the numbers -- purchasing power is roughly similar enough anyway) a typical complainypants American could easily be saying the same thing.

First of all, I have no doubt that somewhere in the Dublin area there exists housing for, say, 1000 per month instead of 1500. I'm sure it wouldn't be as nice as where you're living now, but it's at least possible for you to move there and save 500. If you don't, realize that that's a choice you're making to spend more.

Second, you say you have 30K left after rent and childcare. That's 2500/month, which (again, switching s to $s) is more than a typical mustachian's total budget! You say you're already saving half of it (1250/month), but I see no reason you couldn't do even better. For example, you say your budget for fun is zero, but what about your budget for food? Even knowing nothing about your spending in that category, I'm willing to be you could cut it significantly.

Third, nobody's forcing you to live in an "expensive European capital" in the first place. I fully expect that, if you wanted to, you could find a different city that was cheaper to live in but still had decent job prospects.

Apart from peopling earning 200K+ per year, a 80% savings rate is mathematically impossible for a family... Although it sometimes seems like this level of income is not so uncommon in the US.

Here's a secret: that's really, really uncommon in the US. The folks on this forum are the outliers, and the ones who brag the most about their savings rate are outliers of that!

Paul der Krake

  • Magnum Stache
  • ******
  • Posts: 4568
  • Age: 11
  • Location: USA
Re: Savings rate in EUROPE more difficult than USA
« Reply #3 on: October 15, 2015, 11:50:37 AM »
The child care expense is what's killing your budget, not your location.

Gone Fishing

  • Magnum Stache
  • ******
  • Posts: 2754
  • So Close went fishing on April 1, 2016
    • Journal
Re: Savings rate in EUROPE more difficult than USA
« Reply #4 on: October 15, 2015, 12:14:12 PM »
Do you have tax deferred savings options? 

Also, how about a full on case study?

Maia

  • 5 O'Clock Shadow
  • *
  • Posts: 5
  • Location: Germany
Re: Savings rate in EUROPE more difficult than USA
« Reply #5 on: October 15, 2015, 12:33:02 PM »
We live in Germany and currently we have a 50% savings rate.
We both work full-time, but don't make a lot.
In a year the both of us together earn about 38.000,- net.
Our expenses are about 18.000,- per year.

The main thing that keeps our costs low are the low housing costs.
We are both Dutch but the housing there is way to expensive so we decided to move to Germany.
Now we have a big house with a huge plot of land for which we only paid 100.000,-
We are paying this of in a total of 9 years (7 more to go) and at the same time we are improving
the house to be more energy efficient. Its working out great.


We live a good life for a lot less then most of the people around us, we just make different choices.
That's the thing. We could have stayed in the Netherlands and whined that there is no affordable housing,
we chose to make a plan that works for us. I'm not saying you should move country, just that there may
be more options out there. Try to think in possibilities

Bucksandreds

  • Pencil Stache
  • ****
  • Posts: 829
Re: Savings rate in EUROPE more difficult than USA
« Reply #6 on: October 15, 2015, 12:50:32 PM »
A lot of harsh judgements being made on this OP. Childcare at that amount for kids in school is crazy.  U.S. schools tend to more closely mirror typical work hours which is to our benefit.  If you want to retire slightly earlier than average then you are doing great.  If you want to retire super early then you need to move (different city or worse home.)  Food is more expensive in Europe.  I've spent a total of around 6 months in Europe and can attest to that.  When the kids can watch themselves your savings will shoot up.  If you're miserable working and want out ASAP then move.

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 3057
  • Location: Emmaus, PA
Re: Savings rate in EUROPE more difficult than USA
« Reply #7 on: October 15, 2015, 01:45:34 PM »
Fun with Wolfram Alpha: 4.6% of households in the USA have incomes of $200,000 or more. I found it surprisingly difficult to get the corresponding number for the European Union.

However, I found this on Irish income distribution - I have no idea if this website is trustworthy or not. By my quick math it indicates that having 100,000 of income per year puts you in the top 5.5% of Irish earners. I think I'm comparing households (US) to individuals (Ireland) here so the comparable number would be maybe more like 12%. The other 88% of Irish people are getting by somehow so it seems likely that it's possible for you to reduce your living expenses substantially.

Jschange

  • Guest
Re: Savings rate in EUROPE more difficult than USA
« Reply #8 on: October 15, 2015, 02:20:05 PM »
Wow! You guys have great income and savings! Congratulations!

I live close to Toronto, if I can't find questions roommate soon, ill be making 1978/month in January, with rent between 900-1100. And my income is self employed.... so it's not all mine to keep. But my savings rate, starting from scratch at age 31, will let me retire 5-10 years before my peers - if I want to. And I don't. I just want a giant security blanket. That savings rate is also based on current income and expenses. If I stay single and baby free, my income goes up but my expenses stay the same. So my financial independence comes earlier.

