Learning From The World’s Happiest People

Our tour guide in Stockholm was not Swedish, but Albanian. She stood 5 feet 1 inch tall thanks to three inch heels. As we walked towards Old Town to see the Royal Palace, I often wondered whether she had ever twisted her ankles traversing the uneven cobble stone roads.

Bianca told us she’s a full-time lawyer who enjoys playing tour guide on the weekends as a part-time job. She’s been studying for six years and is getting a second Masters degree in international law. When I asked her how much tuition costs in Sweden, she surprisingly mentioned, “Free!

All citizens and EU residents have free tuition if they want to study university here in Stockholm, Sweden,” Bianca went on to say.

I can’t verify the veracity of her statement, however, with law school tuition commonly over $35,000 a year in the US, Bianca clearly has a good deal!

I love everything about Stockholm! We have 1/3rd parks, 1/3rd water, and 1/3rd land. The government cares about us and you don’t have to work very hard to live a good life. Back home in Albania, the average person only makes 300-350 Euros a month ($390-$450 dollars),” Bianca explained.

I asked Bianca about the local tax rates. She didn’t know for sure, but said she pays about a 32% income tax through the Pay-As-You-Earn (PAYE) employer witholding system. She also pays a 25% VAT tax (consumption tax) on all goods. I was expecting Bianca to highlight a much higher income tax rate since 32% is similar to my effective tax rate, so I was surprised. But then again, our income levels are drastically different as you will discover below.

DIGGING A LITTLE DEEPER

Bianca was open to telling us everything we wanted to know. Between learning about the founding of Stockholm circa 1200 AD and major points of interest such as the Gamla Stan, I asked her how much a nice one bedroom, one bathroom apartment in a good location costs a month.

I have a 28 sqm (~300 sqft) one bedroom apartment in a nice location, and I pay 425 Euros a month,” she said. That’s roughly $500 dollars a month, and a bargain pretty much anywhere in the US! When I told her that a similar apartment in San Francisco would cost at least $1,800 a month (1,450 Euros) she was flabbergasted.

How much does a typical person who pays THAT much for an apartment makes?” she asked? I told her the median per capita income in San Francisco is about $55,000 a year and $90,000 per household. Meanwhile, the typical $1,800 a month one bedroom renter probably earns roughly $3,500-4,000 a month.

Ahhh, no wonder. I have never made that much in my life!” Bianca extolled. “My average monthly income is around 2,000 Euros a month ($2,500 USD). In the summers I work up to 65 hours a week, but in the 5 month long winter, I barely work, maybe 20 hours a week. In total, I average about 35 hours a week.”

Even the poorest people in Stockholm have a good life because they make at least 10 Euros an hour and have their medical paid for. They might have to find a roommate to live with, but that’s no big deal.

LETS DO SOME INCOME AND LIVING ANALYSIS

Bianca loves life and makes just 24,000 Euros a year, which equals $30,000 a year, but has likely the same purchasing power of just $24,000. For example, Stockholm sells Burger King Whoppers for $7 USD, or roughly twice the price here in the US. Things are certainly not cheap in the Scandanavian region. The funny thing is, the Norweigans travel to Sweden to shop because things are even more expensive back in Oslo!

Despite only making 24,000 Euros a year, Bianca pays around E7,680 in income taxes leaving her with just E16,320 a year or E1,360 a month. Let’s break down her estimated expenses:

* Rent: 425 Euros (31.25% of total income)
* Tuition: 0 Euros (but probably closer to 1,200 a year)
* Education Related Expenses: 100 Euros (7.3%)
* Food: 300 Euros (22% of total income)
* Entertainment: 300 Euros (22% of total income)
* Miscellaneous: 100 Euros (7.3%)

Total Expenses: 1,225 Euros a month
Savings: 135 Euros a month

Ah, but we forget that she works as a tour guide every week for six hours on average. Based on her comment that “even the poorest Swedes make at least 10 Euros an hour,” let’s add on another 300 Euros of income a month (including tips) from her side job. Now all of a sudden, Bianca is saving roughly 435 Euros a month, or some 26% of her income!

“NOBODY WILL EVER GET REALLY RICH”

Royal Palace, Stockholm

Bianca admitted that it is very hard for people to get rich in Sweden. “The more people make, the more the government taxes until the point where we pay more to the government than we can keep.” This is the Sweden that I’ve come to expect given stories abound with 50% effective tax rates on incomes over $100,000.

