In this chapter, I will share how to cut the cost of living by more than € 16,000 per year.
How To Save More Than € 16,000 Yearly On Living Expenses?
So let’s look into the details of where we keep spending the majority of our money.
For me, a big thing was always my health insurance. And of course, an even bigger issue was housing, renting a flat, and paying rent for that. Another thing is the vehicle. You probably have a car in your home country. Then, there is the cost of food, drink, and internet and phone connection.
Let’s just go through those five things, which usually create, apart from taxes, but that’s a different chapter, the highest cost of living expenses for you, at least that was the most significant chunk for me.
Let’s compare how much I kept paying as long as I lived in Germany to what I pay now that I live here in Bali.
We start with health insurance. I was self-employed and used the standard German statutory health insurance. They kept charging me almost €700. But we will calculate €600 per month. I canceled that after leaving Germany, and when I started living permanently in Indonesia, I got private international health insurance. This costs me only €600 for the entire year! You can still keep German statutory health insurance, but you pause it as long as you’re not in your home country. That’s what I did in the beginning. They charged me for this service for only €50 a month. That means it was €600 a year, which I paid for the German statutory health insurance while it was paused. Plus the €600 for the international one. Whenever I have a medical issue, I can use the international one. And when I come back to Germany, the German statutory health insurance gets reactivated for the time being, as long as I’m in Germany for a visit.
I used to pay €3,600. Now, I paid only €1,200, at least in the beginning. Meanwhile, I even gave up the €50 for the statutory health insurance to come back to Germany. Because I have no intention of going there anymore. And if I have to go, I just get a short time insurance from a private provider, and the problem is solved. Apart from that, if you want to return to Germany and reactivate German statutory health insurance, you can go to the unemployment office and tell them: “I’m looking for a job.” Then any German statutory health insurance needs to insure your health. It’s pretty easy to get in there. It’s just a little administrative effort, which might be worth avoiding by paying €50 a month. But I decided it’s not worthwhile anymore. Nowadays I’m only paying €600 for the international one, and I don’t have a German one anymore. I’m saving €3,000 nowadays on my health insurance. And even if I would still have this €50 monthly, it still would be €2,400 a year. That is pretty savings, just with one single step!
But let’s go to another one: and that is housing. What do you pay for rent and auxiliary costs for the flat or the house you’re living in?
Let’s assume it’s in total €700 a month that you’re paying for a rented one-room flat in Germany. Well, that won’t be very exclusive, at least if it’s in a big city. If it’s in the countryside, you will probably get a 3-bedroom apartment! Let’s assume you pay €700 for your flat, including the auxiliary costs.
Now, if you want to keep that because that feels safe for you, then you might do that. Let’s do the calculation for that: You keep it, and you subcontract it on Airbnb for €40 a day. That turns out into a monthly rent of approximately €1,200. You might say: “If the flat only costs me €700 and I subcontract it, how should I get €1,200 for that a month? That’s not realistic!”
Prices on Airbnb are higher than what you usually pay for a flat that you find in the newspaper for long-term rent.
Let’s assume you’re only able to subcontract it for 10 out of 12 months a year because your prices are a little bit higher, but it’s well worth it. Your tenant does not have the hassle of taking care of auxiliary costs because it’s already included. The tenant does not have to take care of the furniture because you leave your furniture there. And a pleasant thing about that is you might have an empty drawer, and everything you want to keep in your home country, you just put it in there and lock it, and you don’t have to pay for storage space. In the end, if you subcontract it for 10 out of 12 months per year, you end up with an income of about €12,000, and you just have to subtract what you pay in rent and auxiliary costs. This was €8,400. You end up with €3,600 in earnings by subcontracting your flat in your home country.
Now, we have a look at the cost of renting a space in Indonesia. I keep booking local accommodations, and they usually cost me IDR 5 million a month. That’s a small apartment, usually with a shared kitchen and room service. You get your towels provided. You get your bed sheets changed. You get the room cleaned. So it’s on a quite good service level. Some of those places even have a shared pool. I’m more than happy about that. You might ask yourself: “How much is IDR 5 million?” IDR 5 million sounds like a lot. This is only €300, what I’m paying for that here on average per month. So it will cost me per year €3,600.