When you look at your 21% rate=  37 years to retirement, http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/  could do fancy math to see how your savings rate will jump as soon as you're done paying for after school care. You could also do a case study. The people here might have ideas to get you to a 25-30% rate. And finally, you can also play with how much you need to retire outside of Dublin where houses are cheaper, and if government resources will help top up your retirement.

You're doing really well, and comparably well to most people in expensive cities. Keep avoiding lifestyle inflation and you will be okay. And if you're jealous of American savings rates, remind yourself that they have to think before they go see a doctor. In some countries we're lucky enough to go whenever we feel like it. Personally, I've gone about 15 times since May, enjoyed several rounds of blood work, ultrasounds, etc....all paid for by people in higher tax brackets! (Sorry, got excited and off topic).

nereo

  • Senior Mustachian
  • ********
  • Posts: 10567
  • Location: Just south of Canada
    • Here's how you can support science today:
Re: Savings rate in EUROPE more difficult than USA
« Reply #9 on: October 15, 2015, 03:14:48 PM »

When you look at your 21% rate=  37 years to retirement, http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/  could do fancy math to see how your savings rate will jump as soon as you're done paying for after school care. ...

 And if you're jealous of American savings rates, remind yourself that they have to think before they go see a doctor. In some countries we're lucky enough to go whenever we feel like it. Personally, I've gone about 15 times since May, enjoyed several rounds of blood work, ultrasounds, etc....all paid for by people in higher tax brackets! (Sorry, got excited and off topic).
I think you have a very warped understanding of how health-care works for the vast majority of people in the US.  When living there I never think about going to the doctor beyond "hey, i think i need to go to the doctor".   The stereotype seems to cut both ways though, a large percentage of americans think that it's government policy to let old folks die because it saves money.  So both sides get it wrong.
I will say II've had far worse experiences with healthcare in Quebec then I ever had in the US, although I've also heard that Quebec's health care is not as friendly as some.

Back to the OP - Be very careful when trying to use things like the "very simple math" - it's not what you spend now or even the percentage that you save now which matters.  It's how much you plan on spending in retirement.  For you it's very possibly it will be much, much less without 9k in childcare expenses.  There's a lot you can do to meet your goals.

EDIT:  Corrected some random computer syntax errors.
« Last Edit: October 15, 2015, 03:17:48 PM by nereo »

xxxSedgexxx

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Savings rate in EUROPE more difficult than USA
« Reply #10 on: October 15, 2015, 03:42:49 PM »
Thanks to all who replied. As a 1st time poster here, I am impressed with the volume, reply times and quality of posts. What a great forum and community! It is late here in Ireland but I will be taking time to reply in detail to your comments in coming days.

Jschange

  • Guest
Re: Savings rate in EUROPE more difficult than USA
« Reply #11 on: October 15, 2015, 04:18:58 PM »
Thanks nereo, I'm glad to hear it's not as stressful as news/internets make it sound.

daverobev

  • Magnum Stache
  • ******
  • Posts: 3337
  • Location: UK
Re: Savings rate in EUROPE more difficult than USA
« Reply #12 on: October 15, 2015, 04:26:09 PM »
1. Social systems in Eire are, or at least were, generous. Not sure about retirement stuff but I'm sure it's pretty good.
2. Ireland had a massive housing boom and bust, but prices are high still. Dublin, where 1/3 of all Irish in Ireland live, is really going to be expensive. When you retire you can move somewhere much cheaper and live on a few hundred Euro a month, no trouble.
3. Free healthcare, yay!

Actually Ireland is pretty expensive, coming from the UK. If you're serious, look at other countries for ER. Much better ROI, so to speak.

Mikila

  • Stubble
  • **
  • Posts: 233
Re: Savings rate in EUROPE more difficult than USA
« Reply #13 on: October 15, 2015, 05:26:48 PM »
Re: Childcare

It may be possible to juggle you and your spouse's work schedules so that child care is unnecessary.  We have always done so, and saved thousands.  In 10 years of parenting, I doubt we have spent so much as $1,000.  Total. 

Children do not require much money.  I track ours in a budget called "kids" and we spend less than $40 a month most of the time.  Most of our kids spending is in wages to our little hard workers.

john c

  • 5 O'Clock Shadow
  • *
  • Posts: 80
Re: Savings rate in EUROPE more difficult than USA
« Reply #14 on: October 16, 2015, 03:36:31 AM »
I can confirm what you're observing, Sedge.  What're you're seeing is the difference in wage/price structure between the rest of the world and the US.

