How Europeans See Money Differently From Americans

Stonehenge Sideways View

After almost finishing my loop around Stonehenge, I stumbled across a French woman who was lying on the ground sideways. She adjusted herself a little bit to get more comfortable, but paid no attention to fellow tourists wondering what she was doing.

She made me want to lie down sideways as well to see what she was seeing. I didn’t because I felt a little silly copying her in broad daylight. So instead, I took this picture and tilted my phone. Perhaps you are now bending your head sideways or lifting your laptop sideways to see what she sees.

What do you see?

Disclosure: ONIG Financial Blog has partnered with CardRatings for our coverage of credit card products. ONIG Financial Blog and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities.

A European’s Perspective On Money

I want to highlight a great comment from a European reader on the post, “Maybe It’s Your Fault Why The Wealth Gap Continues To Widen.” I’ve been looking for someone from Europe to finally say these words I’ve been hearing since deciding to spend 2-3 weeks in a European country every year, five years ago.

I would just add some thoughts based on my European origin; I moved to the US two years ago.

America is one of the few places I know where the value of the car owned and income seems so disconnected.
In Europe, low-level employees drive used compact cars and upper management drives new high-end German cars. The value of the cars bought were maybe not 1/10th of income, but they still followed a relatively constant percentage of the income.

But within my new company in the US, full-size pickup trucks are pretty popular… at every level of the hierarchy! It is mind-blowing that the division manager earning $200k+ and a low-level employee at $40k spent the same amount on a car (or even more for the low-level employee as its financing options were probably less interesting).

One solution to solve part of the income inequality is the tax system.

I lived both in Australia and Denmark, two countries with a very strong middle-class but also very high taxes on luxury items. I think the two are correlated.

Concerning income taxes, even if most people in high brackets feel they pay an insane amount in taxes, they are still paying less in the US than they would in most of Western Europe.

High income taxes for high incomes have a double consequence:

1. You get richer slower once you reach a certain salary;
2. Higher taxes “reduces” greed : the interest of making more money once you reach a certain level diminishes strongly as most of it goes towards taxes.

What terrific perspective. I never really thought about how higher taxes REDUCES greed, but I think there’s some huge veracity to this claim. I definitely was much greedier when I was younger, partly because I had less. I wanted to prove to people that going to a state school was good enough. I was greedy for money because I didn’t want my parents to worry about me anymore having caused them much heartache and headache growing up. I wanted lots of money because I was greedy for financial freedom as soon as possible after the first two years of work after college.

Back in the day when I was making a high six-figure salary, I always felt distraught at the $200,000+ in income taxes I had to pay each year even though there was still a healthy amount left over. I no longer wanted to work 60-70 hours a week for money, so I slowly lowered my work intensity over the last two years of my career until I finally pulled the plug in 2012.

My greed for money after a certain level almost completely went away because it made me feel a little sick that I was forking so much money over to an inefficient government that was managed by corrupt and lying politicians. I couldn’t even get a rattling manhole cover fixed within one year, and then to see gridlock in Congress where they would still get paid despite causing a government shutdown was infuriating. If only our US taxation system allowed for more inclusive benefits for everyone.

Higher taxes allowed me to reduce my desire for money and increase my desire for a much more laid back lifestyle. Higher taxes allowed me to be more understanding of those who work 40 hours a week or less and complain why they can’t get ahead. I mean, who doesn’t want to have the corner office and not have to work to death to get there? I certainly want to win the lottery too.

I loved hanging out with early retirees who were able to convince their spouses to work longer so they didn’t have to. No need for both spouses to suffer right? I grew up always thinking that no matter what, I was the one who had to provide for a family. My spouse working was a bonus that could not be counted upon. Such thinking was very stressful because I mentally didn’t count on my partner taking care of me. Now, I am so pleased that men no longer have to be afraid of not being the breadwinners. Self-esteem among boys and men should increase as a result.

With the scepter of higher taxes, I was able to do some thorough research on figuring out when the marriage penalty tax kicks in. The underlying assumption of the post is that the government wants one spouse to stay at home. The other assumption is that after a certain level of income, you start losing your marriage tax credit and start paying a marriage tax penalty – so don’t work too hard to make an unnecessary amount of money you hear?

Americans Have It Good And Europeans Have It Better

Traveling is a must because it makes you think differently. When you think differently, you find more meaning in life. And when you find more meaning in life, there’s less conflict in the world because you are more satisfied with what you have.

Everybody points to Europe as having some of the highest tax rates in the world and how Americans are lucky in comparison. But the problem with this type of thinking is that unless we’ve experienced European taxation rates in our income earning lifetimes, it’s a useless comparison. Same thing with saying US tax rates were much higher 50 years ago. Most of us weren’t working then.

Let’s use Denmark as an example for a happy European country with high taxes (30%-51.5%) and the second lowest wealth gap among 34 OECD nations. If you lose your job in Denmark, you’re not too worried because you’ll receive an unemployment benefit of 10,500 kroner ($1,902) a month after taxes for up to two years. You’re part of a national system of free health care and education for everyone, job training, subsidized child care, a generous pension system, and companies who regularly provide one year’s paid maternity leave. Not bad!

The top 20 percent of Danes earn on average four times as much as the bottom 20 percent. In the United States, by contrast, the top 20 percent earn about eight times as much as the bottom 20 percent. The Danish abhor ostentation based on my conversations with many locals while I was in Copenhagen a couple years ago, which is very much aligned with my Stealth Wealth proposal.

Europeans see money differently from Americans, and that’s a great thing. And within Europe, the British and Germans see money and work a little differently than the Spanish, Italian, Portuguese, and Greek. Americans work a little too hard to try and achieve an unobtainable dream lead by a very few. Our obsession with making lots of money is killing happiness. Remember that money is only a means to an end. What is your end?

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Disclosure: ONIG Financial Blog has partnered with CardRatings for our coverage of credit card products. ONIG Financial Blog and CardRatings may receive a commission from card issuers. Opinions, reviews, analyses & recommendations are the author’s alone, and have not been reviewed, endorsed or approved by any of these entities. Responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

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Planning for retirement when paying for private grade school
Are you on the right retirement path? There is no rewind button.

About the Author: Sam began investing his own money ever since he opened an online brokerage account online in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at Goldman Sachs and Credit Suisse Group. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate.

In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $250,000 a year in passive income. He is aggressively investing in real estate crowdfunding to arbitrage low valuations and take advantage of positive demographic trends away from expensive coastal cities.

Updated for 2021 and beyond.

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