But of course, people can get rich in Sweden. Just look at billionaire Ingvar Kamprad, the inventor of IKEA. What I find very interesting in Bianca’s attitude is that even after studying law for six years, and earning barely 30,000 Euros a year working two jobs, she is enthusiastically happy with the government, high taxes, and Stockholm.

She admittedly has never made more than 2,000 Euros a month, so maybe she doesn’t know what she’s missing. However, does it really matter? The point is that most of Sweden, and the Scandanavian countries consist of people like Bianca. They earn 24,000-50,000 Euros a year, pay 30-50% tax rates, and are consistently ranked among the happiest people in the World!

The government provides free to cheap health care, takes care of their respective cities, and provides relatively high paying minimum wage jobs. Because everybody makes quite a similar amount, there isn’t much discord.

BEING THE SAME MAKES PEOPLE HAPPY

Besides IKEA, I can’t think of any other major company to have come out of Sweden or Scandinavia that has impacted the world. Contrast that to just Northern California alone, where there’s a new multi-billion dollar company going public every year, and we can see why there is a rising amount of income inequality and dissatisfaction in America.

It’s a curious case where everything is fine if you and all your friends make the same amount. As soon as one friend gets a raise and promotion, things suddenly feel a little less warm and fuzzy. And when your childhood friend turns out to have started a company that sold for millions of dollars, then your $60,000 a year income feels like dog food!

I strongly believe that it doesn’t matter how much you make, or how far you rise. If you don’t figure out a way to squash your negative emotions, you will never be happy.

Does the happiness of the middle class not outweigh the disdain of the most motivated and wealthy? Who knows, but living the good life with the optionality of starting your own do-it-yourself billion dollar furniture store doesn’t sound like a bad situation!

Recommended Post: I’ve Seen The Future And It Looks So Bright!

Photo: UN Poll On Happiness, 2012.

Regards,

Sam

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. says

    We do get so stuck in our money thinking over here, and forgetting sometimes that a lot of us could get by on MUCH less. The Bianca story was crazy. 30% of her income on rent? 22% on food? 22% on entertainment? Man, that’s an expensive place. We’re pretty lucky about some of the things that are so freaking cheap here in America. And maybe we should be a little bit more grateful for that.

  2. says

    I love stories like this. Even though she is not rolling in money, she is perfectly happy with her life. This is a very similar story to a guide we had when we did the inca trail in Peru. She didn’t make much money but she loved what she did and where she was from.

  3. says

    Nice story. Happiness goes beyond money.
    Having uncles and aunts that live in Sweden (Malmo & Gothenburg) I know first hand that they’re well taken care of from a social assistance side, education and general opportunities. Stories like this go to show you that you can still be happy with the basics, rather than always chasing bigger and better. Only foolishly do we in the western society chase the American dream, yet never seem to fully attain it.

    BTW, I visited Sweden twice, and seen the lifestyle firsthand. As much as all the positives, it was dull, and could never see my self living there. Just an observation :)

  4. says

    And Volvo & Saab. But I also agree with the main point :)

    The family and acquaintances we have in Europe all say the same thing: less materialism, more equality and more general contentment than here. Can you go for 25% sales tax (which is what VAT compares to best)? On EVERYTHING, including basic food items. That’s why things seem expensive there but “they don’t pay that much more tax.” (That’s why Big Macs, gas, travel, air fares, cars, just about everything is cheaper here in the States.)

    Oh, and one more thing: 5 week vacations over there! :)

  5. says

    Nokia is from Finland, Ericsson is Swedish, as well as Volvo and Saab cars, or H&M clothing stores. But you are right, this is pretty pale compares to California. 30% of your income going into rent is common in Europe, and taxes are high even for small incomes. But you do get free healthcare, decent retirement, and free education, the part about tuition is true. I read that the Danes have the smallest gap between rich and poor in the world. And what about the awesome benefits, like unemployment at 90% of your last income, or one year parental leave that the two parents can split when they have a child!
    I found it great that a waiter had such a high salary and made almost the same money as a young graduate, but I don’t think that there is a motivation to give your best at your job or be an entrepreneur.

    • says

      Nokia and Ericsson really are ants in the mobile space now compared to Samsung and Apple. It’s too bad, but it is the reality. Didn’t think of H&M, so thanks for that.

