Why Americans can't keep money in their pockets — even when they get a raise ( www.cnbc.com )

danielquinn , 5 months ago (edited 5 months ago)

It’s not “lifestyle creep”.

When I moved from Canada to the Netherlands, my salary stayed roughly the same, but the amount I saved every month exploded. The Netherlands has much higher income taxes, but it should be noted that I also enjoyed some pretty sweet tax incentives as a skilled expat.

The relevant differences between the two environments were:

• In Canada, paycheques come every two weeks. In the Netherlands it’s every month, so you have to lean to pace yourself.
• In the Netherlands, your paycheque isn’t 1/12th of your salary after taxes. Instead they actually withhold around 12% your salary and pay it out to you in a lump sum partially in December and again in May. You’re still getting the same amount, but you’re forced to budget on a lower monthly amount, while enjoying bonuses twice a year. I used the bonuses to pay down my Canadian debt.
• The Dutch don’t live off of credit cards the way North Americans do. While in Canada you’re taught to “build up your credit rating” by using a credit card, in the Netherlands, many people don’t even have a credit card. Purchases are typically made with debit cards instead. Unlike Canada, these cards don’t apply a fee to your purchase either.
• They also don’t really care about credit ratings. Instead, there are laws that restrict you from buying or mortgaging at a monthly cost higher than x% of your monthly income.
• Car ownership is drastically reduced there. While in North America people flip out at the idea of 15min cities and refuse to believe it’s possible to live without a car, people do it every day there.
• Finally, and this one may be more specific to me, going out for a meal is a bigger deal there and typically more expensive. Dutch culture expects lunch to be a home made ham sandwich or just a piece of bread, chocolate sprinkles and some buttermilk. Meanwhile I was used to blowing $20/day on eating out for lunch and often went out for dinner too. The amazing quality of food you find at their grocery stores meant that we often collectively bought groceries for office lunch every day, and I cooked at home.

In the space of 2-3 years, I paid off my credit cards ($10k) and what was left on my student loan ($12k). Inside of 5 years, I had tens of thousands of Euros in my bank account.

314xel , 5 months ago

The Dutch don’t live off of credit cards the way North Americans do

in the Netherlands, many people don’t even have a credit card

And I would say most of Europe.

When I pointed that out in another thread, people got butthurt.

314xel , 5 months ago

They also don’t really care about credit ratings.

Exactly. Credit scores are a scam and an incentive into having a credit card and overdrafting.

Instead, there are laws that restrict you from buying or mortgaging at a monthly cost higher than x% of your monthly income

It’s called “level of indebtedness” or “financial burden” and it’s typically 40% of net monthly income. So you cannot get a loan that would put your total monthly installments (counting all of your credits) above 40% of your income.

314xel , 5 months ago (edited 5 months ago)

And I would add that if you are behind with your installments, creditors can only hunt you down for 50% of your income (subtracting any other credits you may have / owe), so you don’t typically go bankrupt because of loans. Of course, for a mortgage, you do lose the house, but I’m talking about general loans so-called “for personal use”.