Are you an Expat living in Germany who is struggling financially? Saving money never seems to be an option for you? What if I told you that you are making the same Money Mistakes Every Expat makes in Germany? In this article I share Why you cannot Save Money in Germany
Why Germans use Cash instead of Cards
Most Germans pay with cash instead of using a Card. Infact More than 50% of all transactions in Germany are still done using Cash. And a Large majority never use a card as payment.
As an expat I never understood why Germans prefer cash over card. But there is some science behind it. Research has shown that using physical money for transactions can make it harder to let go of your money, and may worsen the feeling of loss. And Using cash to make payments might be more effective in helping people who struggle with compulsive shopping or digital gambling to regulate their behavior.
So if you are someone who is struggling to save money in Germany, try switching to cash instead of using your debit or credit card and see the results for yourself.
How Impulsive Shopping is hurting your Savings in Germany
Many of us have a tendency to make impulsive purchases, particularly when we are feeling bored. This is especially true for people who follow deal websites. I used to spend at least five minutes each morning looking for deals on an app called Mydealz. Then, I would regularly visit the deals section on Amazon and eBay to get special discounts. Although I have bought many discounted items, I eventually realized that I was wasting money on useless things.
For instance, if I bought something for 200 euros at a 50% discount but never used it, did I really save 200 euros? I decided to uninstall all of the discount apps.
How to Scientifically spend less Money
Studies have shown that our brains release dopamine in anticipation of rewards. Dopamine is a neurotransmitter that affects our feelings of pleasure, and online shopping can increase dopamine levels because we have to wait for our purchases.
However, the amount of dopamine released decreases over time, and once we receive our purchases, the dopamine release becomes negligible. This means that we get the most satisfaction during the anticipation phase.
We can actually increase the dopamine release, by increasing the anticipation phase. This is also known as delayed gratification which refers to the ability to resist the temptation of an immediate reward in favor of a larger reward that will be available in the future.
It is a key principle that can help individuals control their impulsive buying behavior. By setting a waiting limit of at least 2 weeks before making a non-essential purchase, one can practice delayed gratification and avoid making impulsive buying decisions that may lead to buyer’s remorse.
This waiting period allows the individual to assess whether the purchase is truly necessary and whether they have the financial resources to make the purchase without negatively impacting their budget. By practicing delayed gratification, one can develop a sense of self-discipline and control over their financial habits, leading to a more financially secure and stable future.
How Delayed Gratification can be a life saver
I’ve started practicing delayed gratification myself by setting a two-week waiting period before purchasing non-essential items to help decrease my money mistakes in Germany. For instance, when I was editing some YouTube videos, I noticed that my computer was not functioning as smoothly as I wanted it to be, and I thought about upgrading it. Instead of making a quick purchase, I took two weeks to research and look for the best components that fit my budget. This waiting period not only allowed me to find the best components but also helped me optimize my budget based on my needs.
In addition to Delayed gratification, you can set a budget for your shopping and stick to it. Make a list of what you need and avoid impulse purchases. If you really struggle with saving money you can Unsubscribe from marketing emails and newsletters from stores that tempt you to shop and Avoid online shopping sites and malls as much as possible, especially during sales or discount periods.
Why Expats in Germany struggle with Budgetting
In many of my videos, I have talked about creating a budget. But before we dive into it further, I want you to ask yourself a question: are you currently following a budget?
My guess is that most of you are not. Not knowing where your money is going is the probably the biggest money mistake almost every expat in Germany makes. To avoid this, you can create an Ironclad budget by following some simple steps.
Firstly, determine your monthly income, which is often your salary, and calculate your fixed expenses such as rent, utilities, insurance, and any subscription services. Next, determine your variable expenses such as groceries, transportation, entertainment, and travel.
Prioritize your expenses and differentiate between essential and optional expenses. If possible, reduce your non-essential expenses by setting up short-term and long-term financial goals. Short term goals will help you get to your long term financial goals, be it retiring early and quitting the job that you hate or maybe saving enough to finally buy a house in Germany
I have recently started an app called Finanzguru to monitor my spending habits. I am tracking my income and expenses and with the Analysis option. Based on clever trends, I am trying to optimize my spending behavior. I am quite analog with my budget creation but you can use this app to make a budget as well. Ill put a link in the description if you want to signup for free.
Is spending on food a money mistake in Germany?
When it comes to food Expats tend to be either really good or really bad at saving money. Many of us enjoy eating out, but this can lead to a hefty bank statement at the end of the month. Cooking your meals at home can be both healthier and less expensive.
