Today we continue the ESI Scale Interview series where people answer questions about their success at working the ESI Scale.
In short, the series focuses on what the interviewee is doing in the areas of earning, saving, and investing. They also get an opportunity to ask ESI Money readers for suggestions if they choose to do so.
If you’d like to be considered for an interview, drop me a note and we can chat about specifics.
With that said, let’s get started.
My questions are in bold italics and her responses follow in black.
OVERVIEW
Please tell us a bit about yourself.
I am a single female, aged 33.
I currently live in a medium sized city in the northeast but I just accepted a job offer with my company to move to Germany! This is both super exciting and super terrifying!
I have never been married, but my ex DINK (Double Income No Kids) partner and I were together for 9 years and co-owned a home…more on that later.
I am actively pursuing FIRE, despite not knowing that it was a thing until about 2 years ago!
To be clear, I don’t plan to retire and move to the old-folks community in Florida, but I do want to have a flexible lifestyle where I can work when I want, where I want, and with whom I want.
As an example, I’d love to take a contract/consulting role for 3-6 months, then take a 3-month trip to Thailand (or some other far-off land!). Rinse, wash, repeat that for a few years before finding some more noble causes, maybe. (I don’t have it ALL figured out!)
What is your current net worth?
$442k
This will go down to about $430k in a few months after I ‘sell’ my half of my jointly owned home.
Despite the decrease in Net Worth, I will increase cash by about $35k and eliminate my only debt.
ASSETS
- Cash = $93k
- 401k, IRA, HSA = $210k
- ESPP = $21k
- Taxable Investments = $32k
- Unvested Equity in my Company = $43k
- House (for now) = $250k market value
DEBTS
- $164k remaining on Mortgage
How did you accumulate your net worth?
I did not inherit any money. I accumulated my net worth through sounds ESI principles! More details below
EARN
Tell us a bit about your career.
I have an undergraduate degree in engineering, an MBA, and a few other professional certifications. I am currently in a Director-level role at a Fortune 10 company.
I have worked for the same company for just under 11 years.
In my first job, my starting salary was $45k and I traveled 35-40 weeks out of the year! I worked hard and got noticed by volunteering for special projects, traveling to the ‘less desirable’ client locations, and partnering closely with our support/development teams to solve systemic problems.
I could solve technical problems, but when it came to understanding the finances of the business or how our strategy came together, I was hopeless. Therefore, I decided to obtain my MBA.
I started this part time (and thus partially funded by my company), but I finished my last two semesters with a full 19-credit course load. (Yes, I did quit the company for those 8 months, but it was definitely the right decision at the time.)
When I graduated I had 3 job offers, one of which was with another unit within the original company. They offered the best incentives, so I went back!
Since then I have taken on multiple new roles in multiple departments (operations, product management, project management/process improvement, etc.), growing in both level and salary each time.
The overall CAGR for my salary over the past 11 years is 15.2%. I now have a total compensation package (base, bonus, equity, etc) of roughly $180k annually.
When I move to Germany I will have a similar salary, but the taxes are much higher, therefore my take home pay is going to be much lower. This is a tough pill for me to swallow, but the experience is going to make it worth it…I hope!!
Do you have a side hustle?
I did for the past 4 years, but with my impending move I am going to be missing out on this. I was an advisor for an MBA program where I was paid for my time, about $6k/year.
If you were rating these results on a scale of 1 to 10 (with 10 being best), what rating would you give yourself and why?
8.
If you asked me a few weeks ago I would have said 9 or 10, but this is the first time I have ever officially negotiated by starting salary – and I got everything I asked for.
Apparently, I have been leaving some money on the table for the last 11 years!
What are your future plans regarding growing your income?
For the next few years, I don’t anticipate any significant improvements. I am going to be starting at the very high end of my salary range in the new role I am taking so without taking a new role, I won’t have much room to grow my salary.
My hope is that the experience I gain will help catapult me into a VP-level role within 3-5 years. (TBD if I want to come back to the States or stay abroad for this, but I do know it would be more financially lucrative to come back.)
SAVE
What percent of your gross income do you save?
Purposefully, 38%. In reality, 62%.
The difference really is that chunk of ‘cash’ that you can see I have.
I max out 401k, HSA, ESPP, & Back-door Roth IRA.
Beyond that, I put about 15k per year into taxable investments.
