Europeans see money differently from Americans. Where Americans are obsessed with money, Europeans seem to have a lighter approach about money. In other words, Europeans work to live while Americans live to work.
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?
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.
Denmark Example Of How Europeans See Money Differently
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! Meanwhile, my family pays $2,250 a month for health insurance in 2021 because we receive no subsidies.
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?
Related: Why The Smartest Countries Aren’t The Wealthiest
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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.
Well, I was born in a european country and lived there all my life.
That is before the Euro and after the Euro. With the Euro prizes went up over night. Inflation in my country is compensated we call it cold progression. Taxes are going up, energy costs are going up and this stupid EU has just followed the policy of sanctions to Russia without an emergency plan for energy supply, great. America has its own energy, some european countries were dependent on gas.
Stupidity after stupidity. Social democratic systems tax hight and stiffle progress. The hight taxes do exactely that, they stop people from wanting to achieve more but that styffles development and inovation because its the clever and well educated that want to step up. So those people are slowly leaving europe, heading for, yep the USA where you can open a company and still achieve your dreams easier. And who comes to Europe? Yes, refugees, refugees who can not read or write, who have totaly twisted value systems, refugees who will recieve plenty from the social security stystem but likely never contribute. If you have lived of 50 Dollars a month and come to my country you get 400 to 800 Dollars a month without having to work, you get housing and food for free. That is a major impruvement! If you work 60-70 hours a week they tax you 48 % of your income. You pay for services you never need and you have no option to opt out. I work in technology and quite a few of my younger collegues have left the country, they dont mind working 60-70 hours but they want to keep the money to save and invest. The rest have reduced their working hours, why work like mad if you dont get more. This is the death of inovation and the strive to improve, China is hungry, all upcomming developing countries are hungry, Europe is stagnant and comfortable but therefor on the decline. It has a reason why socialism and communism did not work. People need the see the fruits of their labor, they need something to take home where they feal it is fair pay for their work.
William Tinoco says
If people like you love high taxes and all of that leisure and socialism (no need of working for 2 years in Denmark because daddy government and taxpayers will pay you?), then why don’t you relocate to Europe. I have seen more Europeans leaving the “European Dream” coming to America and third world countries because they’re sick of paying high taxes, and they pay for two types of politicians: the ones of their country and the ones in the EU parliament. Stop trying to make America socialist. Europe is still a weak economy, and rich people there avoid taxes relocating in Luxembourg and Switzerland. It’s false that they pay that almost 50% income tax.
Besides, America has more millionaires per capita than Europe, si it’s false that very few lead the upper echelon. That means that America lets its citizens become richer while Europe prevents them to become rich by making them stick out to the middle class. Europe is the continent for the middle class for a reason, not for the rich. A country for the rich will give you more freedom to move upwards or downwards, while a system for the middle class will prevent you from class movement.
If you want to have high taxes, fine, just don’t force people who don’t want to pay them to pay them. You can take the amount you think you should pay in taxes and donate it to any charity. Capitalism lets you have a choice, while socialism forces you to pay to useless politicians and being stick in the middle class.
America is obviously for the rich, that’s why it’s harder being part of the middle class, and that’s why the system creates more millionaires than any other country. It moves more people up.
Dave t says
There is a lot to criticize in this comment, but lets just stick with the opening “America, love it or leave it”. Both conservatives and liberals criticize aspects of our country. Why is it that conservatives love using this as a way in which to shut down discussion? Would they have said this about apartheid or slavery had they lived in countries where those things occurred. What about more recent travesties, like red-lining or Tuskegee study. The point here IS NOT to say that high taxes is the same as slavery, so don’t go there! The point is that these were things with mixed support in the countries in which they occurred, and discussion would have help end these things. The great majority of people now agree that these things were horrible, so why would anyone offer up the idea that no-one should criticize their country’s government, but should instead just leave if they don’t like aspects of it. Do you real consider this a rational point? I’d actually love a well-thought through justification of this particular point, if willing (as opposed to a name calling rant).
Inane stupidity is expected for those who cannot understand why the culture shouldn’t be destroyed to prop up the indolent. As expected.
Well, it is obvious that YOU & those like you are the problem in America. You refuse to have a socially respectful view & cling to the idea that greed is good. I truly hope that one day your finances fail you & you need to rely on the ‘system’ for support: Then you will discover why the European system is totally superior to the greed-lead US way. I pity you & most of your compatriots who’s greed will eventually bring you all to your kneed…..& rightly so.