I worked for a Fortune 500 company, and had colleagues all over the world.  Many of those (at my same level) in the EU made less than I did in dollar terms, but had to pay high taxes and VAT on top of it.  That's why they generally lived in smaller quarters than I do, and those quarters were generally apartments or attached houses.  They also didn't have nearly as much stuff as Americans.  They are also thinner and healthier.

What this boils down to is that Americans can either wallow in the volcano of consumption, or save a whole heck of a lot, compared to our European friends.  This is especially true in LCOL areas.

kaposzta

  • 5 O'Clock Shadow
  • *
  • Posts: 50
  • Age: 35
  • Location: Hungary
    • Years Until FIRE Calculator
Re: Savings rate in EUROPE more difficult than USA
« Reply #15 on: October 16, 2015, 05:55:23 AM »
We're living in Hungary and we have a 60% savings rate (my wife: 65%, me: 55%). Total combined net income is $24k, or 21k EUR.

I have to admit that we don't have children (yet), our salaries are relatively high (as average monthly net salary is $550 here), and my wife owns an apartment where we live (so we don't have to pay mortgage or rent).

Letj

  • Bristles
  • ***
  • Posts: 381
Re: Savings rate in EUROPE more difficult than USA
« Reply #16 on: October 16, 2015, 04:01:25 PM »
I can confirm what you're observing, Sedge.  What're you're seeing is the difference in wage/price structure between the rest of the world and the US.

I worked for a Fortune 500 company, and had colleagues all over the world.  Many of those (at my same level) in the EU made less than I did in dollar terms, but had to pay high taxes and VAT on top of it.  That's why they generally lived in smaller quarters than I do, and those quarters were generally apartments or attached houses.  They also didn't have nearly as much stuff as Americans.  They are also thinner and healthier.

What this boils down to is that Americans can either wallow in the volcano of consumption, or save a whole heck of a lot, compared to our European friends.  This is especially true in LCOL areas.

This is very true. I spent time in a few countries in Western Europe and I have family and friends there. I can say without a doubt that Americans in professional jobs make much more than they do and live more luxurious lives with a lot of wasteful consumption - 4K square foot homes, 2 and 3 cars, garages full of stuff, eating out everyday, entertainment both at home and outside the home, over indulged children, etc. What this means is that Americans that deliberately choose a simpler life can save a boatload of money even if they live in places like LA and NY.

Sean Og

  • 5 O'Clock Shadow
  • *
  • Posts: 79
Re: Savings rate in EUROPE more difficult than USA
« Reply #17 on: October 16, 2015, 09:18:34 PM »
Hi Sedge,

Welcome to the forum. As an Irishman now living in the US I can understand your frustrations, and having lived in Dublin for a year myself, doubly so! I know many are saying you have to think differently etc but having lived both, it is far easier here. Having moved from Ireland to the USA in 2011, my eyes have been opened by the shear opportunity here to increase ones net worth by living simply, something that really wasn't an easy option back home. I would have moved here years earlier if I had known.

Income: I will say your income is impressive for Ireland, well done. When I left Ireland my salary was 35k as an engineer with a few years experience, that almost doubled moving to the US and with that still I consider myself under payed in US terms for my experience (the joys of my former H1B visa indentured servitude!). Engineers are paid far more handsomely in the US than at home. You're earnings are definitely on the high end of things in Ireland, similar to many on this site being on the high end of US incomes, the median household income over here is around $52k I believe.

Housing: I am living in the Midwest so definitely a LCOL area in the US but then I moved from Galway which is not as expensive as Dublin. I can confirm that housing agenerally is cheaper here, mortgage rates are lower and can be fixed for their entire duration which is impossible back home. When I left Ireland in 2011, I was renting a two bed ground floor apartment for 750 (25% of my income at the time so your statement holds true) in a reasonable but not high end area (students and young professionals), it was the cheapest 2 bed apartment I could find at the time. I am now paying $650 mortgage on a 3bed 2200sqft ranch house with a 3 car garage on half an acre. There is no comparison. Looking at www.daft.ie the cheapest 2bed house in Dublin to rent is 1k and as you likely know, many areas in Dublin are less than desirable for a family. I am thankful to have lived with an uncle in Rathgar when I was there, he bought back in the 1980s, I can only imagine what that place is worth now. Unfortunately the Dublin house prices have remained pretty firm and increased, most of the bust was felt in prices in the rest of the country.

Childcare / Education: I cant comment on this one really as I don't have kids yet but my wife is an Elementary school teacher and generally there seems to be better services for afterschool / latch key, buses home etc in the US. It has been many years since I attended my rural primary school but looking back it would have been difficult for any family with two working adults. When I worked in Dublin in 2006 one of the women in the office quit her job after her third child as she saved more in childcare than she earned working. My wife worked as an afterschool teacher in  a creche in Galway when we lived there, I remember the cost being pretty expensive. Cost of education provided seems similar in both until it comes to University where you will have a big advantage in Ireland in that tuition is free, hopefully it remains so (although im not sure if its free even on your income?). Student Loan debt here is insane and such a terrible way to start out in adult life.

