16 ms·

how is it possible to save 2.5 mil from salary? I am from upper 5% in germany in terms of salary, and I can only manage to save ~10kEur/year, while maintaining

how is it possible to save 2.5 mil from salary? I am from upper 5% in germany in terms of salary, and I can only manage to save ~10kEur/year, while maintaining decent lifestyle. An order of magnitude lower than you'd need to retire with such a sum after 20 years or so. How do you do that? Genuine question

mstipetic 6y ago
Germany is not set up to have people get rich from a salary. Everyone has a comfortable life, but it's very hard to get "rich." That's one of the reasons I left Germany
- ChuckNorris89 6y ago
  Out of curiosity what do you do and where did you move?
  - mstipetic 6y ago
    I run magicsandbox.com. Right now moving to all remote, still weighing options but might settle back in my home country (Croatia)
    - ChuckNorris89 6y ago
      Nice, congrats!
- rv-de 6y ago
  When you're settling down you can still come back to Germany enjoying a mostly functioning society and reasonable expenses. You'll just need to figure out a way to evade taxes.
  - mstipetic 6y ago
    I have no reason to be there. Came there for the "startup scene" but realised after a while how weak, unoriginal and underpaid most of it is
  - majewsky 6y ago
    Living off capital gains is the easiest tax dodge in Germany. You pay ~50% on income, but only ~25% on dividends etc. (and that's before your financial adviser gets creative).
- dm319 6y ago
  I suspect people who grow up in (basically) a socialist country like Germany, France, Scandinavia etc will have far less impetus to 'get rich'. If you feel secure in being able to maintain an income where you can enjoy both the basic and leisurely aspects of life. That you won't be made bankrupt by illness, or by unfair illegal/legal proceedings. In these circumstances the drive to sit on top of 2.5M to feel relaxed about your financial situation will likely fade away.
  - alentist 6y ago
    None of those countries are socialist. Why are you spreading this misinformation?
    - deleted 6y ago
      [deleted]
- benhurmarcel 6y ago
  Funnily enough, one of the reasons I'm looking to move to Germany is to get richer. Salaries in Germany are significantly better than most of western Europe (UK, France, Spain, Italy…) for a similar cost of life.
  - 0xy 6y ago
    Not in tech it's not. London engineers earn more than engineers in any part of Europe with the sole exclusion of Switzerland.
- taneq 6y ago
  Honestly that sounds like a pretty good trade-off. The percentage of people who are ridiculously wealthy goes from tiny to tinier, and in exchange everybody else gets a good shot at a comfortable life.
  - burntoutfire 6y ago
    But it's also pretty hard to retire early... I'm grateful that I was born in Poland where retiring early is a real possibility (high tech wages compared to costs of living and low taxes make it possible) instead of a country like Germany, Belgium or Italy where you basically don't have such option.
goldenchrome 6y ago
Since this is HN I'm guessing they work in tech, where 300k salaries (pre-tax) are common. Tax and SV living expenses use most of that, but you can still save a lot. You can save way more if you've got a high earning spouse. The other key thing is investing in the stock market, specifically index funds which have a historical real return rate of 7%. Folks who invested since 2008 got way higher returns from a phenomenal bull run, but let's assume a more "conservative" 7% return. Save 100k a year with 7% returns for 15 years and you have 2.5mil. The flaw in that modeling is that your earnings typically peak later in your career, so OP may have made a lot of their money in the last few years from being a high level employee making 500k+ a year.
pyrrhotech 6y ago
salaries in the Bay Area are very high, and if you avoid the common pitfalls, you can save a lot. Personally I made about $200-220k average during my 10-year career and lived on 30-40k while saving the rest and investing mostly in equities (of course taxes take a big chunk). Now I spend $50k-ish but I pay for everything for me and my fiance. I plan on spending $75kish once we have a family of four eventually which is the maximum level I'd feel comfortable spending with my current wealth. It wouldn't cover all our wants but definitely most of them and all our needs, hence there is still some additional utility from growing wealth but not enough to justify the stress and anxiety of a career IMO
- uniclaude 6y ago
  To anyone confused by the explanation (as $220x10 < 2.5M!), I would assume the key is likely in the investments. Given the market of the last decade, investing everything above the 30-40k expenses and income tax in the S&P500 and re-investing the dividends would have brought GP there. Not really sure about how one can make it with 30-40k including rent in the Bay Area, but this sounds like the most reasonable takeaway for most readers.
  - analognoise 6y ago
    Live like a hobbit while never marrying and being in the top .5% of all tech salaries for a decade. You might as well get the advice "marry rich" - it's probably more likely.
    - pc86 6y ago
