This is a guest post from Hein Viermann. A freegan in his early 30s, who lives in Germany and wants to get out of the corporate career system. He invests mainly in real estate/rentals.
I was born in 1978 and I’m on the brink of retiring (extremely) early. As I started to be critical towards consumerism early in my life, and embraced freeganism, simple living and childfree life style. All these are definitely not part of the German mainstream, and especially not of the corporate, career-oriented, bourgeois, and wealthy people life styles. An early retiree is a relatively rare species, I suppose, because a lot of old money to inherit faded away in the 20th century wars, and more important, because the welfare state gives a minimum (“ALG2″) of monthly benefits of 345 € + simple housing costs (up to 360 €) + health insurance ( about 140 €) to every needy German citizen as well as to certain categories of residents. (Families get somewhat less per head.) This means that instead of early retirement from your own income, you can become a state-sponsored bum with the equivalent of — let’s say — 800 €. (Most people, who collect their ALG2 are not bums, but honestly willing to work. But that is another problem.) Of course, for many this would mean a low social status, and being chased around by the authorities to potential employers, or worse, to training courses and internships. The logic of the system is that a jobless should have the habit of regular presence at a workplace, or school, or at least the employment agency. It should also keep people from using ALG2 as a basic income and have disposable time to earn a premium on the gray, or black labor market. Many, especially in the big cities, are quite sophisticated in keeping the interventions of that agency into their life to a minimum, but risks and insecurity remain. There might be cuts to your ALG2 to bring you in line with the system. You can stay on welfare indefinitely, with the minor change of institution from the unemployment agency to the welfare agency at around age 60. You are only eligible to those benefits, if you cannot be supported by your spouse, or live from your savings, or other possessions. You may still own a modest house (only common in rural areas), but in practice the average ALG2 recipient has a low or negative net worth. There is also little incentive to save, because after saving too much you are not eligible for ALG2 anymore.
I’m starting with all this welfare state theory, because it partially explains the rarity of [financially independent and] early retiring Germans with a good education and a good career start. Those, who’d rather have just a basic income being free of work or studies never have to start moving the hamster wheel. And the ambitious might have enough ambitions for many years of studies and some decades of career. I’m one of the (relatively) ambitious, but I’m seeing more and more clearly, that too much work would likely end up in my estate becoming too big to draw down in retirement. The big majority can invest their surplus incomes in vacations (most people have more than 25 days of paid leave per year), cars (Mercedes and BMW are almost standard cars nowadays), and family (Germany has world-record child and ex-spouse support after divorce, and every second marriage or so will be divorced). I’m lucky enough to have few monetary needs. Energy prices are high here, but food is relatively cheap, and I like to freegan in addition. It’s possible to survive for 500 € per month in most small university towns, or even in Leipzig or Berlin (not in Munich), if your health insurance is paid in addition to the 1/2k, and if you are ready to share an apartment with somebody. It is very common – even for older singles. Compulsory minimum health insurance for an average non-working single is about 140 €. It does not apply to certain groups of people who might have to pay much more, because they are not allowed to the public system, but to the gross majority. Therefore I will concentrate on that number.
As you can see, living simply but comfortably is possible for less than the welfare state bum income. In addition, being outside the state-sponsored class of the poor, you might loose special benefits and discounts such as discounted public transport, or state sponsored lawyer bills. There is no need in Germany to start university, or work in order to retire early! It’s even counterproductive, because the more uneducated you are, the higher the chance, that the job market has no need for your skills.
Let’s get back to the ambitious I. Don’t think now, that I regret having finished university and working my ass off in different jobs. No, I find little pleasure in being poor, even if it’s luxury version of poverty. I like to be wealthy, but I don’t like to take part in the silly game of consumerism. Wegwerfgesellschaft — throw-away society, is a nice German word for it. Basically, I just have to find the right moment to reduce speed, or pull the brake. I may also say, that I do not enjoy following orders, or contributing to an institution of consumerism with my work. I don’t like that I have to fit in socially in the workplace, that I’m dependent on my bosses taste, that I can not freely express myself. I may have to take part in office consumerism: contributing to silly birthday presents for co-workers, eating out at a restaurant with colleagues, being dressed appropriately, no freeganing in the cafeteria… I may refuse, but then again, that’s not good for my [career] integration. Work (doing things) is ok, but the repressive social environment is nothing I want to recommend. Most workplaces have some of it. I don’t want to waste years by working more than what sustains me through my life. I accept that you cannot plan perfectly to avoid leaving any inheritance, but one shouldn’t go overboard in accumulating money. I want my life for myself — I guess that’s fair.