General: In general I find day to day things are cheaper here in the US, Petrol/Gas is far cheaper here in the US, food is a little less (eating out is far cheaper), clothes are cheaper although I don't buy much (my wife misses Penneys though), Electronics and consumer items are cheaper.

Things I found more expensive are used cars (weirdly new cars are less expensive here), appliances (although it think its because they are bigger), The furniture aspect of renting is more expensive to start as most places are unfurnished whereas Ireland they are furnished. Things like Gas, Electric, Water and Waste are probably similar but location dependent, A/C ups our electric here in Kansas during the summer.

Travel is more expensive here (no Ryanair to use!) but with travel hacking / points if you are responsible, then it is cheaper here in the US (less exotic mind!).

Obviously healthcare is more expensive here in the US, although it can depend on age and condition I guess (I actually pay similar to what I did back home if I don't have any visits outside of preventative care in a year). Dental costs are similar to home, UK is cheapest on this one. As a side note, I saw the 2016 budget brought in free GP care to all children under 12, that's nice.

Taxes: Income taxes are lower in the US but then we have property taxes on our houses which I didn't have in Ireland. Car Tax is dependent on state but I can almost 100% say it is less than Ireland (Car insurance is similar).

Savings / Investments: This is where the US has the MAJOR advantage, the amount of pre-tax and low cost investment vehicles available here in the US is unbelievable. In Ireland these pre-tax options are non existent other than traditional pension buckets, the UK is not much better but is slightly (worked in Belfast for 4 years). Take me and my wife here in the US for example, we have a 401k ($18k limit), 403b ($18k), 457 ($18k), TIRA ($11k), her KPERS (6%) and my HSA ($3350) as pre tax investment accounts available to us for a total of about $70500 pre-tax investment space. This lowers our net / taxable income to about $40k, with a few deductions we will end up paying about $2500 in federal tax on $110,000 income, if we had kids we would likely pay no tax.

In Ireland for your 100k you are paying 28% on taxes, PRSI, Levies etc (not sure if you have included a pension in there) whereas on $110k here in the US we are paying about 11% on Fed & State Taxes, Social Security & Medicare. Thats a big difference right there - 17%, simply by using pre-tax accounts and lower taxes in general

Advice for people living in the USA, DON'T MOVE ABROAD BEFORE REACHING NET WORTH TARGET!

This is my plan, reach net worth target here in the US (likely 10 years or so) and retire to Ireland (or Northern Ireland / UK as my wife can teach there without the Irish language and doesn't really care about FIRE, yet anyway, 10 more years of teaching and we'll see!)

I don't consider us living a frugal existence by any means and when we do have kids we can / will scale back in quite a few departments while still maintaining a comfortable lifestyle. We can save over 60% of our income pretax and plan to squeeze out some more over the coming years for investment properties.

I personally think you are doing well for someone living in Dublin with a family, maybe investigate some alternatives on childcare, housing perhaps look at further out in one of the commuter towns as that may have two fold advantage of lower housing and lower childcare costs (but then public transport, traffic and commute hours will be issues as our road network in Ireland can be frustratingly congested and inefficient)

Sorry for the long response, I hope it is somewhat helpful.

Sean Og
« Last Edit: October 16, 2015, 09:32:15 PM by Sean Og »

DNJ

  • 5 O'Clock Shadow
  • *
  • Posts: 5
  • Location: Dublin, Ireland
Re: Savings rate in EUROPE more difficult than USA
« Reply #18 on: October 16, 2015, 11:54:48 PM »
Hi,

I'm in Dublin too - used to live in the U.S. and visit there regularly to stay with friends and family, so I have some perspectives I'll share when I am on my laptop and can type properly.

A few questions though:
1. What age are your kids?
2. Do you have a work or private pension?
3. What is your childcare cost when school is out?
4. What are your savings in now? Are these post-tax?

Our savings rate is about 55%, so it can be done - we managed to cut our childcare to 50 a month for the first two years of school by adjusting our working hours.

I'll throw out a few other thoughts later.

D



DNJ

  • 5 O'Clock Shadow
  • *
  • Posts: 5
  • Location: Dublin, Ireland
Re: Savings rate in EUROPE more difficult than USA
« Reply #19 on: October 17, 2015, 02:20:59 AM »
On lap top now so here goes (and apologies for the epic):

Housing - Dublin is expensive and your rent amount sounds OK, especially if you are happy enough with your house size and location (are you?).  I doubt there is much you could do to reduce it further without adding to your commute time/affecting your school choices etc.  So that 1500 is a given.