William you an idiot I sure you never lived any where else and socialize country dient mean socialism. You have know understanding of the rest of the normal world
Not sure what the future will hold, but agree with most posters who have lived in both places (Germany & U.S. for me) that the European model was/is much more humane and satisfying. Surprised lack of discussion concerning amount U.S. spends on military and the low corporate taxes. If these two areas alone were re-organized, there would be plenty of money for infrastructure, education and healthcare. Of course, that also depends on the efficiency of the entire govt. itself, which as we see is not so high. Also telling were the many comments on how European labor has high taxes but other forms of wealth/income not so much. I think this results because the only way the “controllers” will put up with taxes is if their own fortunes are protected. I know overall systems are more complicated than this, but generally speaking I think it still is on point. Way back when I lived in Germany, one of the things that hit me the most upon arrival was the high quality of life and material goods esp. houses & buildings; and high value placed on interpersonal relationships, etc. Germans (generalization) have/had high ethics and strong drive to work, but they seemed to be more aware of value gained for that work – I can’t imagine the average German town (when I was there) putting up with half the crap (political, economic & social) that goes on in the average American town. In the end, in my experience, the difference seemed to boil down to education. In Germany, education, knowledge and expertise have/had very high value. Teaching, even at the primary and high school levels, was a respectable, well-paid occupation. And speaking of high school, at the time there were three paths for students to follow based on interest and inclination. This gives students a more satisfying result – why do college prep if you love to build hot rods? Anyway, the Germany that I knew kicked American ass all over the place and they still got 5 weeks off.
“Germans have had high ethics.”
Yes, let’s all remember those wonderful people who brought us WWII.
Thomas Riccardo says
Because France, Britain and America indebted them to a point where their economy collapsed which brought extremism to the forefront everyone was to blame for the Nazi rise let’s not pretend it was some isolated incident only predetermined by Germany!
Dominick Del Prete says
I lived in Germany. I married into a German family. I have had enough experience with Germans to state with utmost confidence that, as a group, they generally try to put their best foot forward in the world, because of the atrocities committed by their ancestors. The world would be a better place if we looked upon Germans today, not for what their ancestors did but what they are contributing to the world, and have for hundreds of years.
For sure. I love germany and the way of live
Edward Wrote: “Yes, let’s all remember those wonderful people who brought us WWII”
OMG, that’s your response… really? The people who started WWII are all DEAD. It’s in the past.
Let’s concentrate on the here and now, try learning from each other… good grief!
Dave T says
Silly, mindless comment. How about the US, the only country that continued slavery into the middle of the 19th century and the only country that put its citizens in, effectively, prison for having japanese ancestry.
What does slavery have to do with anything? Who cares? (BTW, slavery continued in Brazil until the end of the 19th century and is common among domestic help in the Middle East today). Why am I not surprised that you are misinformed?
Wow why cant u ppl let go of the past? U mad bro?
And the US has been at war for nearly 200 years. And what about the Native American Holocaust, Slavery, racism…to this very day.
I don’t see how $1900 a month is exactly considered being “taken care of” type money. And that is Denmark where cost of living is much higher than the USA, so $1900 in Denmark is worth less. Basically that is poverty level income in the USA. So after all the high taxes paid the best you can expect in return is poverty? That’s the problem with these EU vs USA comparisons, what is seen as “generous” benefits are only so in the eyes of Europeans, most Americans would balk at that amount especially if they had to pay the high taxes to get it.
Financial Samurai says
But consistently being in the top 10 happiest countries in the world every year forever has to count for something!
William Tinoco says
That’s the problem with the left: they use feelings instead of facts. Let’s be honest: Europeans don’t use A/C all day, not even Danish people. The reason why Europeans are better is because they spend less: you see Americans spending in brand-new TVs, expensive cars, having A/C all day, even recreational drugs and then say they don’t have money left. It’s their problem how they spend their income, so stop wanting rich people to pay your lifestyle.
And happiness isn’t the same as well-being. I’ve known people from third world countries, por communities, being happier than Americans. Even if they’re excluded from society and when they work, employers take advantage of their ignorance to pay them less than minimum wage and no social benefits. Ignorance is happiness. If Europeans knew that with more money, they could buy better gadgets, new cars, and all that stuff with lower taxes, they wouldn’t be happy since they’d know they’re being stolen.
Kids are generally the happiest humans on earth and it’s because they’re ignorant. Bhutan, the first country to use the Gross National Happiness instead of GDP used this system to distract the world from the abuses it committed against other ethnicities. Relying on happiness will obviously get more benefits for the middle class than for the upper class because the middle class is bigger than the upper one.
And in America, where people are used to think that money=happiness, you can’t solve the problems with high taxes, since they won’t afford more. They’ll get free healthcare and education, while having to give up their luxuries and consumption. Since happiness is relative, Europeans don’t think that happiness is money but more free time and drugs while Americans think that happiness is money, then you can’t assume they’d have the same reaction. On the contrary, higher taxes will affects happiness negatively (first positively as they won’t have to pay healthcare, then, when it becomes the norm, they’ll want less taxes to pay for their A/C 24/7). It’s just a mistake considering these areas have different cultures.