So I might retire this year, or next year, or at 35. I might semi-retire. I might take up another job, if it pays well, and gives room for self-expression. Most compatible to German social state would be a small part-time employment, because it reduces the cost of health insurance. With a job of — let’s say — 500 € per month I have my insurance for about 40 € per month (about 8 % of your income), while paying about 140 € without being employed. And if I keep paying into the state pension fund, and if I do so until the official retirement age (65, 67, …tbc) I will have a small pension which determines my health insurance cost — maybe I’ll get insured for 30 € then! Without a state pension and an almost full record of paying into the state pension system, I would have to take the 140 € insurance (still acceptable). Anyway, reforms are planned by the governing parties.
For a college graduate in Germany, it should be possible to have a monthly net salary of 2000 €. This involves compromises about the kind of work, overhours, idiots as bosses and co-workers, and it’s not going to work without some serious dedication to the whole silly game. The health insurance is then already paid. It is roughly 8 % of the gross salary, so your are paying about 270 € (plus about 250 € from the employer in addition to what’s in your gross salary). A saving rate of 75 % is therefore possible. Engineers or computer kids may have higher salaries and saving rates.
I will have few fellow Germans to share my ERE strategy. But foreigners are invited to check out, whether ERE in Germany might be an option for them.
- cheap real estate (both rental and for sale) in economically and demographically challenged areas, while infrastructure is good and life quality is high (small studio for 25k is possible in Berlin or a room for 200 € rent)
- examples: Berlin, Leipzig (smaller, but very inspiring city, 500,000), Greifswald (university city near the Baltic Sea, 50,000), Witzenhausen (university town with organic agriculture studies, 16,000, nice hillside)
- affordable compulsory public health insurance (140 € per month)
- swimming, hiking, cycling, canoeing possible in many places
- good hitchhiking infrastructure, affordable public transport
- low property taxes; no wealth taxes
- no income taxes on the rent equivalent of your residence – even if it is a 7 digit mansion
- about 10k income p. a. is tax free
- low food prices (organic is expensive, of course)
- many subcultures with tolerance towards frugality (but rather not in your workplace)
- difficult to get a permanent residence for non-EU citizens without regular employment over several years, but there is a loophole: studying in Germany is almost free, you can take up studies pro forma and see further…
- cold climate (on the other side: no air-con needed)
- language barrier
- internet surveillance is becoming worse – Germans are afraid of filesharing
- job market is difficult to enter – but, hey, you want to retire, don’t you?
- cars (e.g. RV) have high yearly expenses; gas is expensive
- high energy prices
- high child and ex-spouse support, and for huge minority still a housewife-stay-at-home culture
Let me now tell you about my own strategies of saving. To begin with, I am a very conservative investor, and never have owned stocks in my life. I have most in real estate which can be rented out. I can live from 500 € per month plus health insurance. I’d usually live in a house of my own, which I would partially rent out. That makes zero costs for living, but opportunity costs, because I’m not renting that room out. I buy only staple food, and I freegan in self-service restaurants and similar places. Still, I’m not stingy with food, so I might spend 200 € per month. Clothing and shoes amount to less than 50 € per month. The opportunity cost of rent is about 200-250 €. When traveling, I might not keep a room for myself at all, leaving more money for transportation. I need little else, and I travel very cheap by hitchhiking and cheap air tickets. In the city I use the bike. I like to couch-surf and offer my couch. This also gives me the chance to meet other people with alternative lifestyles. I go hiking, cycling, swimming, none of which costs money. I avoid spending money in restaurants (freegan!), places of the entertainment industry, books, CDs, and for pre-organized travel packages. I don’t own a car, although I consider living in an RV in the future instead of keeping a room. I buy very little stuff new.
I’ll say some words about freeganing. It’s rather difficult to hunt and gather in supermarket trashes, because supermarkets try to prevent this. There has even been a court case with a 200 € fine in the university city of Tuebingen against a dumpster diver. Sometimes it works. I don’t usually do it, because the time invested is too much in relation to the return. When in Germany, I do a lot of fast food freeganing. I never buy the stuff, but it’s ok for free as a contrast to the vegetables and fruits I buy in the supermarket. It does not take much time, and if you are experienced, you find easy access to Burger King food trays in the trolley. After festivals the trash boxes are full. The university self-service restaurants usually offer an “assembly line” of trays etc. I read that one third of food in Germany is actually thrown away. Going out in the evening is often cheaper than to stay at home, because when I’m in cities, I often find food. (Of course, I wouldn’t pay for clubs, or drinks. My high monthly food cost is due to being in restricted in my search by being at work, or in a city, where I can’t risk being seen freeganing, because of my work.
Clothing can also be found – with shoes it’s more difficult. Germany is an expensive country, when it comes to clothes, but I have little need for brand and fashion. Two pair of shoes per year are very likely, since I’m walking a lot. (No car.)