Childcare - The reason I asked about the age of the kids is that school finishes earlier for the first two years but then should finish an hour later, e.g. Junior & Senior Infants finish at 1.30pm in our school, 1st-6th classes finish at 2.30. So you should have some minor childcare savings as they get older. And 750 a month for two kids in after school is an OK price for that service, but you might take a closer look at whether you can avoid it in any way. 

For example, I was working a 4 day week before mine started school (initially parental leave, then when it ran out I went on a permanent part-time 80% contract).  I requested a 5 day week of working 6 hours a day, starting and finishing early, in order to collect them from school at 2.30 (our school runs a "club" for the little ones for an hour a day to save parents doing two collections - costs 450 for the school year).  So, no change in my overall pay, slight increase in commute costs (and life stress tbh from not having 3 days off a week!) but no childcare costs other than the club cost.   Other friends have both gone to a 4 day week each so their toddler aged children are only in childcare 3 days a week instead of 5. 

In Ireland it is tax advantageous for both parents to be working and earning but if your wife reduced her hours to part-time you would still get the tax advantages but less childcare costs.  If you are making 65K, you get 3240 child benefit a year (tax free), then I'll assume her salary is close to 32K? I usually use something like this tax calculator to run the numbers http://services.deloitte.ie/tc/Default.aspx.  If for example her salary was 20K part-time and she was free in the afternoons, then you are looking at a difference of approx. -500 a month net income but with a saving of 750 in the childcare costs, not to mention commute cost savings etc.  Food for thought?

Pre and Post tax savings - you didn't mention pensions?  Sean makes some good points re limited investment options. In the post-tax space the Capital Gains Tax and DIRT tax on savings is shockingly high compared to the US so you might be better off focusing on what pre-tax investments are open to you.  Where are your savings now? Are you in a work pension?  Does your employer contribute? What are your investment options within the pension?  My eyes were opened when I found MMM in this regard - I ramped up my contributions to my work pension to 22%, plus my employer has an age based salary contribution (14% for me - I doubt you'll ever see that in the US!).  There is an index linked world equities fund choice within the pension, with relatively low fees, so that's where the vast majority of the investment goes each month. In my case, I can retire out of the work pension at 50 and take 25% of the total amount tax free then, if I wish, while moving the remainder into an Approved Retirement Fund (rather than buying an annuity), which remains my money to choose how to invest etc.   We have prioritised maxing out this investment, and thereby reducing our net income, rather than trying to save post-tax money.  We'll also get the state contributory pension at 68.

Other Expenses - I'll be honest, 2500 a month after housing and childcare is paid is a decent enough amount in Dublin to have some fun money.   I've used YNAB for over 2 years and love it - until you tracking your current expenses, and factor in your future knowns ones, you really don't have the full picture of how much money each month is truly needed. Highly recommend buying it (I'll send you a referral link for a discount if you want).   Do you care to share the breakdown of your expenses so that we can see if there is any low-lying savings?   I budget a similar amount each month for non-mortgage costs and that includes a 200 restaurant amount, a 100 entertainment amount on top of 750 in groceries and about 150 in coffees/treats (highly un-mustachian!).  Plus I have property tax (a pittance at 580 a year compared to the US), mortgage protection and house insurance to pay.  We also have two cars, so double the car insurance and car tax amounts. 

I honestly don't believe that we pay more for utilities and basic stuff than the US.  For example, I saved 660 off my UPC bill this year alone by threatening to cancel until they gave me the special offer they were giving new customers of 25 a month (for high speed broadband, cable TV and home phone with free international calls - you'd be hard pressed to get a deal like that in the US). I pay 10 a month for my mobile SIM card with 1 GB data, 300 texts, 300 minutes.  You get better quality groceries for less than in the US, particularly with Irish dairy products, meat, in season vegetables.  I'm a major Aldi fan, we eat very well, and could easily trim some treats and splurges off our grocery bill.  Eating out is much more expensive in Ireland, at all levels, but I imagine with two small children you probably don't do too much of that now. I change our utilities every year for the best offer, I always shop around on the house and car insurances, I recently got a credit card that gives 1% back on groceries and online purchases (with a bonus 3% more back for the first three months). I have another card that gives 0.5% back on all purchases over 5000 annual spend.  What post-tax cash savings we do have are in account with 3.5% annual rate, that had a 1% bonus for a few months - it's not US great, but it's not bad for here.