      I mean the snarkiness just doesn't have any reflection of reality. Debt is a killer. I used to have a lot of credit card and personal debt, and was paying over $1,500/mo in interest on less than $100k USD/year. If you get stuck in that trap it's damn near impossible to get out of if you overextend yourself. A lot of folks grossly underestimate what they spend eating out and drinking. Probably less of a problem now than a few years ago, but coinciding with my credit card debt phase I would have told you I spent "$100, maybe $150" a month when it was closer to $400-500. If you're not set up for retirement (see below) there's little to no reason to be leasing a brand new BMW. I was absolutely guilty of this and it's tens of thousands of dollars I essentially set on fire for three years. You don't even have to sacrifice the nice car, my 2016 5 series was less than $25k out the door and I got it right after someone turned it in off-lease. My payment is less than theirs was and it'll be paid off before the warranty runs out. I'll then have an "asset" (not really) worth $5-10k, and can get another $25k off-lease car which will cost me less and get paid off quicker, if not in cash. If you max out your 401(k) you are saving about $20k/yr while only reducing your taxable income by ~$15k/yr depending on your marginal tax rate. A Roth adds another $6k to that if you're under the cap (something like $140k for 2020) and you can withdraw the contributions from that account at any time without penalty. Not helpful for someone making $40k/yr but if you're making $100k it's hard to make a good argument not to max out your retirement unless you live in one of the outlier cities as far as rent and expenses. There are absolutely the /r/personalfinance types who act like if you go to a restaurant more than once every six months you're going to end up destitute and starving while homeless. And the FIRE community is a borderline cult. But nobody working in our industry, even in super high-COL areas, really has to worry about retirement, even if they've made dumb mistakes like I did that ended up costing hundreds of thousands in the long run.
boltzmann_ 6y ago
> germany That's why, just check how tech is pay in USA http://levels.fyi http://levels.fyi
- artemonster 6y ago
  these numbers are crazy
  - akhosravian 6y ago
    Those numbers are real and it’s why tech hubs are both very expensive and worth moving to.
- quaffapint 6y ago
  Don't assume that's most of the US. Most of it is nothing like those numbers and for those with a mortgage and family , saving much of anything can be challenging.
pietrovismara 6y ago
You just can't. And that's how it's supposed to work. Only a very small minority of the population can reach that kind of worth. It's the foundation of this system, no matter if the baselines grows, there will always be rich and poor.
- artemonster 6y ago
  I really don't undestand this "that's how it's supposed to work". Baseline doesn't grow, it only gets worse. Why the hell my landlord, just by the virtue of being born 30-40 years before, was able to afford buying a nice apartment, while working without education, for which I am giving away today a third of my net salary and with 0 chances of buying one, ever?
  - pietrovismara 6y ago
    Hey, you should just work harder. Work away your entire life and maybe you'll be able to afford a house too! Who knows, you might even get to buy 2 and start exploiting people poorer than you by asking them to pay to use a house you didn't build. The circle completes.
    - tonyedgecombe 6y ago
      Don't forget to cut out the avocado toast.
  - teraku 6y ago
    Hey I feel you. Same category. The gist: If you didn't inherit, you are fkd in Germany. MOST of wealthy people inherit it (and 2/3 of super wealthy inheritance in Germany is former Nazi money). It's unfair. What helps me get by: I know my life is good, even though exiting the treadmill is most likely not possible. Enjoy what you have, invest a bit and focus on things that make you happy :)
  - sershe 6y ago
    Nobody forces you to rent from him; and why are you comparing yourself-now vs him 30-40 years later, relatively speaking? There are plenty of places in the US where you can buy a house now - housing in the US overall is actually cheaper than it used to be per sqft as far as I recall. Then, in 30-40 years you may too be renting out a paid-off house.
ghaff 6y ago
I can't speak to Germany, but in the US saving from a good but not extremely high-paying job over the past few decades, investing prudently but not too conservatively, maybe having a few moderately good stock wins from RSUs/options or otherwise, having bought and paid off a house in a not outrageously expensive area, gets you into that range. Depends of course on how you spend your money, educational expenses for kids, etc. In any case, it doesn't require winning the startup lottery or having a $400K salary at Google. ADDED: ~$2m + paid-off house is the sort of range people (typically engineers, non-software) I've had discussions about "targets" with have in mind.
- pc86 6y ago
  I agree with everything you said but just wanted to add RSUs/options are only even offered to a slim minority of software developers nationally. I am well paid for my job generally, and particularly for my area, but even something like an employee stock ownership program is extremely rare around here and outright RSU/option grants are unheard of. You'd get laughed out of any interview for even suggesting an ESOP to most places that don't have it.
  - ghaff 6y ago
    That's certainly fair and many ESOP plans are not really an especially good deal. Over the past few decades, in spite of a couple significant downturns, even index funds would have done pretty well for you with regular contributions. But having some good stock wins in addition to that certainly can help.