What’s left has just been accumulating as cash. I don’t have any grand plans for this cash – in fact I bet many of you are screaming at me for not having it in at least a taxable investment account. Some others might say real estate…I’m open to advice/suggestions. (nudge nudge, wink wink)
How did you get to this level?
I started investing in my 401k from pretty much the day I started working full time, but only enough to get the company match (5 or 6%).
There was this great system in my 401k program that let me set an auto-increase of 2% every year. I figured that I would get a raise each year and never notice this 2% in my take home pay, so I ‘set it and forgot it’.
I now have maxed out my 401k contributions for the past 2 years. (I highly encourage everyone to use this feature!)
Once I maxed out the 401k, I started to look into Roth IRAs and then eventually opened a taxable brokerage account.
Another option I took advantage of is my company’s employee stock purchase program (ESPP). We get a 15% discount on up to 15% of our salary.
Until last year, our stock had been in constant, steady growth. I was able to get a few thousand dollars per year out of the program with taking on very little risk.
Unfortunately, our stock is not so hot right now and it’s much more volatile. I have stopped contributing for now, but I am leaving the current amount in there as the analysts predict that we are undervalued. TBD how that will turn out….
Another topic, and something many of you can commiserate with… After graduating from my MBA program, I had a combined undergrad/grad student loans of $102k.
Despite having reasonable interest rates from consolidation, I HATED having that debt loom over me. I focused on this debt and I was able to pay it off in 6 years!
Since paying this off (and coming to the realization that apparently that’s not ‘normal’), I really started to educate myself about personal finance. I still have lots to learn though!
Lastly, I credit my high rate of savings to the facts that I drive a 9-year old car, I shop almost exclusively at places like Marshalls/TJ Maxx, and I love estate sales and re-sale shops for things like furniture and other home goods. I’m probably better at ‘not spending’ than I am at ‘saving’!
If you were rating these results on a scale of 1 to 10 (with 10 being best), what rating would you give yourself and why?
9.
I have made sure not to let my lifestyle inflate at a faster rate than my income.
As I noted earlier, I have a CAGR in salary of 15%. The CAGR for my expenses is less than 8%.
My annual spending was $26k in 2011 and I expect to land around $42k 2018.
What are your future plans regarding saving your money?
I am definitely going to continue to save at least at a purposeful rate of 35%-45%.
Beyond that I have a LOT to figure out in my new life in Germany, so I am going to try not to stress if I don’t save more than that for a few years.
Ultimately, I live relatively modestly, but I can tell you with tremendous certainty that my travel budget is going to be WAY higher so that I can enjoy my time spend living in Europe! ?
INVEST
What are your main investments?
- 401k, IRA, HSA = $210k
- ESPP = $21k
- Taxable Investments = $32k
- Unvested Equity in my Company = $43k
As I have noted, I max out my 401k, HSA, and Roth IRAs. According to Fidelity, my annualized rate of return is 10.5% for my 401k. I’m not sure on the Roth or HSA.
My taxable brokerage account is very new (<1 year old) and is exclusively index funds currently. YTD returns are about 5%.
I am now realizing that I have $64k in my company’s stock, which makes me feel uneasy.
I can’t do anything about the unvested equity yet, but I’m rethinking holding onto the ESPP. (I already noted that I have stopped contributing to the ESPP.)
My unvested equity is down from a high of $50k at grant dates to $43k today.
Again, analysts say we are undervalued, so hopefully it will creep back up a bit by the time it vests (1-3 year horizon on existing).
If you were rating these results on a scale of 1 to 10 (with 10 being best), what rating would you give yourself and why?
7.
I want to say 5 or 6 compared to other ESI Scale or ESI Millionaire interviewees, but 9 or 10 compared to my peers, friends, family, etc! I’ll split the difference with 7.
What are your future plans regarding investing?
This is a HUGE question for me now given my international relocation.
My company doesn’t have a 401k or ESPP in Germany.
I also have to contribute to a compulsory German pension. (To me it’s more like social security than a 401k.)
I haven’t done NEARLY ENOUGH research to what my options are going to be beyond increasing contributions to a taxable account.
WRAP-UP
What money mistakes have you made that others can learn from?
Overall, I’ve been very lucky not to make any really dumb money mistakes. I even feel pretty good about how my ex and I handled our finances and the ultimate untangling of things. (We each kept separate accounts for personal use and kept a joint for the house, groceries, utilities, etc.)
I guess my big ‘mistake’ is that I probably would should invest more. I earn and save really well, but I’m losing out on our good friend, compound annual interest.
