The ideal European Family Budget
The ideal European Family Budget (two working adults and 2 kids) needed to live decently is around 4.000€ per month. This is the average budget for a family of four living in a second tier city in the Euro Zone. That equates to an annual expenditure of 48.000€. Before we get into calculation specifics and what that means in terms of household expenditure, lets be clear that this isn’t the ideal budget for living in one of the beautiful European Capitals or tier 1 cities. This is what would be needed to live a decent life in one of the smaller cities, albeit probably as beautiful as the capitals, dotted across the European countryside. How is the average budget calculated? Averages in Europe can be very deceiving. Living in Denmark is decidedly more expensive than living in Portugal. So much so that the average Dane earns more than double the average Portuguese. However, lets put that aside for now. On average, according to Eurostat, mean after tax income for people who have had tertiary education, and who can thus be deduced to be living a decent life, for the purposes of our example, is around 28.000€ per year. For our couple, living with their two kids, that equates to a combined annual, after tax income of 56.000€ or around 4.600€ per month. Given the average savings rates around Europe are about 10-11% of after tax earnings, our tertiary educated couple must be spending around 4.000€ a month. What does the average get you ? HOUSING On average the European household spending on housing equates to 20-21% of after tax income, which means our family must be spending around 800-850 euros a month on housing. Added to this, one must factor in electricity, gas, water, communal taxes and miscellaneous repairs, which with the rental, makes housing the biggest component of our family’s monthly budget at around 1.400€. 850 euros a month is enough for a two bedroom apartment in La Rochelle, a charming and popular sea side town on the West coast of France or a two bedroom apartment in Porto, on the coast in Portugal. That’s also more than enough for a 3 bedroom house with a large garden in Le Thor, in Provence in France. FOOD Food for a family of 4 is a matter of taste, but on average, a family of 4 can make do with 900 euros a month. The Tier 2 cities and countryside in Western Europe often provides ample opportunity to buy fresh fruit, vegetables, bread and meat and fish in one of the many local markets and direct from producers, which equates to significantly less than what the same family would spend in a Capital City. SOCIAL LIFE Spending on social life is the third biggest category and comprises 1000 euros set aside for an annual vacation, or the equivalent of 83 euros a month. Also included in one outing to a local restaurant per month and one cultural event, like a movie or theater per month. There is almost always a birthday party for one of the kids friends every month, so our budget includes 35 euros for those kinds of occasions. TRAVEL Our European family relies on the ample public transportation system, principally comprised of buses and trains and use their car only for buying groceries and their monthly outings. They own their car and spend just over 300 euros a month on gas, oil and repairs. CLOTHES AND KIDS With the kids growing up, they need changes to their clothes almost every year, but our family ensures the youngest kid uses the clothes of the elder in order to save money. The parents take good care of their clothes and ensure they last for at least 3-4 years before changing them out. As they live outside of the big cities, being on the cutting edge of fashion is not something that they feel pressured to adhere to. The costs for the kids also includes school outings and the miscellaneous school fees. The two kids go to public schools so school fees are almost non existant. HEALTH Given our European Family are living in a socially minded state, healthcare is also almost free. However it does cost a little to get miscellaneous things from the pharmacy from time to time, so a small amount is set aside for this every month. Conclusion Living outside of the European Capitals, where the cost of living can rival the highest in the world, living with 4.000€/month for a family of 4 is ideal. This is not an average budget as average salaries for non-tertiary educated people are considerably lower than the couple in this example, and budgets would hence be more restrained. If you would like more details on the calculations that went into this analysis, feel free to drop me an email and your Chief Money Man will send it to you. Stay tuned as well for the Ideal budget for a family of 4 living in a European Capital. Any comment, reactions? Comment below. The CFO