lukas099 6y ago
I live in a sorta expensive area (East Coast U.S.) and have managed to save >60% of my income every year since starting to work, even when I "only" made $65,000 a year. I did it by following a lot of the advice at mrmoneymustache.com. If I do not retire early and continue on this path, I would probably reach $3.5mil by age 50.
InitialLastName 6y ago
I've struggled with the same issue. The keys, as I've learned them, is to a) get to a place where you can invest up front in reducing your cost of living in the medium-long term, b) run like hell from the hedonic treadmill of trying to keep up with your peers' poor financial decisions, c) look carefully at what parts of your "decent lifestyle" make you truly happier, which parts are performative, and for which parts you can replace spending with effort without a loss of quality (for example, you can learn to cook very nice food, at a much higher quality than you will get at a restaurant for much less money; there's also no better feeling than feeding your friends). Keep in mind that the lifestyle changes you make now pay off more than double, by helping you save faster, by having those savings accumulate interest/earn you money, and by reducing the amount of money you need to sustain retirement indefinitely. Finally, make compounding growth your friend, not your enemy. Kill debt ASAP, and start socking away as much of your money as you can in a growth-bearing account. If you can reliably save 50% of your income in an account that beats inflation by 4%, you can support your lifestyle indefinitely on growth after 17 years.
- diydsp 6y ago
  +1 for cooking for yourself. It is time well-spent, especially if your partner is into it. And it can save money and be much healthier than eating out! Especially if you make a little extra and supplement other meals. Also, eating out takes a lot of time... driving to a place, sitting there waiting for waiters to return a credit card, etc. The alcohol is super marked-up. You don't know the ingredients of the food well, it's usually loaded with sugar and fats. I don't mean never do it, but living that way is miserable. And especially in the pandemic, eating out means tons of containers to deal with. Even if you push just push everything in the trash, it's still like a half a bag's worth. And if are a good doobie and wash the containers, recycle, save the leftovers, etc., it's nearly as much time as if you made it yourself. Again, not that you never should, but save it for special occasions if you wanna have a long, above-average healthspan.
BoorishBears 6y ago
Everyone talks about how US tech salaries are inflated values because they don't include the cost of healthcare, a lack of guaranteed PTO, etc. I like feel they're actually under-inflated (at least for comparing high paid workers in both places) because of equity. The company I work at has rallied many times over 100% since I joined a bit over a year ago. I could sell my equity and "semi-retire" 30+ years early, working when/if I feel like it and not eat really into my savings It wasn't some grand plan to join a company that would do well during a pandemic, but I did intentionally choose a public company since saying in the tech sector has exploded would be an understatement, and I wanted equity in that. I'm guessing a lot of people who joined FAANG companies in the last few years are all probably sitting on enough to start thinking about that. There are those who feel this is a bubble and not sustainable... maybe? But the way I see it is, even if this is the bubble before the next dot com era-style bust, it's better to have a position in it provided by my work and cashing out along the way, than not and end up losing my job anyways.
- ghaff 6y ago
  >Everyone talks about how US tech salaries are inflated values because they don't include the cost of healthcare, a lack of guaranteed PTO, etc. In all fairness, if you're working for a public tech (and many other) companies, you probably have good health insurance that's at least subsidized and 3-4 weeks of PTO which may not be great by European standards but isn't nothing. (Though admittedly increasingly shared with sick time so if you're out a lot, it's less good.)
  - BoorishBears 6y ago
    Yeah I didn't touch on that because some people argue it's still not enough, but if you're in the top 5% of earners in the US (which the poster above is in Germany) I think the difference in perks isn't as great as people play up
cortic 6y ago
Not the OP, but this is an interesting question; So you'd have to save at least 72k per year for 35 years. That would put you on the 45% tax in my country so you'd have to make 131k to be left with 72k after tax. Maybe +30k to live on, assuming you commute out of the city. So OP should be on something above 161k. In the US the OP would be in the top 3% of earners, top 4% in the UK. Even if you are in the top few percent you still have to spend most of your life working to be 'free' for a bit at the end of it. Of course if you are inside the top 1% you could probably get away with a 10-15 year sentence. Where the average wage is generally life with a few years of poverty like freedom at the end.
- quickthrowman 6y ago
  > So you'd have to save at least 72k per year for 35 years Yes, if you put it in a 0% interest savings account. Buying assets that give an ROI is what most people do..
HEmanZ 6y ago