Another thing that this question brought up for me is that I sometimes get too high-strung about my finances & achieving FIRE.
I think we all need to get a little perspective on this, no matter our individual circumstances. I suspect that everyone reading this has a roof over their head, a fridge full of food, and clean clothes on their back.
Are there any questions you have for ESI Money readers regarding any parts of your finances?
I know I have too much cash. What do you all recommend?
Anyone have any experience relocating internationally and learning about ‘personal finance’ in other parts of the world (Germany specifically would be awesome!)?
Any other general advice based on what you read about my experiences?
Truly fantastic that you have worked hatd, increased your income and added value to your self through MBA and other certifications. Adding in your low cost lifestyle and you are set for FIRE.
As a fellow expat with a large company I am concerned that you are not getting a remuneration package to move overseas. It seems you will get a lower net salary (tax impacted), not be able to contribute to 401k etc. This is unusual for an overseas move to be negatively impacted relative to your current US siutstion. Encourage you to negotiate the terms if it’s not too late and seek some offsetting compensation for the backwards step in financials, even though you will get a huge forward step in experience and life fulfillment from the overseas move. All the best
Thanks for the note!
I am not getting remuneration / tax equalization because I’ve taken a permanent position on a German contract of ‘unlimited duration’. (The definition of expat is a bit vague in this sense.) When I submitted for this interview I was still in negotiations. Luckily, I have negotiated a higher base salary that maxes me out in my position to overcome as much of the tax impact as possible. That being said, I will net about 3-5% less than I do today but I have a few perks that I don’t have in the US such as a company provided vehicle & transportation allowance. 🙂
Well done. And congratulations for coming over to Germany. A good choice from my point of view being German myself. FIRE is not a big topic in Germany these days. When I try to talk to people about this they mostly look at me as I am talking about aliens. There are very few FIRE blogs (the couple that are around are almost a translation of MMM with few readers).
You are right, your net income will decrease significantly. I am making about the same as you do (150k Euro, about 180k USD) and the calculation on the net is as follows (not married, no kids, Euro numbers, all mandatory payments, basis 150k Euro) – hold tight to not fall of your chair:
* tax: 53.400 Euro
* social security (pension): 6.500 Euro
* social security (unemployment insurance): 1.000 Euro
* health insurance: 5.200 Euro
That leaves you with a net salary of approx. 85k Euro.
The main fear I read in all of the US based FIRE communities is health care. Once you are in Germany there is no need to worry anymore. With the health insurance you pay everything is covered. Broken arm? Get to the hospital they fix it. For free. Complicated surgery by a specialist? All covered, no further costs. I know there are very different viewpoints but having myself lived in different places of the world I am very proud of this health care system we have over here which covers everyone, regardless of income. Yes, its not perfect and people still complain but it gives everyone a good coverage.
I am sure – as you mentioned in then text – you will spent quiet a lot for traveling through Europe. But flights are cheap (use EasyJet and Ryanair) and you can get from Germany to almost everywhere in Europe for 100 Euro return flight. In Germany use the high speed train system which brings you with a speed of up to 200 mph everywhere (e.g. Berlin-Cologne 4 hours, Berlin-Munich 4 hours, Berlin Frankfurt 4 hours).
Not sure where you are moving but housing is a big issue in the last 3 years. In the big cities it is a very tough market and prices are skyrocking. You should discuss with your employer that they cover a couple of weeks hotel stay and support you with the rent. Marty is correct, usually the company that sents colleagues to other countries does this with a pretty nice expad package which you should also try to get.
If you have specific questions just drop a line and I will try to answer them.
All the best. Tom
Thanks Tom! Especially for sharing your net calculations – they are very similar to my estimates so at least I know what I am in for! 🙂
Regarding Healthcare, I am actually quite excited about that aspect. I font have any significant issues, but the idea of being able to take care of my physical & mental self without worrying about the cost is very freeing!
Regarding housing I have 2 months covered by my employer while I search for more long-term apartments/flats, so I’m good there! They are also covering all of my other relocation expenses such as air and sea shipment of goods, assistance in the sale of my US home, flight to Germany, Immigration support, and Tax consultations for year 1. I think its a pretty good deal overall!!
I do have a few questions:
1. Do you pay Church Tax? That’s one area I am hoping to save with as that is QUITE expensive!
2. Do you own a home? I am considering purchasing, but the Germans I talked to about this thought I was NUTS! I do plan to stay for at least 5 years but I’ve not really consider what I want to do after that. As you mentioned, housing supply is limited, therefore I believe it would be a good investment opportunity.