Exactly the money you’re gaining in your home country will pay for your cost of rent here in Bali. So it’s a zero-sum game!
Further, you might ask yourself: “How do I subcontract my apartment in my home country while I’m in Bali?” There are several options:
Either you ask a friend to take care of it. Then you probably want to pay him a little. You might have a family member who’s willing to take care of that. And another option is, you give a professional service just give it to a real estate agent, delegating this to a professional service. And it’s in the best interest of the real estate service to rent it as expensive as possible. What will this real estate service cost you? Nothing, because they usually charge the tenant for their service. And so, you just hand it over with full responsibility, and you allow them to make the contract in your name. Then, they take care of everything. So easy, with no extra cost, and you have some professional working for you, who has the best interest to get it booked as quickly as possible, and for as high a price as possible. Because they usually take two or three months of rent as their commission. So The higher the price they rent it for, the better for them as well.
Let’s go for an even better option: You give up your place in Germany altogether. That’s possible if you’re in a region where you might come back to but where the real estate situation is rather relaxed. Probably, if you come back after a while, you may find an even nicer place, and you can negotiate for even better prices than you pay currently. You’re saving the complete €8,400 a year, and you only have to subtract the €3,600. You can enjoy some pleasant savings of €4.800 a year just by canceling your lease contract and only paying rent in Indonesia.
Let’s have a look at the vehicle costs and transportation costs. If you have a car in your home country, you probably have costs of €300 a month. This is the depreciation of the vehicle, so it’s the loss in value. It’s the insurance for it, the tax for it, and its fuel.
Maybe you also have to pay for renting a garage. This all adds up to €300 a month. Which means it’s €3,600 a year. In Indonesia, the most common way and most comfortable way to get around is with a scooter. So you do not need a car here. Driving a car is a pain in the ass due to the density of the traffic. If you rent a scooter for the long term, you pay about €3 a day, which turns out to be about €90 a month. Due to the low cost of fuel, which is the only additional cost you will have here, you pay about ¢70 currently for a liter. Back home, it’s €2, or even more per liter at the moment. See, with a car, you probably burn fuel for €75, €50, or maybe €100 a month. But I assume that was already included in €300 a month we calculated before with. But here, it adds up to €100 a month. Back home, you paid €300 for your car €300, and now you pay €100 for a scooter. Your monthly savings are €200, which means €2,400 in savings per year.
That’s another big chunk. But it’s not the end of the calculation.
Now, let’s look into food and drinks. Well in Germany I used to go shopping once a week, buying food at the discounter. I paid €50, which is not a very big basket. And I even had to do that sometimes twice a week. But let’s assume you get around buying food and drinks, a box of beer, a box of water, vegetables, fruits, and some little snacks, meat, and fish. That adds up over four weeks a month, €200 a month, which I spent in the grocery store.
Here, I’m getting around if I go shopping three times a week for vegetables and fruits. I pay IDR100,000 each time. That means I’m paying €6 each time I go shopping. I go shopping more frequently here than I would in Germany because I want to have it fresh. Due to the mild and warm climate, the fruits and vegetables go off faster. Going shopping three times turns out like €20 a week. In Germany, I spent €200 a month on food. Here it’s only €80. I’m saving about €120 per month on food and drinks.
Then you might go to a restaurant. Let’s assume that when you’re in Germany, you go to a restaurant that is of reasonable quality. There you pay €20 each time. Here you can easily get around for a snack and a drink for IDR 100,000. If you go for street food, it’s only a fraction of that. But let’s calculate IDR 100,000 per meal when I go eating. This is €6. Let’s assume we go eating in a restaurant ten times a month. In Germany, it would turn out like €200 - 10 times €20. And here, it would be €60 because ten times IDR 100,000 is about €60. So in total, for shopping for food at the grocery store, buying fresh food, and eating in restaurants, we only spend €240 instead of €400 a month. The savings are about €160 monthly. That turns out, times 12, almost €2,000 a year, what you save on food and drinks.
Well, drinks are another story: If you’re an alcoholic, it won’t turn out well for you because the beer costs about the same as what you would have to pay for it in Germany. And wine is usually three to five times more expensive. And the local wines are... Well, it’s not a very nice quality. If you want to have a really tasty imported wine, you’re looking at five times the price you’re paying in Germany at the discounter!
