Finally got my Degiro account approved - need advice on planning my finances as an Indian living in AUT

[lovegod033]

Hey everyone, I turned 30 this year and am looking for some help and advice on planning my financial future out. I am an Indian citizen living and working in Austria (currently have a Rot-Weiß-Rot Plus Karte, will hopefully have a Daueraufenthaltstitel from 2022). I “worked” here from 2015 to 2018 (PhD students count as employees), was unemployed for about a year (who’d have thought finding a job after getting a PhD in comparative cognition would be hard?), found a job in mid-2019, and now have a permanent contract. Fortunately, I am currently 100% debt-free and have no financial dependents.

I plan to settle here with my partner (she is Austrian) and the only “family” we plan to have pets (we've already taken measures to ensure mini humans aren't a possibility).

• Our short-term goal is to buy an electric car. Specifically, we would like to buy a Tesla Model Y. I sold my petrol car off as it made no sense throwing money at a sinking ship (I spent more than the car’s buying price on driving and maintaining it, it didn’t sit well with our sustainability priorities nor with our plans of having pets). We currently use public transport, but this is hella inconvenient (and expensive) when leaving the city (we travel to my partner’s family’s house every weekend and driving would certainly be more convenient and economical). All holiday and travel plans have been postponed till after we have the Tesla. We intend to drive the car to its death.
  
  EDIT: Most comments are about how I cannot afford this car on my salary. While I'm sure this comes from a good place, an excellent addition would be helping me understand what I should aim for if I want to afford it. Ultimately, it IS a goal I want to meet, and the reason I'm posting here is to find out how to meet my goals.
• Our mid- to long-term goal is to buy or build our own house. We’re tending towards building as we want to put together something that’s as self-sustaining, ecologically responsible and technologically thought-out as possible; as these things don’t seem to be priorities for people building houses here, it’s unlikely we could buy a house that would fit our priorities. Since we cannot move from our rented flat in the city (for various reasons), this goal is slated for between 4 and 10 years from now (ideally after the car is paid off). Unfortunately, I have no idea what a reasonable target should be.
• The long-term goal is naturally having some sort of a steady income to supplement whatever retirement income comes in from social security. Again, no idea what a reasonable target should be for this.

For the past couple of years, I have been aggressively saving for the car. It currently costs €66,000 including various overheads like shipping costs and import duties (it’s produced in the US and shipped to EU). The Tesla community seems to think that this price will reduce once the car is produced at the upcoming German factory, but I will use 66k as a target – if it goes down, well and good. Yes, I know it's stupid expensive. We've been talking about this and have looked into several EVs. Unfortunately, nothing seems to come close to what this one has to offer. Ultimately, I guess we are paying an "early adopter tax".

I will take a 5-year loan for €35,000 at 0% interest (it’s part of the push for more EVs) to finance the car, meaning I will need to pay €31,000 upfront (I anticipate having to do this 11 to 14 months from now) and €584 a month for 60 months.

I currently make €1,850 a month after taxes. My monthly expenses are under €900 so I end up putting anywhere between €300 and €1,000 away each month. I have approx. €20,000 already put away and should be able to do another €10,000 by next summer. About €9,600 of this amount is invested across 43 different Indian mutual funds (accounting for COVID-19 market crashes, currency conversion, transfer fees, and 31.25% Indian TDS - taxes deducted at source). The rest is sitting in our savings accounts. The MF gains range from -20% (aren’t pandemics just lovely?) to +23% (healthcare funds during pandemics = STONKS). Overall, my portfolio is currently down about 5%.

I have been so focussed on the car that I haven’t made significant progress towards the other two goals. I have a total of about ₹220k (€2,000-ish) invested across 32 Indian mutual funds (also down about 5%). Henceforth, I want to reduce my reliance on Indian mutual funds as I lose money in currency conversion and exchange fees. Now that I have access to degiro (and eventually flatex, whenever they get around to verifying me), how can I optimize my investments to meet my financial goals?

I have been thinking of buying some Tesla and AMD stock (partly because they’re companies I’d like to support), but I’m not sure how big of a chunk of my savings should go there and what all I should be aware of when buying. I’ve been reading up on ETFs and I gather that they are somewhat similar to MFs and are also quite frequently recommended. Would investing any of my car savings here make sense?