PS – I am moving to Stuttgart.
Sounds like you got a really nice expat package with the new job; well done!
Regarding your questions:
1. I don’t pay church tax as I am not religious (pretty common in Germany). With your salary you would be paying an additional 4k Euro p.a. for this tax. But you can opt out (and than on free will by yourself decide for what causes you give money or not). When you start filling out all the papers to move to Germany there will somewhere be a question what religion you belong to. Make the tick in the box where is says “none”. If by accident you are already registered and they start charging you the church tax you need to go to the residents registration office (in German “Einwohnermeldeamt” – good luck pronouncing that right, lol) and opt out. (You have to go to that office anyway during the first couple of weeks when in Germany to register, its mandatory.)
2. Property ownership in Germany is one of the lowest in all of Europe. Most people rent for good reasons. The numbers just don’t add up. Some of our fellow US FIRE blogger who invest in property calculate their property investments as follows: the monthly rent should be about 1% of the purchasing price (or 8.3 yearly rents). Compare this to the German messed up property market: My apartment would sell for about 40-50 years rent (lets say 1k rent per month comes to 480-600k property price). That gives you a yield of max 2% (before any costs!). So, the Germans you talked to are right, it’s NUTS to buy in that market.
Stuttgart is a nice area. One of the richest region of Germany with lots of big and successful companies (Mercedes and Porsche included) and a main airport hub for the cheap airlines which will help you with all your European travel. The drawback is it is also the most traffic congested city in the country. One of the reasons for that is that the city rests in a valley completely surrounding the city. So even though you get a company car try to check out if MMM’s strategy would not be better for you (life close to work, take the bike) or use public transport which is pretty good all over Germany. Because of the relative wealth it’s also quite a snobbish city and additionally draws attention to a high number of foreigners (and not always the Director or VP kind of people you are – without getting to political here…). Overall a great region in the middle of Europe that you will for sure enjoy big times.
Tom
Nice work and growth in your ESI scale of progress. Congrats and good work. Moving to GER is a lot of fun. I have spent a lot of time through work in GER and other countries. One thing you could consider – if you have not done already, is try to work with your employer to do an EXPAT setup. If your plans are to come back to US at some point, this might be a good option if your employer is willing (with fortune 10 – I imagine they can do this). With EXPAT, you are paid through US company as US employee. Therefore, you get to contribute to social security, 410K, health plan and all US benefits. You will do taxes in GER and US. You will get full deduction for any GER taxes paid. If you are planning to settle in Europe, this is not a good idea.
You will enjoy Europe traveling various countries and enjoying cultures & food. Wish you best.
Thanks for the suggestion & comments!
My company does have this, but they are doing it less and less. Its much more expensive for the company and we don’t have great options for repatriation yet. The US and Europe operate very independently. I had to use personal contacts to get the job in Germany as we don’t have a globally-focused HR team (yet).
I also wanted to spend more than 2-3 years in Germany, so a permanent role made more sense for me. I do think that I will eventually come back to US, but I may make a few more stops before then! My company actually operates in 12 European countries, so I may bounce around for a while, who knows!!
Great job! You are really on the right track and have your act together. I’m many years ahead of you and have achieved millionaire status ( with the added help of my wife’s income), and also still have too much cash. However it makes me comfortable. Don’t worry too much about that if that makes you feel better. If you’ll be overseas consider setting up your cash for automatic investment into a Roth or traditional Ira while you are away. Soon you’ll make too much money to contribute to Roth if you’ve not already hit that limit then consider automatic investments into a traditional brokerage account. Your cash can get gradually invested while you’re gone and get some dollar cost averaging investing over time while you’re gone. Keep the earnings growing and keep your expenses low and your on track to have a lot of options in the very near future. Very impressive had a such a young age.
Be cautious of concentrating too much of your wealth in Company stock. All your eggs in one basket is always a bad thing. I was briefly a paper multi millionaire in my early 30s due to company stock options. The options vested, the company went public, and then the stock value quickly went to zero. Each company is different and who knows maybe you can get rich off company stock, but concentrating all your funds into a single stock is always risky. You’ll hear stories about folks that had Amazon or Facebook stock early and got super rich because they advertise those stories. All the stories of folks that lost money on Company stock typically keep quiet. That happens more often than the winners but you don’t hear about it as much
Thanks!! 🙂 I definitely feel like I’m heading in the right direction overall, and I’m very fortunate to have grown my career and income so quickly.
