What One Woman Learned About Finance From World Travel
Vanessa's first salary after graduating college was $18,000. It was 2013 and she worked for English as a second language (ESL) in China. ESL provides that salary on top of rent, meals, and your only expected to work a few hours a day. Her personal finance journey has led her to China, the United Kingdom, and Germany.
In China Ms. Wachtmeister began to noticed that different cultures had very different views on money. She currently helps people plan the financial implications of moving abroad with her company Wander Onward and YouTube series.
In China she noticed the lack of real estate owners and that there were serious discrepancies in wages and equality in China. Both at ESL and in her second job marketing at a luxury spa she noticed many of the workers lived in a shared dorm because their immediate families lived far away in neighboring provinces (most sent money home, rather than investing it themselves). In China property ownership is valued as the main wealth-generating technique for the middle class. Those with money focused on making more quickly with their money. One interesting anecdote Vanessa relayed was regarding when Uber came to China in 2014. She said she met many drivers who were bored but wealthy young people in super cars who only drove Uber to meet internationals and practice their English.
"Both my wealthy and working class Chinese peers were natural experts in long-term financial planning. They were willing to sacrifice whatever was necessary to achieve their vision of financial freedom." Vanessa said.
Vanessa's next stop was the UK and after attending SOAS University of London in 2016 and graduating with a Masters in Development Studies, her pay increased to £33,000 GBP, or $43,400. She spent 6 years in the U.K. and during that time it became clear that the U.K. is a very savings-poor society. One study found that millions of residents have less than £100 in their savings account, partly due to the cost of living skyrocketing while real wage growth stagnates. Like in China, owning property was considered an important path to wealth generation in the U.K.
The UK uses the Individual Savings Accounts program, which a person can use to save tax-free up to £20,000 per year. There are four types of ISAs: cash ISA, stocks and shares ISA, innovative finance ISA, and the Lifetime ISA. In an ISA, you do not pay tax on the interest earned nor the income or capital gains from investments. In the UK workers are also many time obligated to contribute to their company pension plan.
In February 2020, Venessa moved to Germany. The cost of living in Germany is very affordable with low shelter cost and strong renter protections. It is known as a cash-rich society due to a savings-focused personal finance culture. On average, German households are able to save about 10% of their disposable income (twice as much as the average EU or American household). Germans consider property to be “concrete gold,” or Betongold.
Germany has the second lowest share of homeowners. In German people invest less in real estate or equities and focus on “insurances,” or professional money management programs (these programs guarantee a certain amount of interest by a target date or in case of disability). For pensions, there is a “point-based” retirement insurance in place where the government guarantees qualifying retirees a certain amount of money until that individual passes away.
The overall financial strategy she gleaned from Germany was: hope for the best, but save and prepare for the worst.
Venessa's journey lead her to learn a few tenants to financial success. The first is to control your lifestyle costs (Financial longevity starts by saving at least 10% of your income).
Second, make your money should work for you. Use the concept of compound interest, dollar cost averaging, buying real property, and starting or investing in small businesses to earn passive income.
Also need to have a side hustle to do to ensure you’re not dependent on just one source of income.