My company recently had a broker as a client and I worked on that project; I learned a plethora of new words – knockouts, derivatives, options, calls, puts, stop-loss, etc. I never knew any of this existed and am curious what of it is worth looking into with my goals in mind. My only investment experience is with mutual funds.

Any advice from y’all would be appreciated! Please let me know if there are any details I should provide, and I’ll update this post with them. Finally, one small detail – while I can communicate in German, I am still at somewhere around B1-B2. I absolutely cannot decipher financial or legal lingo (heck navigating this stuff in English is tricky!). I’ve made an account on degero IE so that I can do everything in English.

 

[nelsonnoah]

@lovegod033 A thing regarding Degiro - do not use it.

It is not "steuereinfach", meaning you have to do your taxes for it by yourself. You need to figure out A LOT of German language legal lingo, which you say yourself you are not quite capable of. Get Flatex or dad.at, they do your taxes for you.

Source: I am Austrian

 

[monica444]

@nelsonnoah Another great comment. Degiro is low-fee, but a lot of hassle.

 

[lovegod033]

@nelsonnoah Thank you so much for the heads up! I haven't made any purchases yet. I'll wait for FlatEx to come through

 

[lovegod033]

@nelsonnoah Oh and two follow ups to this:

1. When say they do the taxes for you, does that mean that when you pull your investments out, they deduct whatever is to be deducted and give you the "Netto" so you don't have to bother declaring any profits when filing tax returns and stuff?
2. I know the German FlatEx site is available in English - would it make a difference if I used the German website? Would taxes still be taken care of?

 

[nelsonnoah]

@lovegod033

1. yes, everything is done for you. However, there is a smallish part - due to double taxation you are entitled to get some parts of the tax back (withholding tax, "Quellensteuer"). the witholding tax basically shoots your capital taxrate up to ~40%, if you use single stocks from outside Austria (e.g. Tesla, AMD, VW). this is a HUGE hassle and doesn't really work. you have the same problem with Degiro as well however. Best to buy European based MSCI World ETFs and don't do single stocks, especially from outside the EU. That's just the way it is, investing sucks in the EU
2. as long as you're using flatex.at (not .de) everything is fine

 

[tpevy2]

@nelsonnoah Hey! Would you recommend accumulating or distributing ETFs for Austrian taxes? Our system is not like Germany is it, and we just get taxed a broad capital gains tax of 27,5%?

 

[nelsonnoah]

@tpevy2 Exactly- I would go with accumulating. Just remember to keep some cash in the bank because you pay some KESt for the dividends accumulating.

 

[nelsonnoah]

@lovegod033 Long story short - if you cannot pay cash for a car you cannot afford it. This is financial suicide.

 

[lovegod033]

@nelsonnoah This is a good pointer. Thank you. So then would you say that waiting for a few years and building up to that 66k and paying for it in cash instead of taking a loan would be the better idea? Or am I misunderstanding something?

 

[nelsonnoah]

@lovegod033 There are various rules of thumb regarding cars - one is that it should not cost more than 1/4 of you annual take home pay (a rule I live by as well). Get your income up. Until then drive old beaters, it's simply the financially responsible way to go.

Get a tesla when you're 45.

 

[neen1]

@lovegod033 No offense man, but you can't really afford that car with your salary. Now, that's not bad news per sé, as it's a good motivator to find a better job.

 

[lovegod033]

@neen1

it's a good motivator to find a better job

This is so much nicer of a response than everyone bashing people who plan to buy expensive things.

In your opinion, at what point would you say that a car in that price range would be "affordable"?

 

[neen1]

@lovegod033 I live in Amsterdam so my answer is probably "no car is worth it unless it has no important impact on your savings". I've been toying around with the idea of buying a car myself, but I always end up deciding it's not worth the financial effort.

 

[marissavchon61]

@lovegod033

[...] About €9,600 of this amount is invested across 43 different Indian mutual funds [...] (€2,000-ish) invested across 32 Indian mutual funds [...]

Am I reading that correct as you're invested in 75 different funds at the same time? Seventy-fucking-five funds? With a total of less than 12k €? Why?

 

[lovegod033]

@marissavchon61

Why?

Because I never knew of this sub till a few weeks back. I was told that diversification was a good idea and I interpreted that as "diversify your investments in MFs".