I already make too much for Roth, but I do a backdoor conversion today. In the US side of my company it is possible to do Mega-back-door Roth IRA conversion, but so far I haven’t gotten confirmation it would be possible to do when in Germany. I do plan to at least continue the $5500 contribution to IRA, though that doesn’t seem like much when I’m currently maxing out 401k AND doing back-door Roth IRA today.
Since I wrote this interview, I have moved another 20k into my Vanguard account. I plan to do the same with the proceeds from the sale of my house. I like your suggestion about setting this up to contribute regularly for cost average investing. I might look into this further! 🙂
I totally get it with company stock. Like I said, I have stopped purchasing through ESPP for now and I dont have access to the Restricted Stock yet. Once I do I will reallocate the dollars into index funds most likely.
Again, thanks for the note!
Well done. Financially and career-wise you are really on a good progression. We’ve all been really fortunate to for the stock market run-up of the last years, but I suspect not a whole lot of people your age were t savvy enough to join in. You were. Good on ya. And now off to Germany! It’s a terrific place. My wife & I spent 18 years in England & Austrlia and I can’t imagaine a life that doesn’t include some time abroad. It won’t always be easy, but you’ll expand your horizons in ways you never imagine. To make sure you stay on the same financial track, you should definitely get some good tax & SS advice – if it’s not in your expat package, pay for it. Money well spent. You’ll probably get a (nice German) car in your package. Drive safe!
Being an expat is a lot like being an astronaut I think. Lift off can be terrifying. But onc in orbit it’s a blast, even though it can be a bit lonely since you’re so far from home. But the worst part is actually the re-entry. You’re different and the office you worked in will be different. So keep your contacts current. But most important, have fun – and keep growing your ESI.
Thanks M24! I love your astronaut analogy!! My younger sister spent 3 years in the Peace Corp and that’s similar to what she was told. Repatriation is the hardest part.
I do have one year of tax consulting from EY via my package. Tax wise I feel pretty good, but I still want to talk to someone about retirement planning as an expat. I am on a ‘permanent/indefinite’ contract, but I highly suspect that I will return to the US well before retirement. I need to put a plan together that accounts for the uncertainty…
And YES! I do get a car in my package which is super cool. I have driven my Honda Fit for 10 years so I’m looking forward to a nice, fancy, new (mostly free except taxes) car!
Thanks again!
You are on an awesome track. Enjoy your time & travels while abroad. You are going to have opportunities to travel so much more economically while there! At least you won’t have US to Euro airfares & time! Wow enjoy your experience. I know of a family in the US, the husband is Swiss & wife is US citizen –they have 2 young adult kids (20, 18, I think) they raised their family spending some months of the year in Switzerland — how awesome is that!? Not sure what his corporate career was, but recently retired, wife is a musician, so flexible with travels).
Great Job so far!
Personally, I wouldn’t worry about have the $90k in cash.. you should keep 6 months of living expenses at least in cash.. However, I’d put it in a cd or 3 month tbill while you didn’t need it. At some point when you get back from Germany, You will need to purchase a home so good to have that down payment readily available. I also agree with the first responder Marty regarding a package to get you to move to Germany.. you shouldn’t have to take a pay cut…
Good luck!
Thanks! Based on my spending, $90k is actually >2 years of living expenses, so I could probably allocate more of it somewhere else. 😉
Regarding pay, it’s a challenging topic. I have a VERY high salary for Germany. My base is actually higher than I make now, but taxes cut into it to make it net -3 to -5%. My company doesn’t provide tax equalization unless it’s only you accept a role on “long-term assignment”, whereas I have taken a “permanent” position. There were pro’s and con’s to each side and overall I am happy with where things landed!
Make sure you have a trusted person set up as a power of attorney in the US to handle your state-side affairs.
My sister who lives in Germany recently found that her nationwide stock brokerage where she has had an account for decades will no longer handle a stock account for an ex-pat who does not plan to move back to the US within two years. Since she’s lived in Germany for 40+ years, that’s not happening. The brokerage also will not recognized my power of attorney for her. She’s moved her assets to a US-based brokerage that doesn’t have a problem with ex-pats’ money.
Also, Germany has changed its rules regarding whether German stock can be owned by foreigners who live in the country. Find good German (or I should say international) tax and estate advisors so you’ll know how you need to set up your financials in both countries.
My son now lives in Sweden and is having a blast, so enjoy the EU!
