Our tour guide in Stockholm was not Swedish, but Albanian. She stood 5 feet 1 inch tall thanks to three inch heels. As we walked towards Old Town to see the Royal Palace, I often wondered whether she had ever twisted her ankles traversing the uneven cobble stone roads.

Bianca told us she’s a full-time lawyer who enjoys playing tour guide on the weekends as a part-time job. She’s been studying for six years and is getting a second Masters degree in international law. When I asked her how much tuition costs in Sweden, she surprisingly mentioned, “Free!”

“All citizens and EU residents have free tuition if they want to study university here in Stockholm, Sweden,” Bianca went on to say.

I can’t verify the veracity of her statement, however, with law school tuition commonly over $35,000 a year in the US, Bianca clearly has a good deal!

“I love everything about Stockholm! We have 1/3rd parks, 1/3rd water, and 1/3rd land. The government cares about us and you don’t have to work very hard to live a good life. Back home in Albania, the average person only makes 300-350 Euros a month ($390-$450 dollars),” Bianca explained.

I asked Bianca about the local tax rates. She didn’t know for sure, but said she pays about a 32% income tax through the Pay-As-You-Earn (PAYE) employer witholding system. She also pays a 25% VAT tax (consumption tax) on all goods. I was expecting Bianca to highlight a much higher income tax rate since 32% is similar to my effective tax rate, so I was surprised. But then again, our income levels are drastically different as you will discover below.

DIGGING A LITTLE DEEPER

Bianca was open to telling us everything we wanted to know. Between learning about the founding of Stockholm circa 1200 AD and major points of interest such as the Gamla Stan, I asked her how much a nice one bedroom, one bathroom apartment in a good location costs a month.

“I have a 28 sqm (~300 sqft) one bedroom apartment in a nice location, and I pay 425 Euros a month,” she said. That’s roughly $500 dollars a month, and a bargain pretty much anywhere in the US! When I told her that a similar apartment in San Francisco would cost at least $1,800 a month (1,450 Euros) she was flabbergasted.

“How much does a typical person who pays THAT much for an apartment makes?” she asked? I told her the median per capita income in San Francisco is about $55,000 a year and $90,000 per household. Meanwhile, the typical $1,800 a month one bedroom renter probably earns roughly $3,500-4,000 a month.

“Ahhh, no wonder. I have never made that much in my life!” Bianca extolled. “My average monthly income is around 2,000 Euros a month ($2,500 USD). In the summers I work up to 65 hours a week, but in the 5 month long winter, I barely work, maybe 20 hours a week. In total, I average about 35 hours a week.”

Even the poorest people in Stockholm have a good life because they make at least 10 Euros an hour and have their medical paid for. They might have to find a roommate to live with, but that’s no big deal.

LETS DO SOME INCOME AND LIVING ANALYSIS



Bianca loves life and makes just 24,000 Euros a year, which equals $30,000 a year, but has likely the same purchasing power of just $24,000. For example, Stockholm sells Burger King Whoppers for $7 USD, or roughly twice the price here in the US. Things are certainly not cheap in the Scandanavian region. The funny thing is, the Norweigans travel to Sweden to shop because things are even more expensive back in Oslo!

Despite only making 24,000 Euros a year, Bianca pays around E7,680 in income taxes leaving her with just E16,320 a year or E1,360 a month. Let’s break down her estimated expenses:

* Rent: 425 Euros (31.25% of total income)

* Tuition: 0 Euros (but probably closer to 1,200 a year)

* Education Related Expenses: 100 Euros (7.3%)

* Food: 300 Euros (22% of total income)

* Entertainment: 300 Euros (22% of total income)

* Miscellaneous: 100 Euros (7.3%)

Total Expenses: 1,225 Euros a month

Savings: 135 Euros a month

Ah, but we forget that she works as a tour guide every week for six hours on average. Based on her comment that “even the poorest Swedes make at least 10 Euros an hour,” let’s add on another 300 Euros of income a month (including tips) from her side job. Now all of a sudden, Bianca is saving roughly 435 Euros a month, or some 26% of her income!

“NOBODY WILL EVER GET REALLY RICH”

Bianca admitted that it is very hard for people to get rich in Sweden. “The more people make, the more the government taxes until the point where we pay more to the government than we can keep.” This is the Sweden that I’ve come to expect given stories abound with 50% effective tax rates on incomes over $100,000.

But of course, people can get rich in Sweden. Just look at billionaire Ingvar Kamprad, the inventor of IKEA. What I find very interesting in Bianca’s attitude is that even after studying law for six years, and earning barely 30,000 Euros a year working two jobs, she is enthusiastically happy with the government, high taxes, and Stockholm.

She admittedly has never made more than 2,000 Euros a month, so maybe she doesn’t know what she’s missing. However, does it really matter? The point is that most of Sweden, and the Scandanavian countries consist of people like Bianca. They earn 24,000-50,000 Euros a year, pay 30-50% tax rates, and are consistently ranked among the happiest people in the World!

The government provides free to cheap health care, takes care of their respective cities, and provides relatively high paying minimum wage jobs. Because everybody makes quite a similar amount, there isn’t much discord.

BEING THE SAME MAKES PEOPLE HAPPY

Besides IKEA, I can’t think of any other major company to have come out of Sweden or Scandinavia that has impacted the world. Contrast that to just Northern California alone, where there’s a new multi-billion dollar company going public every year, and we can see why there is a rising amount of income inequality and dissatisfaction in America.

It’s a curious case where everything is fine if you and all your friends make the same amount. As soon as one friend gets a raise and promotion, things suddenly feel a little less warm and fuzzy. And when your childhood friend turns out to have started a company that sold for millions of dollars, then your $60,000 a year income feels like dog food!

I strongly believe that it doesn’t matter how much you make, or how far you rise. If you don’t figure out a way to squash your negative emotions, you will never be happy.

Does the happiness of the middle class not outweigh the disdain of the most motivated and wealthy? Who knows, but living the good life with the optionality of starting your own do-it-yourself billion dollar furniture store doesn’t sound like a bad situation!

Recommended Post: I’ve Seen The Future And It Looks So Bright!

Photo: UN Poll On Happiness, 2012.

Regards,

Sam