Education - We have very high quality free education in our local primary school (plus it is multi-denominational, no uniform, mixed and only has one class per year).  We do pay about 500 per child over the year for the voluntary contribution, books/stationery, trips etc. Secondary school will probably cost more in books and will probably have a uniform cost.  College registration fees in Ireland are about 3500 I think, and if you are still in Dublin when they reach that age then more than likely they will live at home and commute.  I'd actual prefer the US liberal arts style college degree for mine, if they got full scholarships.  I wouldn't be encouraging going into debt for a college degree. 

Parenting - Paid maternity leave (6 months paid, then 4+ months unpaid) and the availability of unpaid parental leave per parent of up to 18 weeks per child up to the age of 8 (age 13 if you work in the public sector) are also major plusses over the US.  We have covered all of the school summer holidays from a combination of one or both of us taking parental leave - as we both fall into the 40% tax category that net income loss isn't all that noticeable and we've had fabulous summers off.  It's a legal right, so definitely look into that for covering school holidays. 

And as for health care! We're lucky in that my employer covers all of us, otherwise a similar plan (with cash back for GP, dentist etc) would be about 2800 a year.  I think it is worth it for the better hospital choices and quicker appointments, but what is wonderful about here is that if you didn't have it and got into a serious accident tomorrow, your only cost would be 100 A&E charge and a max of 750 bed charge if you were admitted for more than 10 nights. Also, the max any family in the country pays for prescription medication per month is 144.  You can also claim back tax at 20% on any medical costs that aren't covered by your insurer, including for gluten free food if you are coeliac.

For us, staying in Ireland was a much better financial decision than moving back to the States, along with allowing us to have much more time with our children in their early years (two year-long maternity leaves, 4 day weeks, extended parental leave).  Our higher saving rate of 55% is due to approx. 30K more in income, large scale pre-tax investing in pension and the fact that half our monthly mortgage payment is going against the principal.  But as important as any savings rate is your expenses, as these are ultimately what will drive your retirement needs - focus on those as much as possible and hopefully try to free up some more cash for a bit of fun!

D

Sean Og

  • 5 O'Clock Shadow
  • *
  • Posts: 79
Re: Savings rate in EUROPE more difficult than USA
« Reply #20 on: October 17, 2015, 12:33:57 PM »
Just want to chime in and say great post DNJ and nice to see another from Ireland on here.

Also wanted to second the use of YNAB, well worth the expense, we have been using it 2 years also and it is excellent for keeping you on track. You could do a free trial starting now which is about a month and if you like it, grab a deal on Thanksgiving if they offer it on discount again (stack the referral code DNJ offered if you can).

DNJ also hit on something I forgot in the parenting section, this is huge as I see what my coworkers get when it comes to maternity leave and young kids, ideally we would have our kids in Ireland as we would be able to spend quality time together but realistically they will be born in the US (if only it was as easy as aligning it with her teachers summer holidays!). In my experience also, vacation etc is far more family friendly back home and looking forward I would prefer to be in Europe with a young family.

I'd actual prefer the US liberal arts style college degree for mine, if they got full scholarships.

I second this as the system in the US i feel offers greater flexibility of changing direction unlike Ireland where degree courses are far more rigid. You may be more specialized in your degree area but I think the US system provides a more rounded individual.

DNJ

  • 5 O'Clock Shadow
  • *
  • Posts: 5
  • Location: Dublin, Ireland
Re: Savings rate in EUROPE more difficult than USA
« Reply #21 on: October 25, 2015, 10:50:44 AM »
Sean, it's good to hear the perspective of an Irish person in the US.  Hopefully you'll be at FIRE stage by the time your kids are old enough to enjoy extended trips home.   My OH works in a large Irish university (my alma mater) and they are better than most when it comes to more general degrees, but we've friends teaching in some of the New England liberal Arts colleges and we prefer that style of broader third level education.

OP, any thoughts on your situation after reading the responses?

D

MrSal

  • Pencil Stache
  • ****
  • Posts: 866
Re: Savings rate in EUROPE more difficult than USA
« Reply #22 on: October 25, 2015, 01:31:34 PM »
I can confirm what you're observing, Sedge.  What're you're seeing is the difference in wage/price structure between the rest of the world and the US.

I worked for a Fortune 500 company, and had colleagues all over the world.  Many of those (at my same level) in the EU made less than I did in dollar terms, but had to pay high taxes and VAT on top of it.  That's why they generally lived in smaller quarters than I do, and those quarters were generally apartments or attached houses.  They also didn't have nearly as much stuff as Americans.  They are also thinner and healthier.

What this boils down to is that Americans can either wallow in the volcano of consumption, or save a whole heck of a lot, compared to our European friends.  This is especially true in LCOL areas.

This.

In Europe, even a Partner or Director in a company like Deloitte or being a CEO of a company like Santander - one of the biggest banks - you probably make AT THE MOST about 150k a year and this is being the #1 in that company.