In the USA top 5% income is about $300k USD[1]. With the relatively low tax rates, I would expect you can take home at least $200k (depends on the state). Like the original poster said, it's not that hard to live off of $50k in most of the US (even in the bay or NY, but you live like a college student). That leaves savings of 150k USD/yr from one source of income. Many families have two working professional adults and can almost double these numbers. Add in investment returns and $2.5 mil becomes a very achievable goal. I know a lot of people in their 30s like the poster and am closing in myself, it is not that uncommon in the US tech community. [1]https://www.investopedia.com/personal-finance/how-much-income-puts-you-top-1-5-10/ https://www.investopedia.com/personal-finance/how-much-incom...
- bumby 6y ago
  >Many families have two working professional adults and can almost double these numbers It happens, but only if you have a loose definition of "many". If a family makes $531k, they are in the top 1% https://dqydj.com/average-median-top-household-income-percentiles/#:~:text=Household%20Income%20Percentiles%20for%20the%20United%20States%20in,%20%2014.83%25%20%2040%20more%20rows%20 https://dqydj.com/average-median-top-household-income-percen...
  - astura 6y ago
    I think the GP way trying to say that if you are a high income earner you tend to attract/marry other high income earners.
    - bumby 6y ago
      You're right, thank you for the correction. In fact, although it's been awhile since I've read up on it, two high income earners marrying is a major contributor to the growing wealth inequality. Decades ago it was more common for a high income earner to marry a non-high income earner but (IIRC) that trend has been decreasing
astura 6y ago
High salary and/or low expenses, invest the difference. Most of that 2.5 million probably came from either interest or capital gains (which compounds). I've only been saving for a bit less than a decade and my increase in net worth for the last few years was greater than my total salary (before tax) the same year. [My salary is extremely low compared to Bay Area.] I save 40% of my after tax income.
castlecrasher2 6y ago
I'm just revising my investment strategy so I'm no expert, but the book The Richest Man in Babylon (https://www.amazon.com/Richest-Man-Babylon-Magic-Story/dp/1939438632/ https://www.amazon.com/Richest-Man-Babylon-Magic-Story/dp/19...) helped me put finances into perspective. While it's stuff most of us already know (save money, make more money), the way it's presented helped me realize what I need to do now to be financially secure later.
lnsru 6y ago
There is no secret, that Germany isn’t a country with decent wages. I can see a ceiling somewhere at €100k before taxes. If you are single, you give half away for taxes, if you are not, then you have family expenses. Living like a student I could save €36k yearly. Now it’s only €15-18k. Considering moving to Switzerland, but it’s simply too expensive with family. And good sounding CHF 135k aren’t that impressive with local prices.
jandrewrogers 6y ago
The top 5% household income in the US starts at ~$270k, which leaves at least $100k for investing after taxes and ordinary expenses. Combine this with US investment market performance e.g. the S&P500 over the last decade, and it is straightforward how someone with a good income might arrive at $2.5M in a relatively small number of years starting from zero. Americans have notoriously poor investment/saving habits, which obscures the fact that it is remarkably easy to accumulate liquid wealth in the US if you are a diligent saver. The median US household has enough investable income, after all ordinary life expenses, to accumulate a couple million dollars over a typical career. High earners can easily save 10x that amount.
trianglem 6y ago
I make around 200K a year and live in a relatively rural part of the country and own my home so I don’t have a mortgage. I save between 60-100K per year. I don’t have kids yet though so that might change once that happens.
quantumofalpha 6y ago
>I am from ... germany Well there's your problem. Extremely few well paying (say $150k+) jobs and crazy taxes don't exactly encourage wealth accumulation. Try Bay Area - with tech salaries there and stocks growth being what they were this past decade, the real question is how is it not possible (if only you wanted) to have made $2M+ working for a FAANG for a decade there. Or at least go for Switzerland, although market is much smaller there, beware. But I know multiple multimillionares in person who made it all on Google Zurich payroll.
- iwangulenko 6y ago
  Indeed in Switzerland the taxes and living costs are lower than in SF/Nyc; hence, you are more likely to become a millionaire with a tech job here than almost anywhere else. If Switzerland is an option, ping me. I am a well-connected tech recruiter with a solid network in Zurich, and I worked as a programmer before, so I know the tech scene here inside out.
_untom_ 6y ago
This sounds off to me. I was able to save ~20k EUR / year while on a 40k/year PhD salary in Austria. I was living a decent livestyle (intercontinental yearly vacations, taking on cost-of-living expenses for my girlfriend, ...), yet I was far from the upper 5 % of the population, and living in an expensive-ish town (the gentrified/expensive area of Berlin i now live in has roughtlye the same overall CoL). So I am assuming your problems come down to varying definitions of "decent lifestyle".