I still think that’s generous. You get that money and it’s worth more than it would be in the US because that money goes to rent, food, etc. – since healthcare, childcare, and education are mostly covered by the government, that unemployment payment goes a long way. So yes, I’ll happily pay those taxes to get these benefits. I’m already paying high taxes in NYC WITHOUT getting any of those same benefits. So yeah, I’ll say the Europeans are better off than we are.
So u expect the government to feed u through these 2 years like u would earn 200k before u got fired. How about lower ur expectations? Ppl like u are the issue of this world. U only care about having all the nice things that rich ppl on tvs have. But u dont want to work for it. Be glad u dont end up on the street and suffer from hunger. Thats when u think that u better took the 1900 bucks. What a fool u r. I hope u end up being poor someday so u have to learn to adapt and get down from ur damn horse.
And what’s with the parking spot obsession?
Maybe the biggest factor is that Americans have too much money and it makes them careless in how they spend it. Even in politics, it’s like they don’t care enough to be informed and they vote for one of the 2 big “brands” and that’s that. Income is high, taxes low and so are prices.
Recently i was looking at some numbers from the Bureau of Labor Statistics and in 2013 the average spending per household was 51,100$ . Out of that, transportation was 9,004 , food 6,602 , housing 17,148. All in all not much is left after the musts and made me wonder how in the hell isn’t buying an efficient car a huge priority. The cost of ownership is huge and one can easily save 3-4k $ per year by going smaller.When it comes to cars ofc there are other factors like gas being cheap, poor public transport and underdeveloped railways.
Americans are very vulnerable to marketing and that’s a bad thing. If you buy for example and Apple product,half the price is marketing and once you buy it,it’s only worth half. An economist might be tempted to factor in the resale value but vast majority of users don’t take advantage of that so it wouldn’t be appropriate to factor in the resale value.
You could also look at it another way, if you buy on marketing, you are an irrational consumer and for competition to function ,the consumer needs to be rational. So spending without thinking actually harms capitalism – it also deepens income inequality since consumers get less for more.
Americans also tend to have higher debt and lower saving than reasonable limits.
So i don’t think it’s all that much about culture, it’s the system that enables the behavior and i do believe that having less money due to higher taxes would have a positive impact on the behavior of the American consumer since the consumer would be more rational.
Anyway , there is one problem the US has that has to be fixed first and that’s money in politics. Without fixing that, nothing else can be fixed and the long term outlook can only be negative.
Almost forgot to mention military spending. You can’t talk about he lack of a social safety net without pointing out how much of the GDP gets spent on the military vs how much others spend.
Ofc cultural differences do matter and the education system. In France kids study philosophy in high school, in the US high school is very easy and kids barely learn anything (and graduation rates in big cities are beyond scary low). Someone said somewhere about US unis “We don’t educate people anymore. We train them to get jobs”. If kids don’t learn much about the world in high school and after that they are trained to be just robots performing a single task , where do we get?
“Bargain hunting” is costly in time. Americans value their time more and spend less time on it than Europeans.
The US spends vastly more on social services than any Euro nation ($1.6 Trillion per year). Medicare costs more per capita than any socialized medicine system and only covers the elderly. The US does NOT however give unlimited money to healthy people – that is the only real difference. The US spends far more on social programs than it does on the military (much of which, btw, is spent defending europeans from Russia).
US Universities are still the best in the world – American High Schoolers in the big cities generally don’t get into selective universities. Selective schools target children who go to top privates and competitive suburban magnet schools.
U know why they are so popular? Because of the brand. Universities dont necessarily have to be good. I have heard that harvard students most of the time will get a pass because they pay a lot of money for it. I have also experience that dutch schools treat foreign students differently because they pay more fees than the national students. Chinese for example have basically unlimited chance to take an exam. Meanwhile, me as a european student only got 3 chances max. After that i will be kicked out. Thats and unfair system and ppl on the outside dont see that.
Old thread, but since no-one else has mentioned this yet…
I’m English, lived in Switzerland for a time, and have now been in the US for some years. The biggest difference I’ve noticed in how US v Europeans view money, especially as regards cars, is that every American I’ve ever discussed prices with talks in terms of monthly payments. Ask them how much their new car was, or their insurance, and you get ‘Oh, I got a great deal, $449 a month’, ‘I’ve just changed insurers and it’s dropped from $85 to $75.
No European I know thinks like this. We say the cost of something as a lump – the car we’ve just bought was 6,000 GBP, or our insurance is 150 GBP a year (note: car insurance in the UK is madly cheaper than here – you know you’re all effectively funding a national health service via medical liability payments on your car insurance, right?).