If I knew exactly how to sort my finances out, I wouldn't be asking for advice

 

[monica444]

@lovegod033 Hi! My 2 cents. Also a foreigner PhD student in Austria. Same salary. Sorry, you can’t afford that car. Most of my coworkers, don’t own a car and we live very frugal to be able to save a bit. With the exception of the ones getting a flat from their parents. And even those buy a renault clio/ford focus, not a tesla. Some postdocs with higher salaries still live similarly. Maybe the job uncertainty, but definitely the rest of austrian system with insurances, taxes and some stuff really draining your finances.
I have an old petrol car, I paid in cash for 10 years ago and the maintenance and insurance is cheaper compared to a brand new one. 66k can be a downpayment for a good house mortgage in the future.
Also having kids is quite cheap in Austria compared to some other places. It’s fine if that is your choice and all, just putting it in the financial perspective.
Good luck with the rest of your plans

 

[lovegod033]

@monica444

Sorry, you can’t afford that car.

My question would be, then, at what point would you reckon that a car like that would be affordable?

I have an old petrol car

I bought a second hand i10 in 2015 because I needed it for my PhD commute. I spent about 4.5k on it. From then to 2020, when I sold the car, I had already spent well over 9k in fuel and maintenance. I'm well and truly done with internal combustion vehicles.

Maybe the job uncertainty

This is why I quit academia altogether. I didn't want to deal with the job insecurity and comparatively bad pay.

insurances, taxes and some stuff really draining your finances

Coming from India, I guess I have a VERY different baseline. Even with my current salary, I am living much more than comfortably. Others have mentioned that I would have to sacrifice my lifestyle to own an expensive car, but what a lot of folks don't see is that I really struggle to spend money. I barely ever eat out, I hardly shop, I don't go out partying... Not because I'm actively trying to be frugal - I honestly could not care less. The frugality and savings are really just a side effect of how I live

Also having kids is quite cheap in Austria

Many more reasons than just financial to not have kids

Other than both of us hating kids, we really don't want to additional stress, tying down or responsibility that children would bring. Plus, I hear not having kids is the more ecologically responsible decision or some such...

66k can be a downpayment for a good house mortgage in the future

This is also something I've been thinking about - it sort of makes me second guess the idea of buying an expensive car.

 

[monica444]

@lovegod033

1. I would say, when both of you pull in at least 7-8k together. And definitely after housing is taken care off. Even the boss of my institute drives an 15y old car pulling in 6k netto.
2. I spend 500 eur/year on maintenance, insurance, road tax and vignetta ( no fuel costs included). I also paid 4.5k in 2010 for it. Serves me well. But both me and husband use it and his commute is 140km daily sometimes so fuel would be spent anyway. We have no charging options nearby.
3. True, I am planning to transition to industry soon as well. But PhD was still paid better and with better social security benefits compared to my home country. I am EU so residence/visa/ work travel is easier.
4. Yes, I have also noticed that partying and spending 100 eur per weekend on booze is socially encouraged here. At home there are different values. Mostly spending a shit ton on family style meals inviting everyone over. On the other hand my coworker just bought a 900k worth flat. So definitely different values.
5. Of course having/not having kids is a very personal and private decision with multiple pro/cons. Just saying from a financial perspective. In the USA having a kid can significantly slow down your financial independence journey. Here there is a lot of social security support and tax benefits.
6. Me& husband will continue to rent until we settle on where we want to spend at least 10 years. We don’t want to tie our savings into bricks. However, we also do not want to tie it into a depreciating asset like a car. For now, I have a one year emergency fund (last phd year, similar situation, don’t expect to graduate and find a job the next day), rest is put in one mutual index fund in my home country - I am a dual tax citizen so I still keep my accounts there. Rest is put into etfs split over world and some bond. A small amount 3-5% is out in p2p investing, which is kind of gambling, but I can withdraw whenever. In my country withdrawing from mutual funds/etfs is exempt from capital tax after 20y, so that is the most efficient for now.

Sorry, I focused on car first, but it seemed quite a big difference between income/savings/other assests. Also we did not get any info. on your partners job security/income so the story might completely change.

 

[lovegod033]

@monica444 Thank you, this is incredibly useful, especially the numbers!

The reason I didn't not say anything about my partner is because she's about to get done with her masters and is just looking for a job. She is t sure whether she wants to head down the PhD route or quit academia. There are still some uncertainties there so we are currently not factoring her income into anything.

For all intents and purposes, she has enough to pay her bills and save a tiny bit, so the household income is between 1.8 and 2.2k. This will increase once she gets a real job.