mstipetic 6y ago

Germany is not set up to have people get rich from a salary. Everyone has a comfortable life, but it's very hard to get "rich." That's one of the reasons I left Germany

ChuckNorris89 6y ago
Out of curiosity what do you do and where did you move?
- mstipetic 6y ago
  I run magicsandbox.com. Right now moving to all remote, still weighing options but might settle back in my home country (Croatia)
  - ChuckNorris89 6y ago
    Nice, congrats!
rv-de 6y ago
When you're settling down you can still come back to Germany enjoying a mostly functioning society and reasonable expenses. You'll just need to figure out a way to evade taxes.
- mstipetic 6y ago
  I have no reason to be there. Came there for the "startup scene" but realised after a while how weak, unoriginal and underpaid most of it is
- majewsky 6y ago
  Living off capital gains is the easiest tax dodge in Germany. You pay ~50% on income, but only ~25% on dividends etc. (and that's before your financial adviser gets creative).
dm319 6y ago
I suspect people who grow up in (basically) a socialist country like Germany, France, Scandinavia etc will have far less impetus to 'get rich'. If you feel secure in being able to maintain an income where you can enjoy both the basic and leisurely aspects of life. That you won't be made bankrupt by illness, or by unfair illegal/legal proceedings. In these circumstances the drive to sit on top of 2.5M to feel relaxed about your financial situation will likely fade away.
- alentist 6y ago
  None of those countries are socialist. Why are you spreading this misinformation?
  - deleted 6y ago
    [deleted]
benhurmarcel 6y ago
Funnily enough, one of the reasons I'm looking to move to Germany is to get richer. Salaries in Germany are significantly better than most of western Europe (UK, France, Spain, Italy…) for a similar cost of life.
- 0xy 6y ago
  Not in tech it's not. London engineers earn more than engineers in any part of Europe with the sole exclusion of Switzerland.
taneq 6y ago
Honestly that sounds like a pretty good trade-off. The percentage of people who are ridiculously wealthy goes from tiny to tinier, and in exchange everybody else gets a good shot at a comfortable life.
- burntoutfire 6y ago
  But it's also pretty hard to retire early... I'm grateful that I was born in Poland where retiring early is a real possibility (high tech wages compared to costs of living and low taxes make it possible) instead of a country like Germany, Belgium or Italy where you basically don't have such option.

goldenchrome 6y ago

Since this is HN I'm guessing they work in tech, where 300k salaries (pre-tax) are common. Tax and SV living expenses use most of that, but you can still save a lot. You can save way more if you've got a high earning spouse. The other key thing is investing in the stock market, specifically index funds which have a historical real return rate of 7%. Folks who invested since 2008 got way higher returns from a phenomenal bull run, but let's assume a more "conservative" 7% return. Save 100k a year with 7% returns for 15 years and you have 2.5mil. The flaw in that modeling is that your earnings typically peak later in your career, so OP may have made a lot of their money in the last few years from being a high level employee making 500k+ a year.

pyrrhotech 6y ago

salaries in the Bay Area are very high, and if you avoid the common pitfalls, you can save a lot. Personally I made about $200-220k average during my 10-year career and lived on 30-40k while saving the rest and investing mostly in equities (of course taxes take a big chunk). Now I spend $50k-ish but I pay for everything for me and my fiance. I plan on spending $75kish once we have a family of four eventually which is the maximum level I'd feel comfortable spending with my current wealth. It wouldn't cover all our wants but definitely most of them and all our needs, hence there is still some additional utility from growing wealth but not enough to justify the stress and anxiety of a career IMO