      Unemployment at 90% of your last income sounds pretty good! Perhaps Obama will implement that and go for my Shock & Awe Yeah 5-year unemployment benefits program! :)

  6. says

    You might want to tweak your numbers in the article for Bianca’s 435 Euros/month into savings. You forgot to tax that.
    So, let’s subtract 96 Euros from her savings for the income tax too. Now she could reasonable put aside 339 Euros into savings. Quite a bit lower than being able to pay for her 500 sq. ft. place, as opposed to paying for that bill entirely by her savings.

  7. says

    “Besides IKEA, I can’t think of any other major company to have come out of Sweden or Scandinavia that has impacted the world.” 3 companies in decline – Saab (Auto – now owned by NEV Sweden, AB still going strong), Volvo (sold to Geely in China), and Nokia and a few companies going strong – Lego, H&M, Electrolux, and Securitas.

    But you’re right – they’d all be midsized firms if you stuck them in, say, New York.

    • says

      On closer examination of the comments, the only original one I brought to the party was Electrolux! (And Volvo doesn’t count anymore).

  8. pcash says

    We must be careful to not let selective bias give us a false picture. The job of a tour guide will typically filter for the happier, more pleasant person. But still, very insightful article.

    • says

      You make a good point. However, Bianca was with us on the 35 minute bus ride to Stockholm from Nynasham, and then left us to go do her own thing. She didn’t spend hours with us in other words.

      I make an assumption in this article that the year after year major polls claiming Scandinavians are happiest are correct. I then WENT to Scandinavia to do some fact checking. It’s a tough business, but somebody’s got to do it!

  9. says

    You forgot Volvo – it was founded in Sweden and made a few people very rich as well. But I think you’re right in that money doesn’t buy happiness – freedom does. In the US, money allows for more financial freedom (based on how our economy and government works). However, in Sweden, since many things are provided, you don’t necessarily need high incomes to get the same level of freedom, which equates to happiness.

  10. Joe says

    A lawyer makes only slightly more than minimum Wage? She makes around 13 Euros an hour.
    24,000 Euros yearly working 35 hours per Week

    That’s totally unbelievable. I wouldn’t be motivated to do anything other than a minimum wage job.

  11. says

    The European viewpoint is very different from our super consumer point of view. In the U.S. everything seems to center around consumption. In the rest of the world, they value socializing with friends or family much more. In Europe (and outside the U.S.), they live without cars or owning a home and are doing fine. A typical evening is out with friends at a cafe and they may not spend anything. I think I adopted some of the same attitude and value the free or low cost things much more. It makes you happier than earning and spending!

  12. Kyle says

    Don’t forget about Vestas in Denmark!
    They’re an extremely successful global wind turbine company.

    vestas.com

  13. rubin pham says

    sweden is a perfect example of why the united states is so far behind so many other countries when it comes to progressive social policy.

  14. says

    You are wrong, Sam :) I am in IT. My specialization is in Business Intelligence. Qliktech is one of the fastest growing visual BI companies from Sweden.

    What is happening in Europe reminds me of the classic novel Atlas Shrugged.

  15. says

    There are tradeoffs for every decision including where one lives. Having moved from a low cost of living area to a high cost of living (and tax rate) area, I appreciate the benefits of living in a locale with amazing weather, culture, and diversity. The tradeoff’s are all personal, but having a positive attitude is possible no matter what your external circumstances.

  16. says

    So what is the difference between someone who lives in Sweden and works minimally, but still has health care and other social benefits and someone here who is low income and receives Medicaid and welfare, other than the social stigma associated with persons who live on government assistance in the US?

    • says

      The difference is that the person in Sweden can be anyone from a lawyer to a musician, from I gather in the above post. In the U.S. a lawyer is most certainly not living on welfare. Sounds like in Sweden, every job position is part of the larger puzzle and no one type of worker is awarded with a disproportionate amount of income.

    • Janet says

      To me, the difference is that the person in Sweden is working (hopefully, at least if able). In the US, I don’t think most working people qualify for medicaid and welfare. Unless, perhaps, one is only minimally employed, or not reporting all income. A lot of people who work in the US make too much income to qualify for Medicaid and welfare. Being single with children probably improves the odds of getting help.

  17. says

    Hi Sam and Co.
    Just to compare with your friend Bianca, I also have a 25% tax rate here in Croatia – not VAT tax but sales tax! The 25m2 apartment I now stay in costs 250€ / month – before utilities which I thankfully stay in cost free. On the other hand we have sunshine day in and day out and I live about two minutes from my job. Food here is also about 25% of income, though people here eat less meat and more fish and vegetables.

