Best Countries in Europe to Achieve Financial Independence (FI)
Photo by Mathias Konrath on Unsplash. Neuschwanstein castle, Germany.
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Disclaimer: I am not a financial adviser, and this content is for informational and educational purposes only. Please consult a qualified financial adviser for personalized advice tailored to your situation.
Exploring the Best European Countries for Financial Independence
In a previous post, we explored how living in Germany may help or hinder your journey to financial independence. We provided insights into salaries, taxes, cost of living, cultural circumstances, and other factors to be aware of when considering Germany as a location to pursue financial independence.
In today’s post, we will attempt to identify the suitability of different European countries and cities for pursuing financial independence. Specifically, we will benchmark salaries and cost of living across European countries to identify the most financially advantageous locations for financial independence. To illustrate, in our previous post, we found that the cost of living in a major European city like Madrid or Rome was 11.9% and 13.9% lower than Berlin, respectively, yet the net average salary in the German capital was almost 40% and 75% higher than in the two cities. Clearly, Berlin offers a financial edge for those pursuing financial independence compared to major cities in southern Europe, such as Madrid and Rome. But how does this interplay between salary and cost of living look like across other major European countries and cities? Keep scrolling down and let’s find out!
How to Choose the Best Countries in Europe for Financial Independence
How Your Savings Rate Can Accelerate Financial Independence
As we’ve covered in previous posts, the most important factor for achieving financial independence is your savings rate, i.e., the percentage of your net take home pay you are able to put away and invest on a regular basis. There are many different calculators you can use to estimate your timeline to reaching financial independence (for example, this one or this one). But the bottomline, though, as depicted in Figure 1 below, is that there is a non-linear relationship between your savings rate and your timeline to reaching financial independence and retirement. Reducing expenses can significantly accelerate your financial independence timeline because it lowers your required nest egg while increasing monthly savings. It has a double impact–hence, the non-linear relationship.
Figure 1: Non-linear relationship between your savings rate (X axis) and your timeline to reaching financial independence (Y axis). Play around with your own data here.
Finding the Best Countries in Europe for Financial Independence (methodology)
To maximize your savings rate, focus on reducing living expenses or increasing your income for faster financial independence. Obviously, your net take home pay and the general cost of living is going to play a key role here. Living in countries with high salaries and affordable cost of living is key to accelerating your journey to financial independence.
For our analysis of European countries, we use cost of living data and average net (after tax) salary data from Numbeo. Our analysis includes 37 countries in Europe and 94 cities. As part of our methodology for an exploratory country analysis, we propose plotting the differences in cost of living and salary in relation to where we are based (in my case, Germany, see Figure 2). In the X axis we present the cost of living in different countries as a percentage of Germany’s cost of living. For example, Norway’s cost of living is 18.4% higher on average than in Germany. Similarly, the Y axis represents each country’s net average salary in relation to Germany. For instance, the Netherlands presents salaries that are 15.6% higher on average than in Germany, while France’s salaries are 16.9% lower. The red line serves as a benchmark, indicating countries with similar financial independence potential compared to Germany. For example, Sweden falls right on the red line: its net average salary is 7% lower than in Germany, but its cost of living is also 7% lower. Hence, the experience of pursuing financial independence should be–more or less–similar in both countries.
Figure 2: Identifying suitable countries to pursue financial independence from the perspective of someone living in Germany (0,0 in the graph). The X axis depicts the cost of living difference (%) in relation to Germany’s cost of living. They Y axis presents the net average salary difference (%) in relation to Germany’s salary. In general, countries situated above the red line are–in theory–better performers than Germany for these two variables.
Top European Countries for Financial Independence
As observed in Figure 2 above, Germany is comparatively a strong location to pursue financial independence. From the perspective of someone living in Germany, there are only 4 countries in Europe where it may be easier to pursue financial independence via savings maximization–the Netherlands, Denmark, Switzerland, and Luxembourg. The outputs of this exercise align well with our general perception of pursuing financial independence in Germany, which we covered in detail in a previous post.
Figure 3 applies this method to Italy, highlighting which European countries offer better financial independence opportunities. In this case, we find there are 13 countries where the difference in salary in relation to Italy are substantially larger than the difference in cost of living (Switzerland, Luxembourg, Denmark, Netherlands, Germany, United Kingdom, Sweden, Norway, Finland, Belgium, Ireland, Austria, and France). For example, the UK and Sweden have 81.2% and 62.4% higher average net salaries, respectively, than Italy, but enjoy a cost of living that is only 22.3% and 6.2% higher than its transalpine counterpart. Sounds like quite a bargain. You could consider relocating to countries with lower living costs but proportionally higher salaries, creating ideal conditions for financial independence (e.g., Spain, Poland, Czech Republic, and Estonia, although the last two fall very close to the red line.). To illustrate, the cost of living in Spain is 7.5% lower than in Italy, yet they enjoy salaries that are, on average, 7.3% higher. Again, this looks like a good deal for someone in Italy.
Figure 3: Identifying suitable countries to pursue financial independence from the perspective of someone living in Italy (0,0 in the graph). The X axis depicts the cost of living difference (%) in relation to Italy’s cost of living. The Y axis presents the net average salary difference (%) in relation to Italy’s salary. Switzerland–the top performer with Luxembourg–is left out of this figure so it is easier to visualize all other countries. In general, countries situated above the red line are–in theory–better performers than Italy for these two variables.