uniclaude 6y ago
To anyone confused by the explanation (as $220x10 < 2.5M!), I would assume the key is likely in the investments. Given the market of the last decade, investing everything above the 30-40k expenses and income tax in the S&P500 and re-investing the dividends would have brought GP there. Not really sure about how one can make it with 30-40k including rent in the Bay Area, but this sounds like the most reasonable takeaway for most readers.
- analognoise 6y ago
  Live like a hobbit while never marrying and being in the top .5% of all tech salaries for a decade. You might as well get the advice "marry rich" - it's probably more likely.
  - pc86 6y ago
    I mean the snarkiness just doesn't have any reflection of reality. Debt is a killer. I used to have a lot of credit card and personal debt, and was paying over $1,500/mo in interest on less than $100k USD/year. If you get stuck in that trap it's damn near impossible to get out of if you overextend yourself. A lot of folks grossly underestimate what they spend eating out and drinking. Probably less of a problem now than a few years ago, but coinciding with my credit card debt phase I would have told you I spent "$100, maybe $150" a month when it was closer to $400-500. If you're not set up for retirement (see below) there's little to no reason to be leasing a brand new BMW. I was absolutely guilty of this and it's tens of thousands of dollars I essentially set on fire for three years. You don't even have to sacrifice the nice car, my 2016 5 series was less than $25k out the door and I got it right after someone turned it in off-lease. My payment is less than theirs was and it'll be paid off before the warranty runs out. I'll then have an "asset" (not really) worth $5-10k, and can get another $25k off-lease car which will cost me less and get paid off quicker, if not in cash. If you max out your 401(k) you are saving about $20k/yr while only reducing your taxable income by ~$15k/yr depending on your marginal tax rate. A Roth adds another $6k to that if you're under the cap (something like $140k for 2020) and you can withdraw the contributions from that account at any time without penalty. Not helpful for someone making $40k/yr but if you're making $100k it's hard to make a good argument not to max out your retirement unless you live in one of the outlier cities as far as rent and expenses. There are absolutely the /r/personalfinance types who act like if you go to a restaurant more than once every six months you're going to end up destitute and starving while homeless. And the FIRE community is a borderline cult. But nobody working in our industry, even in super high-COL areas, really has to worry about retirement, even if they've made dumb mistakes like I did that ended up costing hundreds of thousands in the long run.

boltzmann_ 6y ago

> germany That's why, just check how tech is pay in USA http://levels.fyi http://levels.fyi

artemonster 6y ago
these numbers are crazy
- akhosravian 6y ago
  Those numbers are real and it’s why tech hubs are both very expensive and worth moving to.
quaffapint 6y ago
Don't assume that's most of the US. Most of it is nothing like those numbers and for those with a mortgage and family , saving much of anything can be challenging.

pietrovismara 6y ago

You just can't. And that's how it's supposed to work. Only a very small minority of the population can reach that kind of worth. It's the foundation of this system, no matter if the baselines grows, there will always be rich and poor.

artemonster 6y ago
I really don't undestand this "that's how it's supposed to work". Baseline doesn't grow, it only gets worse. Why the hell my landlord, just by the virtue of being born 30-40 years before, was able to afford buying a nice apartment, while working without education, for which I am giving away today a third of my net salary and with 0 chances of buying one, ever?
- pietrovismara 6y ago
  Hey, you should just work harder. Work away your entire life and maybe you'll be able to afford a house too! Who knows, you might even get to buy 2 and start exploiting people poorer than you by asking them to pay to use a house you didn't build. The circle completes.
  - tonyedgecombe 6y ago
    Don't forget to cut out the avocado toast.
- teraku 6y ago
  Hey I feel you. Same category. The gist: If you didn't inherit, you are fkd in Germany. MOST of wealthy people inherit it (and 2/3 of super wealthy inheritance in Germany is former Nazi money). It's unfair. What helps me get by: I know my life is good, even though exiting the treadmill is most likely not possible. Enjoy what you have, invest a bit and focus on things that make you happy :)
- sershe 6y ago
  Nobody forces you to rent from him; and why are you comparing yourself-now vs him 30-40 years later, relatively speaking? There are plenty of places in the US where you can buy a house now - housing in the US overall is actually cheaper than it used to be per sqft as far as I recall. Then, in 30-40 years you may too be renting out a paid-off house.

ghaff 6y ago

I can't speak to Germany, but in the US saving from a good but not extremely high-paying job over the past few decades, investing prudently but not too conservatively, maybe having a few moderately good stock wins from RSUs/options or otherwise, having bought and paid off a house in a not outrageously expensive area, gets you into that range. Depends of course on how you spend your money, educational expenses for kids, etc. In any case, it doesn't require winning the startup lottery or having a $400K salary at Google. ADDED: ~$2m + paid-off house is the sort of range people (typically engineers, non-software) I've had discussions about "targets" with have in mind.

pc86 6y ago
I agree with everything you said but just wanted to add RSUs/options are only even offered to a slim minority of software developers nationally. I am well paid for my job generally, and particularly for my area, but even something like an employee stock ownership program is extremely rare around here and outright RSU/option grants are unheard of. You'd get laughed out of any interview for even suggesting an ESOP to most places that don't have it.
- ghaff 6y ago
  That's certainly fair and many ESOP plans are not really an especially good deal. Over the past few decades, in spite of a couple significant downturns, even index funds would have done pretty well for you with regular contributions. But having some good stock wins in addition to that certainly can help.

lukas099 6y ago

I live in a sorta expensive area (East Coast U.S.) and have managed to save >60% of my income every year since starting to work, even when I "only" made $65,000 a year. I did it by following a lot of the advice at mrmoneymustache.com. If I do not retire early and continue on this path, I would probably reach $3.5mil by age 50.