Great point for anyone moving abroad on Power of Attorney. I have actually already set up my mom as such!
Interesting on the brokerage account. I have Vanguard – I guess I’ll have to double check their policies….
Thanks!
The “unvested equity” piece is always an interesting one. Having lived and worked in startupland for many years, I see what happens when this goes very well and what happens when people bet big and lose. Those who have been around for a while understand there’s always a balance, but taking a compensation package that limits your current income in exchange for future equity is always risky. There’s a middle ground for sure, but I’ve seen too many people work for years at a reduced salary on company that doesn’t pan out.
I’ve seen that as well. That, or someone starts spending before the investment liquidates- big mistake!
That being said, my RSUs were a bit of a nice surprise a few years ago. I started getting them earlier than most people in my company, based on my job grade & tenure. (Remember, I’m not at a start-up, I’m at Fortune 10 company.)
In fact, having the RSUs is what helped me to negotiate a much higher base in my new role in Germany. They don’t have an equivalent equity program in Europe (yet). Since I have had RSUs for a few years now, I was able to leverage it in my negotiation to increase my base in my new role. As I noted in the interview, and in some comments, with taxes net is still slightly less, but its for cash NOW vs potential future equity so there’s something to be said for that!!!
Ultimately, companies pay based on the market. In Germany the market doesn’t demand as much as it does in the US. That’s what I’ve had to come to terms with if I want to take a ‘permanent’ position!!
Thanks again!
This was such a good read. We have a very similar career trajectory with me being a few years behind. I graduated from engineering and switched to a project management role recently after 4 years of technical experience. I want to eventually become a manager of a team or director so you really are where I want to be career wise. And you also see debt as a burden like I do.
I want to get an MBA degree but the one that is in my area that is a top 25 MBA costs about $125k!! I can go to a less known one that is a generic state school and it will only cost me $35k.
I wanted to get your input on what you would do in my shoes. Does it matter that much whether you go to a top 25 MBA school or a top 250? 🙂
Any other tips for career progression besides jumping on harder projects that everyone else avoided?
I hope you have a blast in Germany. You should definitely allocate some travel money. It’s a great opportunity to travel a LOT at a much lower cost. I would love to see a follow up interview from you regarding your financial experience in Europe as I have always wanted to move there but I’m concerned that salaries are lower.
Thanks!
RE: MBA
Honestly, I didn’t look at rankings. (Note, currently the regional ranking for the school i went to is in the 30s and nationally its in the 50s.) I just knew that I was severely lacking in business fundamentals. I didn’t get my MBA because I wanted to be recruited by a big 4 consulting or to a big, sexy tech company. I did it so that I could understand what was going on around me. Therefore, I think it depends on what you want. If you want to get into rotational development program or get into big 4 consulting, you should go to a top ranked school. If not, I personally don’t think its as important. I’d be curious to hear others’ thoughts on this topic though.
RE: Career progression. I have a lot of opinions about this. 🙂 I can sum it up by saying to focus on the “4E’s of Career Development”: Education, Experience, Exposure, and Evaluation.
Here are few other thoughts that come to mind quickly…
1. Consider moving laterally. You don’t always need to move ‘up’.
2. Take advantage of all of the training/education you can get for free via your company. I have taken over $20k worth of courses in the last 11 years and didn’t pay a dime.
3. Be sure to make it known what your interests are. It’s not enough to just ‘do good work’.
4. Volunteer for special projects BUT be sure they are full of ‘promotable tasks’. I don’t advise professional women to volunteer for things like social committees. Volunteer to be a mentor or to help on-board a new hire. Don’t offer to plan the next office party.
5. Realize that life is 10% what happens to you and 90% how you react to it. Stay positive in the face of adversity & change. This is something that all the best leaders I know do really well.
6. PRIORITIZE and “do what you say you will do”. Remember, you can do anything, but you cant do everything.
The currency conversion will affect your income. Getting paid in US dollars, but paying rent in Euros, means your cost for rent, utilities, food, etc will fluctuate.
Read up on electricity conversion. When I was stationed in Germany, we had to buy adapter plugs for lamps, since the plugs/sockets are different there. You have to use a separate transformer for anything that has a motor. I blew up a TV by forgetting the transformer and just using an adapter! Once you’re in Germany, you can easily buy appliances that are switchable between European and US electric, without a transformer.
You’ll need to go to special drivers training and get a new driver license. Driving in Germany was a great pleasure, but the customs can be different.