This is gross... so take the taxes out and VAT and you probably are seeing at the most a 10000 euro salary net for a CEO of one of the biggest banks.

My in-laws make together about 120k as a couple and complain about retirement how they cant see how they will be able to make it... and I laugh. That's 10k dollars a month!! They spend about 700 dollars in groceries or more per month and are always buying things...

I myself, I am from a high family class in Europe, and even the rich families there, they dont spend much money. Well they do, but they arent as consumption directed.

For example, my uncles are filthy rich and a lot of their friends as well as well as their larger family - we are talking 200+ million here ... They have been driving most of them Hondas, Volvo's, and good VWs cars... not top of the line but mid-line or so. They have kept it for a decade as far I remember.

I myself sometimes goes weeks before I grab my wallet and actually spend money on something... i simply dont see the need. Most stuff after you use them 1 time, end up in the basement or something never to be used again...

Left

  • Handlebar Stache
  • *****
  • Posts: 1159
Re: Savings rate in EUROPE more difficult than USA
« Reply #23 on: October 25, 2015, 02:55:11 PM »
Quote
I second this as the system in the US i feel offers greater flexibility of changing direction unlike Ireland where degree courses are far more rigid. You may be more specialized in your degree area but I think the US system provides a more rounded individual.
they say the same here in the US but vice versa...

you hear how people can't get a job because no one wants to hire them? I partially blame that on them, when they were in school, they had too many choices and didn't use the time to connect/network with people in their field of study and focus on what jobs are looking for to study it before graduation. Part of why people take 5-6 years... they spend 1-2 years "looking for themselves" and end up in debt. Maybe whatever they found at the end of it, will include a flashlight to get out of debt hole.

I didn't go to an European school, but Asian schools I'm going to guess are a bit more like Europe (IE more structured), and in that case, I would have preferred the European system a bit more. It seems like overseas, schools are still treated as a place to learn and not "grow" as a person. Growth to me happens just by living... you don't need to go to school to grow and yet it gets treated like that in US. I don't know if it is like that in EU but the media doesn't portray it as such to me.

But I hear nothing on the thread that actually makes it sound like Europe is much harder than US. The majority consider 1/3 of paycheck spent on housing as normal here as well. And sure we have lower taxes but we get "less" provided, so we end up buying it which ends up coming out about the same as in EU. I'm talking about healthcare and transportation.

Though, I would say we have slightly better chances at investing in the US. It seems like it investing in the stock market has a lower barrier of entry, whether that is money or just attitude I'm not sure. But I saw/know of fewer people investing (general population and not business/investors) on their own through a stock brokerage. It seems like the fees were just plain higher over there as well, but I didn't any research and was just listening to them complain over a meal. But the same with real estate too, it's a lot easier to get real estate in the US, both with a mortgage and just availability of houses. The US has so much more land/open space that there are just more houses to buy. In EU, it seems like most people live in more urban areas which by definition means less land leading to higher real estate costs. And it's a lower entry to start a business in US from just glancing at the laws, I got lost in the paperwork when reading it once before. For me, I could just start something from my basement and call myself a business owner, or if I want it more official, I register myself as a LLC and within 1-2 weeks I have it up and running. Financing might be the same? I don't know, I never tried it. And I was comparing the laws needed from the perspective of a foreign guy, most involved getting the correct visa >.>

But all of this doesn't involve the "savings" rate. I'd say the savings rate is about even, we just have more variety of things to do with it once saved. One example is that I never heard about tax advantaged accounts for real estate investing in EU (by whatever they want to call it there), we have self directed IRAs if we went that route. I thought about this once in a while, putting a rental in my IRA, but then decided if I had to hire a managing company for it, I might as well just invest in REITs... and then I saw MMM's post on the reit SNH, so I got 5-10% in there. I got lucky and the price dropped a bunch, but I'm just holding it at moment, and future contributions all go into VT for me.
« Last Edit: October 25, 2015, 03:04:26 PM by eyem »

Sean Og

  • 5 O'Clock Shadow
  • *
  • Posts: 79
Re: Savings rate in EUROPE more difficult than USA
« Reply #24 on: October 25, 2015, 08:03:44 PM »
The majority consider 1/3 of paycheck spent on housing as normal here as well.

Spending 1/3 of my paycheck here in the US I believe would only happen in the most HCOL cities, I spend about 1/10 of my paycheck (not including my wife's income) in the Midwest city I live in. In the EU you will pay 1/3 of your paycheck as a minimum in any of the cities, I know I was.

And sure we have lower taxes but we get "less" provided, so we end up buying it which ends up coming out about the same as in EU. I'm talking about healthcare and transportation.

I am going to have to disagree here as we are discussing Ireland in particular in this thread. Your statement may be accurate for other European countries however, I will agree.