InitialLastName 6y ago

I've struggled with the same issue. The keys, as I've learned them, is to a) get to a place where you can invest up front in reducing your cost of living in the medium-long term, b) run like hell from the hedonic treadmill of trying to keep up with your peers' poor financial decisions, c) look carefully at what parts of your "decent lifestyle" make you truly happier, which parts are performative, and for which parts you can replace spending with effort without a loss of quality (for example, you can learn to cook very nice food, at a much higher quality than you will get at a restaurant for much less money; there's also no better feeling than feeding your friends). Keep in mind that the lifestyle changes you make now pay off more than double, by helping you save faster, by having those savings accumulate interest/earn you money, and by reducing the amount of money you need to sustain retirement indefinitely. Finally, make compounding growth your friend, not your enemy. Kill debt ASAP, and start socking away as much of your money as you can in a growth-bearing account. If you can reliably save 50% of your income in an account that beats inflation by 4%, you can support your lifestyle indefinitely on growth after 17 years.

diydsp 6y ago
+1 for cooking for yourself. It is time well-spent, especially if your partner is into it. And it can save money and be much healthier than eating out! Especially if you make a little extra and supplement other meals. Also, eating out takes a lot of time... driving to a place, sitting there waiting for waiters to return a credit card, etc. The alcohol is super marked-up. You don't know the ingredients of the food well, it's usually loaded with sugar and fats. I don't mean never do it, but living that way is miserable. And especially in the pandemic, eating out means tons of containers to deal with. Even if you push just push everything in the trash, it's still like a half a bag's worth. And if are a good doobie and wash the containers, recycle, save the leftovers, etc., it's nearly as much time as if you made it yourself. Again, not that you never should, but save it for special occasions if you wanna have a long, above-average healthspan.

BoorishBears 6y ago

Everyone talks about how US tech salaries are inflated values because they don't include the cost of healthcare, a lack of guaranteed PTO, etc. I like feel they're actually under-inflated (at least for comparing high paid workers in both places) because of equity. The company I work at has rallied many times over 100% since I joined a bit over a year ago. I could sell my equity and "semi-retire" 30+ years early, working when/if I feel like it and not eat really into my savings It wasn't some grand plan to join a company that would do well during a pandemic, but I did intentionally choose a public company since saying in the tech sector has exploded would be an understatement, and I wanted equity in that. I'm guessing a lot of people who joined FAANG companies in the last few years are all probably sitting on enough to start thinking about that. There are those who feel this is a bubble and not sustainable... maybe? But the way I see it is, even if this is the bubble before the next dot com era-style bust, it's better to have a position in it provided by my work and cashing out along the way, than not and end up losing my job anyways.

ghaff 6y ago
>Everyone talks about how US tech salaries are inflated values because they don't include the cost of healthcare, a lack of guaranteed PTO, etc. In all fairness, if you're working for a public tech (and many other) companies, you probably have good health insurance that's at least subsidized and 3-4 weeks of PTO which may not be great by European standards but isn't nothing. (Though admittedly increasingly shared with sick time so if you're out a lot, it's less good.)
- BoorishBears 6y ago
  Yeah I didn't touch on that because some people argue it's still not enough, but if you're in the top 5% of earners in the US (which the poster above is in Germany) I think the difference in perks isn't as great as people play up

cortic 6y ago

Not the OP, but this is an interesting question; So you'd have to save at least 72k per year for 35 years. That would put you on the 45% tax in my country so you'd have to make 131k to be left with 72k after tax. Maybe +30k to live on, assuming you commute out of the city. So OP should be on something above 161k. In the US the OP would be in the top 3% of earners, top 4% in the UK. Even if you are in the top few percent you still have to spend most of your life working to be 'free' for a bit at the end of it. Of course if you are inside the top 1% you could probably get away with a 10-15 year sentence. Where the average wage is generally life with a few years of poverty like freedom at the end.

quickthrowman 6y ago
> So you'd have to save at least 72k per year for 35 years Yes, if you put it in a 0% interest savings account. Buying assets that give an ROI is what most people do..