    Like your friend, I am a tour guide – my pay is also “minimum” of 3,000 Croatian Kuna (the exchange rate to Euros is about 7.5 to 1, so figure 400 Euros a month.) I spent about 6,000 kn (800 €) in school to become a state certified tour guide, but we basically live on tip income, not unlike waiters and waitresses. Even so – mainly due to tips and frugal living, I am also saving about 25% of my income. Remember, most tour guides work roughly half the year, when it’s warmest.

    From what I can tell, many Croatians are also happy campers.

    • says

      Great insight Anastasia! Sounds like you enjoy your job and are doing well financially.

      A 25% savings rate is 6X the American average. Is your main source of income from tour guiding? Can tip income be more than base salary income?

      25% is an expensive sales tax! However, do you not have to pay income tax and only sales tax?

      I love Croatia, and I must look you up when I go!

      Tx!

  18. says

    Yah Nice story. I have read many times about Sweden that it has the highly life satisfaction rate in whole world.

    The reason you have described it’s absolutely correct, because of the minimum gap between a rich and poor. They are all wealthy… no one is less money to envy.

  19. Greg says

    “I strongly believe that it doesn’t matter how much you make, or how far you rise. If you don’t figure out a way to squash your negative emotions, you will never be happy.”

    In my opinion this was THE point to take away from the article

  20. says

    Thanks a lot for sharing the story and breaking it down, Sam. I do agree (and obviously so does your chart) that people are probably happier when everybody is making the same, but for Bianca I’d say she’s particularly happy because she’s making WAY more in Stockholm than in her birth country. If she came to America, she’d be just as happy assuming she made $10/hour and didn’t live on a coast.

    Anyway, you’re 100% right that you’ll never be happy if you can’t control your negative thoughts and emotions. Contentment is a powerful thing and you can really be happy in most scenarios if you learn to enjoy life and be thankful for what you have…instead of being pissed/envious/jealous about what you don’t.

    • says

      True. Going from Albania to Stockholm, as expensive as it is provides her a greater appreciation.

      So for those in America who are grumbling about how bad they have it, take a trip around the world and gain some perspective. We’ve got it GOOD!

      • Rr says

        Based on your post, people are happier when they’re the same, which I agree with. Sure, we Americans got it good because of higher levels of income, opportunities to increase wealth and other factors, but we are also not better off because of income inequality, and too much diversity (according to the premise of your argument that people are happier when they’re the same.) I think most Americans are pretty unhappy because of this problem.

        • says

          Yes, we are happier if we are the same or better off, and get really unhappy web we are worse off. Due to massive income inequality, more and more unhappiness will be produced until the masses overthrow the select rich.

  21. says

    Great story. Thanks for sharing! Americans doesn’t like that kind of system because we’d rather work hard and become rich. We don’t want to be at the same level of everyone else. I guess we have a bigger percentage of successful rich people than the Scandinavian countries, but we also have a huge gap between rich and poor. I don’t know which system is better. I would like to try the Scandinavian system though. Sounds like a good deal for regular people.
    Nokia?

    • says

      I don’t know how much we really want to work hard though. Working hard is straight forward. There is NO skill in working hard, but in my time working at a company, I only say about 25% of folks working relatively harder. The rest were happy to work standard hours and that’s that.

      Many want to be rich, but not as many want to work hard to become rich. Hence, the Scandinavian model seems pretty good!

  22. says

    I have always thought the Europeans really know how to enjoy and LIVE life as opposed to Americans who just like to work, work, work.

    Going along with this, however, is that if we chose to, we could have a more leisurely life here in the US. We could have extended vacations, shorter hours, and a spouse who stayed home taking care of the kids instead of the typical 2-income household so often seen in America. If you choose to live modestly, avoid consumerism and debt, and choose to be happy with less, than you could have a more European lifestyle of simple living and time with family being paramount. Just a thought.

  23. says

    Great Read Sam. We all certainly seek happiness. All of us do this in different ways. I think in America we have “expectations” to achieve great wealth, etc. Unfortunately this doesn’t come true for most. In Europe, I believe the “expectations” are less, which makes them more content with their every life (which is a good life, like most Americans).

    Whenever I think about happiness, I can’t help but think of this quote… It nails the human condition.

    “All men seek happiness. This is without exception. Whatever different means they employ, they all tend to this end. The cause of some going to war, and of others avoiding it, is the same desire in both, attended with different views. They will never takes the least step but to this object. This is the motive of every action of every man, even of those who hang themselves.”