The roads infrastructure here in the US is far superior to Ireland and outside of Dublin (maybe include Cork also) public transportation is pretty unattractive to most and seems to be getting worse, yes it exists but so does the Greyhound and Amtrak here. Dublin doesn't have an underground and is primarily serviced by buses, there is an overground train system called the DART and a tram network (only 2 lines), neither of these connect to the airport and are limited in route. The nationwide bus service seems to be reduced every year with private companies doing their best to fill a void but only on the lucrative routes. The train service is no better than the amtrack IMO. Many places in the US have equivalent public transport systems.

Healthcare is public in Ireland yes, and I found it to be sufficient when I lived there but never had to use it much, many however choose to also have private healthcare insurance, the premiums for which can be similar to here in the US. The one plus in Ireland however is that you don't have to be worried about major out of pocket expenses if you suffer a serious illness. People being bankrupted by illness just doesn't happen.

Social support is probably the main area I see a difference as Ireland are /were quite generous to the less fortunate within the society but as a working person that isn't something that would help your savings rate.

Overall, you have more of your paycheck in your pocket in the US and I don't see an equivalent drop in public amenities / services to reflect that when comparing directly to Ireland.

I can only speak from my personal experience and say I would never be able to achieve the savings rate I have now if I were still living in Ireland.


daverobev

  • Magnum Stache
  • ******
  • Posts: 3337
  • Location: UK
Re: Savings rate in EUROPE more difficult than USA
« Reply #25 on: October 25, 2015, 08:27:49 PM »
In Europe, even a Partner or Director in a company like Deloitte or being a CEO of a company like Santander - one of the biggest banks - you probably make AT THE MOST about 150k a year and this is being the #1 in that company.

No. No, no.

https://uk.finance.yahoo.com/news/ftse-100-ceos-average-pay-125518590.html

HappyHoya

  • Stubble
  • **
  • Posts: 134
Re: Savings rate in EUROPE more difficult than USA
« Reply #26 on: October 25, 2015, 09:19:33 PM »
You're comparing an expensive capital city to a whole country. This isn't about one country being harder than another. As someone who lives in an expensive city in the U.S. (Washington, DC), it can absolutely effect your savings rate. You may be getting a distorted view of the U.S. because it's a large and diverse country, and people tend to emphasize the good things about where they live, but there are almost always trade offs.

Left

  • Handlebar Stache
  • *****
  • Posts: 1159
Re: Savings rate in EUROPE more difficult than USA
« Reply #27 on: October 25, 2015, 11:20:33 PM »
Quote
I spend about 1/10 of my paycheck (not including my wife's income) in the Midwest city I live in. In the EU you will pay 1/3 of your paycheck as a minimum in any of the cities, I know I was.
I'll take your word for it, no experience in ireland outside of airport

but out of curiosity, did you live in the US before or after Ireland? Mostly, did you get accustomed to the smaller houses and then kept using that size while in the US?

I noticed that when I was living in Asia, I got used to smaller houses, and when I was in Australia and now US, I just live in smaller houses which are generally cheaper too. Just wondering if your spending 1/10 on housing is really from cheaper housing or just different standards than US norm

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 3057
  • Location: Emmaus, PA
Re: Savings rate in EUROPE more difficult than USA
« Reply #28 on: October 26, 2015, 06:03:06 AM »
You're comparing an expensive capital city to a whole country. This isn't about one country being harder than another. As someone who lives in an expensive city in the U.S. (Washington, DC), it can absolutely effect your savings rate. You may be getting a distorted view of the U.S. because it's a large and diverse country, and people tend to emphasize the good things about where they live, but there are almost always trade offs.

Dublin is the capital, sure, but the entire population of Ireland is 4.6 million. A few more people than metropolitan Phoenix.

HappyHoya

  • Stubble
  • **
  • Posts: 134
Re: Savings rate in EUROPE more difficult than USA
« Reply #29 on: October 26, 2015, 06:07:17 AM »
You're comparing an expensive capital city to a whole country. This isn't about one country being harder than another. As someone who lives in an expensive city in the U.S. (Washington, DC), it can absolutely effect your savings rate. You may be getting a distorted view of the U.S. because it's a large and diverse country, and people tend to emphasize the good things about where they live, but there are almost always trade offs.

Dublin is the capital, sure, but the entire population of Ireland is 4.6 million. A few more people than metropolitan Phoenix.

Sure, but the OPs specific examples are from Dublin. The OP is 32 with a family of 4 living in a major city. I'm DC, it's not a given that a family of four could have a 2 bedroom place in the city proper and still save. Heck, having 2 kids by 32 around here would make people think that you must have family money or be millionaires somehow already! I'm not saying it's right, but OP isn't alone in his frustration or doing a bad job saving.