If you are short on time, you can try meal prepping by preparing meals in advance for the week or cooking partially prepared meals that can be finished quickly. This saves you time, stress, calories, and sometimes money as well. If you do choose to eat out, consider setting a monthly budget for yourself. Stick to your budget and once it’s gone, avoid eating out for the rest of the month.
How 0% Financing in Germany is a trap for Expats
Another money mistake expats in Germany do is going for 0% financing. This can be specially harmful for younger people because it often entices people to spend more than they can afford. When people see that they can purchase something with 0% interest, they may be more likely to buy something that they wouldn’t normally be able to afford.
In addition, 0% financing is often offered for a limited time, and if the balance is not paid in full by the end of the promotional period, the interest rate can jump up to a much higher rate, sometimes retroactively. This can lead to high-interest charges and even debt if the balance is not paid off quickly.
With the recent increase in Interest rates, companies offering 0% financing has certainly decreased but I still see students buying expensive phones with contracts which they cannot afford!
How contract comparison helps save money in Germany
Even if you try to avoid signing contracts, it’s likely that you will have to sign up for several of them while living in Germany, such as with your electricity and internet providers. However, you can save money by comparing your contract with other providers.
You may find a better deal elsewhere and can even negotiate a price reduction from your current provider. For example, when my internet contract was about to end, I compared my plan with other companies online and found a cheaper option.
Instead of changing providers, I negotiated a contract with my current provider that is 10% less than my previous one.
You don’t have to stay loyal to a specific company, so try to compare your contracts online and find a good deal for yourself.
How Local Trips save money and avoid a huge money mistake in Germany
Another large money mistake for expats in Germany is on travelling. Obviously being in Europe has its ease of travel but Instead of planning for your next trip to Paris, you can plan a regional holiday trip and save the difference.
Many expats don’t even know about the interesting things about the cities they live in. For example One of the most visited sights in Germany is the Cologne Cathedral (der Kölner Dom) But what a lot of visitors to Cologne don’t realize is that right underneath are ancient Roman ruins from the end of the first century AD.
So try to find hidden gems in your own city or places nearby instead of visiting places which are usually crowded with tourists.
Many Germans actually do this, they plan trips to places which as an expat I have never even heard of. Just the other day a work colleague told me that their trip to Puglia saved them 25% of the costs compared to their trip to Tuscany. I haven’t been to both so I can’t say much about that but let me know in the comments if youve been there. In this article I share similar tips to help you save money in Germany. And if you want to save even more money, try getting a Free Credit Card in Germany that covers travel insurance free of cost
Why you should Rent in Germany instead of Buying
One more thing that the Germans do and trust me expats lose a lot of money on that is Renting instead of Buying. We sometimes buy things that we only need for a short period and end up forgetting about them after using them once.
For instance, if you plan to take photos on your trip using a DSLR camera but require a telephoto lens instead of the kit lens, consider renting it rather than purchasing it. If you like the photos and wish to continue taking such pictures, you can buy the lens later.
However, often, we buy things just to experience the excitement of anticipation, as I mentioned earlier. Also If something stops working, instead of ordering a new one.
Try to get it repaired. I am sure you know how to fix things or at the least have friends that know how to fix many things. So if you cant fix something invite a friend who can fix it to dinner. You can get something fixed and have a nice time with them too. If its not fixable then you can always replace it but at least now you have tried and done your part to avoid this money mistake in Germany!
Not Investing as an Expat in Germany
As a foreigner in Germany, new opportunities open up to you. One of them is getting the opportunity is Investing as a Foreigner in Germany. From Stocks to ETFs, Real Estate to Commodities.
You can get started with investing in Stocks for free with a minimum investment amount of just 1€ per month. This option is probably not available in many countries that Expats come from.
Biggest Money Mistake every expat makes in Germany
The Biggest Money Mistake most Expats in Germany make is not filing a tax return.
In Germany you can get back an average of 1000€ from the government if you file your tax return. And if you have work or study related expenses you can get even more. For example you can get back the travel costs to work, any expenses you hard that were related to your work and much more if you just submit your taxes. You can read my detailed guide on How to File a Tax Return in Germany to get more info!
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Disclaimer: None of the content in this article is meant to be considered as investment advice, as I am not a financial expert and am only sharing my experience. The information is based on my own research and is only accurate at the time of posting this article but may not be accurate at the time you are reading it.