Now finally, let’s look into the cost of communication, internet connection, and telephone. In Germany, if you have a cheap provider for your mobile phone card and wired connection, you probably pay €25 a month each. It adds up to €50 a month. Which means it’s €600 a year. Here in Indonesia, internet connections with free Wi-Fi are available everywhere! Wherever you go into a restaurant and have a coffee or something like that, you don’t pay for it. That’s why you do not need a cabled connection. Plus your accommodation, if you rent one with a service like I do, the internet connection is included in the price. So, I don’t pay extra for that. Still, I want to have a mobile phone internet connection. If I go with the best and most expensive provider, I pay for the package IDR 100,000 equals €6 a month. This usually includes about 20 GB of data, a flat rate for telephone and SMS. So I don’t have to take care of it. I usually get around with a data volume of 8 to 12 GB a month. Because free Wi-Fi is always available, and you can use that for your work, and you do not even have to pay for that at all. Instead of paying €600 a year, I only have costs of €36 a year. My savings on the internet and communication costs are €564 per year. That’s a lot of money for that!
Let’s talk about the quality of connection. If you have a cable connection in Germany, The service is usually quite reliable. But you probably have a 20, 30, or 50 MB connection. Here a 50 MB connection is standard. And it’s symmetrical! In Germany, you usually have an upload rate of only 1/8 of the download rate. But here, the upload is as fast as the download, sometimes even faster than the download rate. With the UMTS connection, the data connection on your phone is also pretty fast, but it’s not as reliable as you might be used to in your home country. Because of the long distances here in Indonesia, there are wireless transmissions, and if there is a big cloud in between or a heavy rainstorm, then the connection has a lot of dropouts. Those are much more frequent than you would experience in your home country. Anyhow, that happens during the rainy season. It’s more reliable during the dry season. But if you go to a restaurant and they have a dropout, you always have a fallback by using your mobile phone as a hotspot and continue working like that. Most of the time, you have the alternative of switching between two different providers, and that can give you a connection that is almost always available.
Let’s add up how this can turn out for you in the best case:
For the health insurance, we had savings of €2,400 a year.
If you give up your flat in your home country and you only pay here for a service apartment, you can save €4,800 a year.
If you sell your car and rent a scooter here, you may save €2,400 a year.
On food, you will save about €2,000 a year.
And finally, on the cost of communication, the internet connection, and phone calls, you can save €564 a year.
That turns out into €16,164 per year of savings. Unbelievable, isn’t it?
Let’s do the math for that saved money, which is the additional net money you got available. Saved money does not get taxed!
Now imagine you want to gain those €16,000 by additional income so that your net income will be €16,000 more. How much do you need to earn before taxes to gain €16,000 net? Let’s assume you’re on a tax rate of 30%. To gain a higher net income of €16,000 per year, you would have to earn €24,000 more before taxes!
As an example: Now your income before taxes is €50,000 minus 30% taxes is €35,000. You would have to earn €74,000 before taxes, minus 30%, which turns out into €49,000!
And in most countries, the tax situation is even worse. If you increase your income from €50,000 to €74,000 before taxes, your tax rate will increase.
Most countries do not have a flat tax rate, but a progressive tax rate: Higher incomes are getting taxed more percentage-wise than lower incomes. So, you probably will experience a new tax rate of 35% instead of 30%. So your additional income would have to be not only €24,000 but probably €30,000 more to gain the extra €16,000 after getting taxed!
Once again, saved money is money without taxes!
What are you doing with this saved money? I would recommend putting it completely in your Financial Freedom account! See, if you put it in there completely, you will reach your financial protection within five months! With that, you have enough money in the bank that you can live for five months without any income on it, and find a new source, how to create income. And if you keep saving, you will reach your financial security within seven years. Financial Security, as I explained before, is that you have so much money invested that you can live on the interest on a very basic level, And it’s only seven years with this to get there. That is a very, very pleasant situation because you do not have to take care of money or worry about money ever again!
So start cutting your costs. Go through each of those steps, and put all the money you are saving, or at least half of it, into your Financial Freedom account.