There’s so much to see, and a lot of it within just a few hours drive. Don’t wait til your last year to start seeing it all. Enjoy!
Thanks for the note. I appreciate the advice, but luckily some of those situations won’t apply for me!
I am actually going to be paid in Euro, so no issues with conversion, at least not ongoing. That being said I worry about conversion rates to transfer some USD to Euro now, and also what it will be like in a few years when I return. (As of right now, it’s looking favorable to convert from USD to Euro, so at least I have that going for me! It’s certainly not the best it’s been in the past few years, but better than a slump I noticed a few months ago.)
As far as electronics, I’m actually not taking anything with me except my laptop. I am fortunate to have a ‘relocation allowance’ to help cover the costs of these things! Ill be spending frugally and putting the rest in savings. 🙂
For license, it really depends on the state you are moving from. I am luckily in that my state has full reciprocity with Germany, so no testing for me!! (See: https://www.german-way.com/for-expats/living-in-germany/german-drivers-license-reciprocity/)
I am an American who took an expat contract in Germany and later localized there. I understand you’re receiving a lower salary but it some ways it’s easier to live more cheaply there (recognizing the Stuttgart is expensive though.) I found it to be much less of a ‘consumer’ society. There is no Target lol.
A few tips not already mentioned:
1. Get a US accountant who understands the details about working abroad as there are some difference of what and how things can be claimed vs. someone who works only in the States.
2. Get a German accountant who understands the details as well once your EY support ends. The German tax authority can and does audit heavily. I was audited twice and my accountant handled that with them.
3. If healthy, consider private health insurance. While you pay a percentage of your salary for the ‘public’ system you can instead buy private health insurance. If you are sick or need it, you use it. If you don’t you can claim back a percentage of the premiums (not an option on the public systems). I had only a minimal need for health services so I paid out of pocket (doctors are a lot less expensive in DE) and claimed back the ‘no claims’ discount.
4. Sign up to expat blogs and forums, these can be a goldmine of ‘been there, done that’ advice.
5. Note that you can claim back your German pension contributions if you leave in under 5 years. Personally I don’t mind having a stake in their system as I think it will still be solvent when I retire but many people don’t want the added hassle at retirement of having to deal with a foreign entity.
6. I banked cash when I lived in Germany and converted it to USD to be handled by a financial planner as I was still planning to return to the States at the time. Later when I localized in DE I just saved it up in my bank account and bought my property for cash. Not sure it was the best move since I missed out on lowering my taxable income but I stressed too much about all of the fine print being in German on local investing. Later, I think this was OK for my situation, to not have a mortgage so it all worked out in the end.
GREAT insights, thanks!!!
I am hoping that something comes out of the ‘less consumerism’ side of things, but I already operate that way for the most part. I don’t buy much ‘stuff’ as it is. I’m not sure how much I could bring down my spending without forgoing traveling or eating out, but maybe I’ll be surprised!
RE: 1. & 2.
Great advice on accountants after EY support. Even just as simple examples, I just had my tax briefings last week and found that immediately I’ll have to file for US deadline extension given the timing for German tax filing. Good to know there’s a strong chance of audit. I’ll DEFINITELY pay for that service! 🙂
RE: 3.
I recall my employer saying something about private insurance, but they made it sound like it was ‘supplemental’. Are you saying I can ‘opt out’ of German public healthcare insurance payments??
RE: 4.
Do you know of any good ones? I have joined a ‘Stuttgart expat meetup group’ on Facebook already but I’d love to find more!
RE: 5.
From what I read if you leave in <5 years you only get access to half. Do you know anything about that??
RE: 6.
Not sure if you saw the comments from Tom above but it is interesting that you purchased a home… Did you do that because you decided to stay long term? What's your take on Tom's notes about it not making sense to purchase in some cases?
Regarding less spending, you’d be surprised. I always thought I was cheap and then in Germany I spent very little outside of travel. As well the shops are mainly shut on Sundays so shopping becomes less of an option if you work a lot.
3. Yes, you can opt out of public insurance if you purchase private health insurance which I did. When I was localizing my German colleagues did the research for me, they chose the company ‘HUK’ as the best for my circumstances. Other expats choose them often as you can do the claims forms in English. (Maybe there is some special reason that your company does not offer this option, not sure but I am thinking you are above the earnings threshold so it should be allowed?)
If you don’t choose a health provider your company will put you into a default ‘public’ provider which is fine for health insurance, I don’t want to be negative about German healthcare at all. But they might be fobbing you off as it’s more work for payroll to put you into something other than the default?
