A very interesting episode brought to you today with Erik from the USA! We chat about the differences between reaching FI in the US versus in Europe, his house-hacking strategies and entrepreneurship on both sides of the ocean.
What we talk about:
- The FIRE movement in the US vs in Europe
- Entrepreneurship is easier in the US
- House hacking
- The pros and cons of reaching FI in Europe
Why is the FI mindset different in the US?
Erik tells us FI is a way for Americans to escape their menial work, which can be a 40-60 hour work week for them (maybe not as much in Europe). They take debt early on, and they can easily feel trapped by banks with all these payments. FI is a way for Americans to gain back that freedom. He says that although health insurance and college is much more expensive, Americans do have more flexibility in creating wealth with their own businesses and investments.
I do ask him if he believes reaching FI is easier in the States rather than Europe, but Erik answers that really it comes down to making the right decisions and keeping to the simple daily disciplines. Although it’s also true that Americans do have access to bigger capital markets and it is easier to get loans from banks.
Entrepreneurship in the US vs Europe
Both Alvar and I feel there is not as great support for entrepreneurship in Europe than in the US, most likely because we are less focused on growth and volume. We argue that in Europe, many times governments make choices for people because they don’t want them making stupid mistakes. This is why we have higher taxes and more restrictions. Erik tells us this scares him 😛 (wealth tax is coming for you!)
Erik has a great house hacking story. At the age of 23 he was able to get a mortgage with a crazy 2.5% down payment. His mortgage was $1800 and his roommates were paying him $1650, so after equity and appreciation he was pretty much coming on top.
Could we do this in Europe? Maybe not at 23.
First of all he had a pretty great starting salary of $63,000, and his lack of credit history did not affect his ability to buy a house (nopety nope in Europe). He also bought the house at a time of lower interests and combined with a bit of luck, he managed to pull it off. Pretty crazy.
Erik admits the US is on the brink of a massive debt crash, since all this debt requires cheap energy which is slowly drying out. He also admits he could have been easily wiped out if his house had lost value – this is certainly what happens to many other Americans.
Europe is a little more careful when it comes to mortgages and buying houses. Plus on top of that we have a ton of taxes to take care of. Not so great for the FI community here – however it’s important to remember that this helps us and many others with free healthcare and education.
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