A few days ago we got the following e-mail from a reader:
I’ve found your blog and I very thankful for you to share all the FI-related information with a focus on Europe.
Would you mind sharing which area in Germany do you recommend to live post-ER, and how much money would be recommend to have accumulated before retiring early?
Thanks in advance!
Since these are questions everyone interested in FI inevitably asks themselves at some point, I decided to make my answers into a post for everyone to read. Feel free to add your own ideas in the comments, I’m sure my answers aren’t exhaustive.
Which area of Germany is good to live in once you reach FI?
There is no easy answer to this question. Sorry. Where you live depends on a multitude of factors. Here are some questions to ask yourself to get some ideas:
- Is it important for you to live close to your family? If so, how close? Round the corner? In the same town? Within a couple of hours’ drive? Or at the other extreme – do you hate your family and want to live as far away from them as possible? This should already give you a shortlist of possible areas.
- Are there any other people you want to live close to? Having a closely-knit community around you can make or break a place. Do you have close friends in a particular place? Maybe you want to live nearer to them? If you’re considering moving somewhere where you don’t know anyone, think about how you would go about getting to know other people in the area. Are there any local clubs you could join so you could get to know like-minded people through your hobbies? Can you find a friendly neighbourhood where everyone greets each other on the street and neighbours spontaneously drop in on each other for impromptu barbecues?
- What size of place do you want to live in? Do you want to be in a big city with an airport close by and all amenities within walking distance? Or would you prefer to live in a smaller town or village where you may have to travel by bus or car to get to the nearest supermarket, doctor, cinema etc.?
- What will you be doing with your time when you reach FI? Do you see yourself volunteering on community projects? Then you need to live near other people and not out in the middle of nowhere. Want to spend all day growing your own vegetables? Then a big city probably isn’t for you. Like cycling up mountains? Then you’re going to need a friendly neighbourhood mountain.
- Do you have any hobbies you can only do in certain places (skiing, sailing, etc)? Would you like to live near the sea, in the mountains, near a forest?
- Do you have kids or do you plan to have kids? What kind of place do you want them to grow up in? What kind of school do you want them to go to?
It’s worth taking some time to consider these points and really envision what kind of life you see yourself and your family leading once you no longer have to work for a living. This should help give you a framework of basic criteria you can then use to scout out potential areas.
One thing I would advise you against is picking a place to live based purely on financial considerations. The cheapest place to live in Germany is probably somewhere in the former East, where family houses can sell for as little as 15,000€, but if you have no connection to that region, don’t know anyone there, and go off and buy the cheapest house you can find in the middle of nowhere, you could end up being pretty miserable. On the other hand, if you’re from the East and you have family and friends there it may make perfect sense for you to move there and spend your time with the people you love. The decision is deeply personal and the answer will be different for everyone. The main thing is to work out what you really need and what you really don’t want and search for a place that fits the bill. Mr W and I have been doing a lot of thinking about all these points recently and we’re coming close to making some big decisions. Watch this space for more details soon.
How much money should you accumulate before you retire?
One MILLION euros!!! Mwah ha ha…
…no, only joking, you probably won’t need that much. Again, there are no easy answers here since everyone has a very different lifestyle and very different expenses. Here are some questions to give you some inspiration:
- What are your current monthly expenses? If you don’t track your expenses already, start doing so right now! If you don’t know how much you need to live on now, you can’t work out how much you’re going to need once you’re FI…
- Look at your current expenses – how will they change once you reach FI? If you stop commuting to your job, you may not need your travel pass any more. If you need special clothes for work, you’ll no longer need to buy new ones or maintain the ones you already have. On the other hand, you may take up mountain biking and decide to buy a fancy bike and 10 pairs of lycra cycling shorts. Or you may decide to travel more so your expenses in that category will go up. The main point is to plan in all the stuff you like doing. If you work out that by cutting out all non-essentials you could manage to live on 500€ a month but doing so would make you desperately miserable, don’t do it. Many FI sceptics think the only way to reach FI without winning the lottery or resorting to highly illegal practices is to live in a van down by the river eating nothing but potatoes and denying yourself everything that isn’t absolutely essential for you to stay alive. If you try to do this long-term you will probably fail. Much better to base your plan on a more realistic vision of what you see yourself doing once you no longer have to work. Obviously nobody has a crystal ball to see into the future – plans will inevitably change, big expenses may come up unexpectedly, or even disappear unexpectedly. But it helps to have some numbers to work with.
- How are you going to earn passive income? Once you know roughly how much you’ll need to live on once you’re FI, you know how much passive income you need to generate per month to officially declare yourself FI and go tell your boss to take a running jump. Now all you need to do is compulsively consume FI blogs to learn how to do it. Are you going to go for rental properties that generate rental income every month like we did? Or build up an ETF portfolio then use the 4% rule to get your passive income like basically everyone in the US? Will you trade options like Amber Tree Leaves? Build one or more online businesses like Pat Flynn from Smart Passive Income? A mixture of some or all of the above? Or do you have a new crazy idea that nobody’s thought of yet? (If you do I’d love to hear about it!) It’s up to you. Go out there and make it happen. Oh, and let us know how you get on!