Thinking of things monthly leads people to think of them as permanent expense streams, that just flow out of your life for ever in a steady trickle. No-one in the UK expects to pay for a car indefinitely – they buy one, either with cash or short-term finance, then take pride in it being paid off, and drive it around for 5, 7, 10+ years more whilst they save up for the next one.
This is why it’s so easy to sell Americans anything as a subscription model. It’s seductively easy to sign up to something for $9.99 a month, whereas in Europe you’d be marketing it as $120 a year – a much harder sell. (The auto-renewal rights that companies have here are hilarious too, and would never be countenanced by people agreeing to pay for something as a lump sum rather than a perennial drip feed.)
I usually also find that when Americans are talking about their comparatively low tax rates, they entirely forget about their property taxes, which are paying for services which are funded at a ‘federal’ level through income taxes in the UK and elsewhere. Again, it’s because their property taxes are invisible, part of their monthly mortgage payment, part of the monthly cashflow that’s assumed to be just an inevitable part of modern living. I pay property taxes as one lump sum, saved and budgeted for over the year – it’s much more painfully noticeable that way, and drives my housing decisions much effectively.
Financial Samurai says
Great perspective. All posts are new in my eyes, so thanks for sharing your thoughts. I’ve tried hard to help change the way Americans think about automobile consumption in my post, “The 1/10th Rule For Car Buying Everyone Must Follow“. Let me know what you think. How did you find my site btw? Happy 2015!
Can’t remember exactly how I found your site, but it was almost certainly via other financial bloggers – there’s a steep learning curve each time we move cross-border, have to get to grips with how taxes and other finances work there, and then work out how to save for our retirement across several regulatory systems and currencies. I’m profoundly grateful for the entire financial blogging community.
I like your 1/10th rule. The usual advice for young people in the UK is along similarly sensible lines: seriously consider not having a car – bike, bus, live somewhere you don’t need one – but if you do, then buy an (almost certainly boring) old one for a couple of thou in cash, then drive it until it dies whilst saving up for your next one; hopefully that might then be 3-4k, rinse, repeat, until you get up to something respectable. Borrowing for newish cars IS done, but is still seen as slightly stupid.
I have a teen and an almost-teen, and they’ve grown up with me drumming into them that the things that will make or break their financial life without them realising will be their decisions about housing and transport – how big, how much, how close to work, etc – because these not only have by far the largest budget impact, but are also the most painful to undo if you realise you’ve got it wrong.
What the commenter forgets to mention:
When you ‘cap’ someone because higher taxes would mean you would get richer less and less, you essentially trap everyone in society to be a wage slave. Everyone MUST work, and it is near impossible to get out of the rat race.
Also, you assume that we should just be handing all this money over to the government! Look at record debt levels, corruption at all levels, and you want to give them more of our hard earned money? Don’t think so!
I only read a few of the comments. Good discussion but the Europeans still don’t get it. They are bankrupt!!!! I love Europe and plan to live in Italy when I retire, but their system is unsustainable. Ours is also but that is pretty much due to us trying to be like them. This should be fun!!!!!
Kirsten @ Indebtedmom says
My husband and I, combined, make well over 6 figures. With our student loan debt and very expensive daycare for two, we are not living “the life”. Still, I support higher taxes for the top earners. I want a great national healthcare system, subsidized child care, and paid maternity leave (just got back from scraping by for my 12 week unpaid, but maximum covered by the law, leave). We are greedy people, for sure, all trying to keep up with the Joneses, and I’m afraid for what it will do to our economy in the future.
I would much rather people change their understanding of the value of money by living, thinking, and connecting with their neighbors and communities rather than by simply taking their money and giving it to politicians to waste.
I absolutely agree. Government says our taxes support community, but they often do the exact opposite and incentivize anti-social behavior. I’m thinking of subsidizing people for having kids out of wedlock, in particular.
I feel ya bro. but there is a way around the high taxes. Its about entreprenurship. When you build a company, keep salary decent (in terms of taxes), then grant equity units based on percentage of income. You get the recipe of low taxes. How? When you get units of a company that is not publicly traded, they effectively have a value of 0, so no taxes at inception. Eventually, once it is publicly traded, its value shoots up to a ridic amount. You can choose to diversify and sell, or prolong paying taxes by holding. When you do decide to sell, your taxed at capital gain, which is low and behold smaller. Lots of ppl in silicon valley follow this route. Some of them even put it in a roth ira, so they are never taxed at all (IMO this is extremely cheating the system and needs to be regulated asap). But as david tepper says, it is what it is.
Financial Samurai says
Hmmm, sounds like a good strategy putting it in a ROTH IRA since it’s not worth anything!
But, can we really say “eventually, once it is publicly traded”? I don’t see this as a common occurrence. Most companies never make it to IPO.
You can get acquired too. I feel like as long as you can see the ebitda per unit, then you are not making a losing bet. Of course in silicon its all about valuation by the right vc.