How I Ended Up Debt-Free by Moving to Europe

What a difference a generation makes.

Back in 1993, when my now ex-wife and I were buying our first house, we ran up against an emotional chasm—me on one side, she on the other.

The house in question, in Flower Mound, Texas, was a nice newbuild brick home. Three bedrooms, two baths. A kitchen that opened to the family room. A cattycorner see-through fireplace separating that family room from a formal living room. Out back… a black-bottom, saltwater pool our Siberian Husky puppy loved.

Cost for all of that: about $125,000.

And I was losing my mind!!!

That. Much. Debt.

On our combined salary—about $82,000—I felt like I was signing a one-way ticket to financial hell. How in the world were we ever going to repay that kind of debt? We’d never be debt-free.

How You’re Raised Impacts How You See Debt

Looking back on it now, I was clearly in panic mode and overreacting. A house of $125,000 on an $82,000 salary is well within the bounds of sanity. My wife at the time knew that. She was perfectly fine and panic-free about the whole affair. I, however, struggled to wrap my head around this clear lunacy.

Our difference? That generational divide.

Only, the divide I’m talking about wasn’t between my ex-wife and me. We were born about 17 months apart.

No, the divide was between her parents and my grandparents (who raised me).

She saw life through the eyes of young parents growing into their peak earnings years in the 1970s and ’80s. I grew up with grandparents moving into their retirement and a fixed income.

We saw and experienced money and debt very differently.

Now, I share that long-ish anecdote because there is, as always, a bigger story here. Recent news notes one-third of Americans are at or close to their highest level of personal debt ever. Ten percent expect to be in the red for the rest of their lives.

I can sympathize with that. I viscerally feel what those facing “forever debt” are no doubt burdened with.

I’ve been there.

And not just during those early years of my former marriage.

The Expat Benefits of Debt Reduction

I was there as recently as 2017, in the aftermath of the divorce and losing a job, and then returning to school to better my skillset and chase a dream of becoming a screenwriter.

I was burning through my savings, and I had debts to repay. And being a white guy in his ’50s… hell, I was a stereotype! As younger reporter in the `90s, I’d written stories for The Wall Street Journal about guys just like me in that exact same situation.

For me, moving to Europe was a big part of the solution to my problem… part of my road back from purgatory and into a better life.

There’s this American perception that Europe is crazy expensive. That taxes are over the top. Certainly, some of that is true. Yet, those examples are not necessarily indicative of the continent as a whole. Just as I was a stereotype, so, too, are those examples. The U.S. media has stereotyped Europe as an insanely expensive place where social spending means most of what you earn goes to feed the government machine.

It’s just not true.

Better yet, as an expat you’re eligible for all kinds of highly beneficial tax regimes in a variety of countries, as well as in the U.S. For instance: The IRS allows me to write off as much as $120,000 in personal income each year. That $120,000 on which I pay zero personal income taxes. Those tax savings go a long way toward reducing debt or improving lifestyle.

How I Pay 0% Tax In Portugal

When I was a self-employed writer in the Czech Republic, the tax laws allowed me to write off the first 60% of my salary, and then pay a flat 18% tax on the remaining 40%. That’s an effective tax rate of 7.2%.

Here in Portugal, I’ve been able to structure my income to benefit from the country’s non-habitual resident (NHR) program. That program aimed explicitly at expats who gain residence in Portugal. One of the benefits is that dividends are taxed at 0% for the first 10 years. By structuring your finances so that your income flows through an entity like an offshore LLC… then paying yourself a dividend from the LLC… you’ve effectively created a zero-tax obligation in Portugal.

And if you retire to Portugal, your foreign-sourced pension income isn’t taxed at all.

I could run through a variety of countries with beneficial tax arrangements for foreigners: Uruguay, Spain, Greece, Panama…

My point is simply that if you live in fear of your debts consuming your life because your life in America is so pricey, I’m proof that there’s a better way.

If you have the capacity to work abroad as a remote worker, or if you can turn your skills into a career as a self-employed consultant, writer, teacher, or whatever role that allows you to work from anywhere… then you have access to the solution that allows you to begin minimizing your debts. Living costs and taxes can be so much cheaper overseas that the spare income you have each month can go toward quickly eradicating your debt.

Or quickly building up a savings account. Or quickly fattening a much-too-anemic retirement account.

I ended up debt-free in Europe. Zero credit card balances across the board. And I was able to rebuild a healthy savings account. Both of which bolstered my financial peace of mind.

I know heading overseas isn’t for everyone.

But if at some point the emotional burden of living under “forever debt” becomes too much, well, just know that there is an “out” for you somewhere overseas.

And if you want to know more about that, just ask me. I can help you find the solution that fits the life you want to live.

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