HEmanZ 6y ago

In the USA top 5% income is about $300k USD[1]. With the relatively low tax rates, I would expect you can take home at least $200k (depends on the state). Like the original poster said, it's not that hard to live off of $50k in most of the US (even in the bay or NY, but you live like a college student). That leaves savings of 150k USD/yr from one source of income. Many families have two working professional adults and can almost double these numbers. Add in investment returns and $2.5 mil becomes a very achievable goal. I know a lot of people in their 30s like the poster and am closing in myself, it is not that uncommon in the US tech community. [1]https://www.investopedia.com/personal-finance/how-much-income-puts-you-top-1-5-10/ https://www.investopedia.com/personal-finance/how-much-incom...

bumby 6y ago
>Many families have two working professional adults and can almost double these numbers It happens, but only if you have a loose definition of "many". If a family makes $531k, they are in the top 1% https://dqydj.com/average-median-top-household-income-percentiles/#:~:text=Household%20Income%20Percentiles%20for%20the%20United%20States%20in,%20%2014.83%25%20%2040%20more%20rows%20 https://dqydj.com/average-median-top-household-income-percen...
- astura 6y ago
  I think the GP way trying to say that if you are a high income earner you tend to attract/marry other high income earners.
  - bumby 6y ago
    You're right, thank you for the correction. In fact, although it's been awhile since I've read up on it, two high income earners marrying is a major contributor to the growing wealth inequality. Decades ago it was more common for a high income earner to marry a non-high income earner but (IIRC) that trend has been decreasing

astura 6y ago

High salary and/or low expenses, invest the difference. Most of that 2.5 million probably came from either interest or capital gains (which compounds). I've only been saving for a bit less than a decade and my increase in net worth for the last few years was greater than my total salary (before tax) the same year. [My salary is extremely low compared to Bay Area.] I save 40% of my after tax income.

castlecrasher2 6y ago

I'm just revising my investment strategy so I'm no expert, but the book The Richest Man in Babylon (https://www.amazon.com/Richest-Man-Babylon-Magic-Story/dp/1939438632/ https://www.amazon.com/Richest-Man-Babylon-Magic-Story/dp/19...) helped me put finances into perspective. While it's stuff most of us already know (save money, make more money), the way it's presented helped me realize what I need to do now to be financially secure later.

lnsru 6y ago

There is no secret, that Germany isn’t a country with decent wages. I can see a ceiling somewhere at €100k before taxes. If you are single, you give half away for taxes, if you are not, then you have family expenses. Living like a student I could save €36k yearly. Now it’s only €15-18k. Considering moving to Switzerland, but it’s simply too expensive with family. And good sounding CHF 135k aren’t that impressive with local prices.

jandrewrogers 6y ago

The top 5% household income in the US starts at ~$270k, which leaves at least $100k for investing after taxes and ordinary expenses. Combine this with US investment market performance e.g. the S&P500 over the last decade, and it is straightforward how someone with a good income might arrive at $2.5M in a relatively small number of years starting from zero. Americans have notoriously poor investment/saving habits, which obscures the fact that it is remarkably easy to accumulate liquid wealth in the US if you are a diligent saver. The median US household has enough investable income, after all ordinary life expenses, to accumulate a couple million dollars over a typical career. High earners can easily save 10x that amount.

trianglem 6y ago

I make around 200K a year and live in a relatively rural part of the country and own my home so I don’t have a mortgage. I save between 60-100K per year. I don’t have kids yet though so that might change once that happens.

quantumofalpha 6y ago

>I am from ... germany Well there's your problem. Extremely few well paying (say $150k+) jobs and crazy taxes don't exactly encourage wealth accumulation. Try Bay Area - with tech salaries there and stocks growth being what they were this past decade, the real question is how is it not possible (if only you wanted) to have made $2M+ working for a FAANG for a decade there. Or at least go for Switzerland, although market is much smaller there, beware. But I know multiple multimillionares in person who made it all on Google Zurich payroll.

iwangulenko 6y ago
Indeed in Switzerland the taxes and living costs are lower than in SF/Nyc; hence, you are more likely to become a millionaire with a tech job here than almost anywhere else. If Switzerland is an option, ping me. I am a well-connected tech recruiter with a solid network in Zurich, and I worked as a programmer before, so I know the tech scene here inside out.

_untom_ 6y ago

This sounds off to me. I was able to save ~20k EUR / year while on a 40k/year PhD salary in Austria. I was living a decent livestyle (intercontinental yearly vacations, taking on cost-of-living expenses for my girlfriend, ...), yet I was far from the upper 5 % of the population, and living in an expensive-ish town (the gentrified/expensive area of Berlin i now live in has roughtlye the same overall CoL). So I am assuming your problems come down to varying definitions of "decent lifestyle".