Photo by André Fuck on Unsplash. Brandenburg Gate, Berlin.
Best European Cities to Achieve Financial Independence
This methodology can also be applied to individual cities, revealing the best urban locations in Europe for financial independence. There are interesting differences to be observed. For instance, from the perspective of someone living in Berlin (Figure 4), we can observe that there are actually at least 8 Germany cities where the difference in salary in relation to Berlin is substantially larger than the difference in cost of living. It is likely easier to pursue financial independence by living and working in Frankfurt, Nuremberg, Stuttgart, Dresden, Hamburg, Cologne, Düsseldorf, or Leipzig, compared to Berlin.
Top-performing cities for financial independence include Zurich, Luxembourg, and Geneva, known for high salaries and proportionally manageable living costs (these cities have been left out of the figure to avoid distorting the visualization of the rest). In addition, there are 21 other European cities in the dataset where pursuing financial independence may be faster than in Berlin. Some examples of top performing cities outside of Germany and Switzerland would be The Hague and Eindhoven (The Netherlands), Gothenburg (Sweden), Copenhagen (Denmark), Glasgow and Edinburgh (UK), or Oslo (Norway).
There are also major European cities where it would be substantially more difficult to pursue financial independence. Indeed, 69 other cities in the dataset would–on average–slow down the pursuit of financial independence in relation to living and working in Berlin. Poor-performing capitals for financial independence include: Lisbon (Portugal), Athens (Greece), Rome (Italy), Budapest (Hungary), Moscow (Russia), Paris (France), London (UK), Madrid (Spain), or Dublin (Ireland). In these countries, the relationship between salary and cost of living is not ideal.
Figure 4: Identifying suitable European cities to pursue financial independence from the perspective of someone living in Berlin, Germany (0,0 in the graph). The X axis depicts the cost of living difference (%) in relation to Berlin’s cost of living. The Y axis presents the net average salary difference (%) in relation to Berlin’s average net salary. Geneva, Zurich, and Luxembourg–the top performers–are left out of this figure so it is easier to visualize all other cities. In general, cities situated above the red line are–in theory–better performers than Berlin for these two variables.
Beyond Finances: Key Factors for Choosing a Country to Pursue FI
There are other important factors to consider when deciding on a city or country to pursue financial independence. This post outlines an effective method to identify the best countries and cities in Europe for pursuing financial independence. It assumes you are both willing to relocate and, of course, understand that there are many other factors to consider when evaluating a move to a different country. In addition to the focus of today’s post–average net salaries and cost of living–one should consider as well the consideration summarized in Table 1.
Table 1: Example of variables to consider when deciding to move to another country in search of better economic opportunities.
| Category | Variables |
|---|---|
| Economic Variables |
- Job opportunities and industry relevance - Currency stability and exchange rates - Inflation rates and economic stability |
| Legal and Political Environment |
- Political stability and freedom - Ease of obtaining work or residency visas - Legal protections for expats and workers - Property rights and investment opportunities |
| Quality of Life |
- Healthcare quality and affordability - Education system - Safety and crime rates - Air and water quality |
| Cultural and Social Factors |
- Language barrier and availability of resources for non-native speakers - Cultural compatibility and social norms - Community and networking opportunities for expats - Food and cuisine variety |
| Infrastructure and Accessibility |
- Transportation systems and connectivity - Availability of technology and internet - Proximity to other countries for travel |
| Personal and Family Considerations |
- Access to healthcare for family members - Availability of recreational activities and lifestyle preferences - Work-life balance culture - Climate and weather preferences |
| Financial System and Opportunities |
- Banking systems and ease of transferring money - Investment opportunities and regulations - Access to affordable housing and utilities - Social security or retirement benefits for residents |
| Cultural Tolerance and Diversity |
- Acceptance of diverse cultures, religions, and lifestyles - Religious freedom and tolerance |
| Taxation and Residency Benefits |
- Double taxation treaties with your home country - Retirement benefits or tax incentives for expats |
| Future Considerations |
- Long-term prospects for citizenship or permanent residency - Stability of political policies and leadership - Opportunities for personal and professional growth |
Conclusion: Choosing the Best Place in Europe for Financial Independence
In this post, we explored a simple yet effective methodology for identifying suitable countries and cities in Europe to accelerate our path to financial independence. We leveraged publicly available data from Numbeo and compared the cost of living and average net salaries across 37 European countries and 94 cities. The objective was to help readers make informed decisions when considering relocation during the accumulation phase of their financial independence journey. Although you can easily reproduce the analysis for your own location by substituting data from Numbeo and tailoring it to your specific circumstances, you can also use the graphs above to see how other countries and cities roughly perform in relation to yours. Share your thoughts in the comments below: how does your city or country rank for financial independence, and would you relocate for better opportunities?
In a previous post, we covered in detail the pros and cons of pursuing FI in Germany and came to the conclusion that it is generally a solid choice, at least from the financial perspective. This was further supported today using salary and cost of living data–only Switzerland, Luxembourg, Denmark, and the Netherlands performed better. Finally, while financial metrics are important, factors like quality of life, cultural fit, and long-term goals (Table 1) are also essential when considering relocation for financial independence.
Enjoyed this post? Don’t miss our insights on reaching your first $100K investment milestone or our post on pursuing financial independence with kids (comprehensive list of blog posts further below).
Photo by Mateusz Sałaciak on Pexels. Wagenbrüchsee, Bavaria.