    ― Blaise Pascal

  24. says

    Similar to poverty, I believe that happiness is a state of mind. It lies on the satisfaction level of an individual. Some people may not agree to give almost half of their income to the government. But come to think about it, education and health care are free and rent may be cheap, but the government will not be able to provide those benefits if people are not paying taxes. People are happy despite the high tax because their government is taking good care of them.

  25. Tim says

    My grandfather and grandmother in Mississippi were dirt poor all their lives but seemed to be happy for the most part. They never really wanted for much as they didn’t really strive to have much. They knew they were poor and were simply OKAY with it. Unlike many of us today.

    I think happiness is much more than income or physical things. As long as the basic necessities of life are met. And as far as healthcare goes, that to me is another big want. I mean, I cannot really remember going to the doctor much as a boy. When I got sick, my mom would give me a home remedy or something. Do we really need to go to the doctor or a clinic as often as we do nowdays?

    I really have a hard time with these happiness polls. Who gets to decide who is happy or not? Frankly, I’m happiest in a fast-paced work environment where I have to make snap decisions over critical projects. Others may not be and that is okay for them. So is happiness just based on who smiles more or who gets more vacation or who takes their kids to the doctor more often? Is that what life is about for all people in all countries?

    • says

      I have an issue with these happiness polls as well, which is why I went on a business trip for 2.5 weeks to Scandinavia to see for myself! The result is this post, along with the I See The Future post. Our Scandinavian friends are indeed a happy bunch b/c the government takes care of them!

  26. says

    I love how so many European countries have strong education systems that are either free or super cheap. All the Europeans I’ve met in my travels and those who moved to the US all speak at LEAST 2 languages, most of them 3-5. It’s incredible!

  27. Sojourner says

    Dear Financial Samurai,
    I have been reading many articles of yours with interest and respects, and can’t help but wonder if your philosophy with money has changed substantially in the past few years, especially when you compare this article with THIS article you wrote: http://www.financialsamurai.com/2010/06/03/only-the-poor-or-super-rich-say-money-cant-buy-happiness/

    You said back then that there is a huge difference between the happiness afforded by 40K income and 80K income. But according to the article you posted here, it’s not so much of the absolute amount but what you need. If you live in the US with no universal health care and no free education and weak social safety, yes, you may need more money to feel safe and happy. But as you say, in a country with strong social safety, strong sense of community, and no “Joneses” to catch up with you don’t need as much to be happy.

    I never made as much as you did but I have traveled in about 30 countries and I know you don’t need much money to travel. In fact traveling like a destitute person is not only a way to travel cheaply but a great way to travel. Just as an example. While more money surely gives you more options, by no means the lack of money closes all the options. And psychological studies suggest having more options does not make one happy.

    A couple of websites I would like to share:

    Early Retirement Extreme

    Website made by a physicist originally from Denmark, who also “retired” in his 30s. He lives in the SF area and advocates much of the same financial advice you give out. (Do not buy expensive cars, invest, generate passive income, etc) The main difference is that he managed to retire on 7K a year passive income. His main argument is that skill, resourcefulness, and right philosophy can eliminate the need for greater income. I am not saying he is right and you are wrong and I fully respect your views. But again I find it interesting that it appears that your view has changed a little, perhaps a little closer to his view.

    Nomad Matt

    The guy who managed who quit his corporate job, and travels around the world and teaches people how to travel dirt cheap.

  28. says

    It’s difficult to compare such vastly different countries. On population alone, the U.S. is nearly 35 times bigger than Sweden (at approx 9m people, it’s has just slightly fewer people than NYC). It’s easy for everyone to be the same when there are only that many people to compare. I don’t have any hard data, but I’d wager ethnicities are not as diverse in Sweden. Couple that, with the fact that our country was founded on the principles of “escaping taxes and rules” (my definition), I don’t see how the U.S. could ever be like Sweden.

    With that said, I think I want to live there. :=)

  29. says

    Hi Sam;enjoyed reading this article. I have a visiting position in Sweden and yes, it is a very expensive place. Did you have a drink there? Yeah, you know what I mean. Also, I thought to tell you about my conversation with a Danish PhD student of mine (and my research assistant) about the Danes being the happiest people on Earth.

    Me: Did you know that you are the happiest people on Earth?

    Him: Yes, this is the ones who don’t comit suicide are very happy. And we really love to p*ss everybody else off!

    May be this is the secret?

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