In layman’s terms the way my German colleagues described it to me was like this…public insurance is a percentage of your salary. If you are a pack a day smoker or have a chronic illness or a sick child, you’ll pay between 10-14% of your salary and that is a good deal for you. If you are relatively healthy, well paid and have no dependents to cover, private is better. Your premiums will be the same or lower than public and you’ll get better coverage.
Here is a link that probably explains it more fully than me: https://www.expatica.com/de/healthcare/German-health-insurance_693463.html
Side note: there are a number of insurance options in Germany, I once heard Germans are the most insured in Europe, not sure if that is factually true. You can buy standard home and contents insurance, legal insurance in case you ever need a lawyer and what they called ‘oops’ insurance, so if you damage something by mistake, so my colleague’s mother-in-law accidentally hit the power button for the freezer and they lost a lot of frozen meat. The insurance paid out on the loss.
4. https://www.toytowngermany.com/
5. *Your* contributions are fully refunded, your company’s contributions are not. Here are more details: https://www.toytowngermany.com/wiki/Pension_refunds_on_leaving_Germany
6. Fully agreeing with Tom, I should have been more clear. After I localized in Germany I moved to the UK where I purchased. In Germany it was about 50/50 for people in my age range (40’S) of who owned vs. rented. I don’t know of any expats who bought and I rented for my entire time there (6 years).
Side tip: in Germany, rented flats often come *without a kitchen.* Then you need to go to Ikea or the like to ‘buy your kitchen’ if you don’t buy it off of the previous renter. It’s awkward as your first flat may have a certain layout but your next one has a different layout so your kitchen doesn’t fit. Easiest (I did) was to rent a flat with an Einbauküche (built-in kitchen) although it limits your rental options.
I agree with uk american in some important points.
Health insurance:
Yes, you can opt out of the public health insurance but than can become a tricky thing long term. Public health insurance is taken as a percentage of your salary. It’s currently about 14.5% up to a certain maximum of income (so called Beitragsbemessungsgrenze), salary above that are free of the health insurance premium. So a cap is in place. Employee and employer share this premium in equal amounts.
You have the opportunity to opt out and instead decide for a private health insurance. The premium is completely independent from your salary but instead is calculated on the basis of your current health situation. If you are all healthy, low premium, if not, high premium. The tricky thing is that once you decide for the private health system there is no way back to the public one. Premium is usually lower than for the public system if you are in good health. BUT, there is no protection about premium increases. The last two years a friend who is privately insured had premium increases of 50% to swallow. Whereas that will not happen with the public one since it it highly regulated.
Also, you mostly have to pay your doctors visits first and than claim it back from the insurance. Another point to consider, if you get a child you would have to pay a separate premium for it in the private system, in the public one not, it’s covered with you. Lastly, if for any circumstances you fall so much in love with Germany that you want to stay long term premiums in the private system will increase significanty with age and there are cases where people pay 50% of their pension for private health care. That does not happen with public health care, is is always 14, 5% with a cap.
Regarding you company car what I didn’t mention: even though it is free from the first perspective the taxman comes into place. Taxation towards you is as follows: 1% of the list price plus 0.03% for every Kilometer between office and your place of living. Example: price of the car is 50k and you live 10 km away from work. That means the taxman sees this as a taxable income of 650 € (50k x 1% + 10km x 0.03%) for which you would pay about 45% income tax, about 3. 500 € p.a. So the free car is not really free. But since Germans love their car I know very few people besides me who opt out of a company car.
Uk american is also right that life besides housing is very affordable in Germany. You will be surprised how low prices are for groceries (shop at Aldi or Lidl which are the discount stores with pretty good quality). I would say your grocery bill will be cut in half compared to the US.
Also eating out is way more affordable. Prices on the menu are final prices, no additional tax and no expectations of 20% tip. People working in the service industry gain a salary and therefore employers can not put that burden on the customers by outrageous tip expectations. If you round up the bill by 5% all is well (please don’t tip as you would in the US, nobody expects this and you would mess up the prices :)).
That will also help driving your savings rate towards 70%, I would say.
Lastly, a good expat network is “Internations” which is all around the world. Just recently I went to one in Berlin, like about 600 expats. Highly recommend to sign up for them.
Thank you both again for all of your insights! I really appreciate the time you both spent to share this with me. This has been incredibly helpful to me in my preparations to move (3 weeks from today!!!!).