A shortcut to financial independence is cutting your costs (drastically). Easier said than done of course, but for those of us who live in (relative) expensive countries, moving to a cheaper place may be a way to achieve it. In the post series ‘Financial Independence Abroad’ I will put my investigative hat on and look at a city/country that I find promising. My main questions are: Can I see myself living there? And how would moving there impact my journey to financial independence?
In this first installment: Cluj, Romania. Or rather Cluj-Napoca.
The city is located in the historical region of Transylvania in central Romania, Eastern Europe. You may now think ‘I am never going to move to Dracula land’. But I suggest you keep reading. Or maybe you see Romania as nothing but a country of migrants flocking abroad to find work. Again, keep reading.
While there are definitely Romanians trying to find their luck elsewhere, back home things seem to be booming. This EU member has one of the fastest growth rates in Europe. It’s still one of the poorer places, lagging behind the Baltic states of Estonia, Latvia and Lithuania for example, but they’re definitely catching on. My company even has an office there as it is a great hub for IT-outsourcing.
I will not make my case by going through all the numbers though. That’s not my aim. What I do want to look at is whether I could see myself living there and what it would mean financially.
Those of you who don’t know where Romania is, try to locate it on the map of Europe shown below.
I have been in Romania twice. The main cities I visited were Cluj, Brașov, Sibiu and Botoșani. The first three are all in the region of Transylvania, whereas Botoșani is in the Bucovina region in the east, beyond the Carpathian mountains (which boasts some amazing national parks).
When I traveled from the relative prosperous west and crossed the mountains into Bucovina, I realized that the Carpathian mountains are more than just a natural divide. The east seems poorer and more conservative than the west (mind you, not less interesting). I am not going to give a historical explanation (I would fail), but the cities in the west I visited breathe an unmistakable Hungarian, German atmosphere. Less so in the east.
The Cluj-Napoca area has more than 400,000 inhabitants. It is a city with a soul. It has everything I look for in a city. It’s old, has grand architecture – a truly wonderful mix of Renaissance, Baroque, Neo-Classical and Austro-Hungarian; Buildings and churches that speak of a rich history. And there are grandiose squares, like Piaţa Unirii, with the imposing St. Michael’s church. Also important, it has plenty of spaces where you can breathe, like Cluj Central Park. It’s a great place to relax with a book or newspaper. I imagine strolling there in the summer – with my coffee to go – and find a spot in the shade to read and watch other people walk by (and after reading my newspaper I would check my investments on my tablet – that needs to be done as well).
And then there are narrow cobblestone streets, excellent restaurants and….people. Artists, students (Cluj has a university with more than 40.000 students and the total number of students is easily double that number), people in business attire. You name it. They’re all there.
I found Cluj a vibrant city, with an outspoken young and creative vibe. I like that. And even though the pace seems a bit slower (or laid back) compared to other major cities in Europe, there is a lot going on. Important: The locals are coffee-addicts. Coffee comes in every form in the impressive line-up of excellent coffee places.
I have written this in other posts. Once I reach financial independence, I want to begin each day at a coffee place. That’s why a good selection of cafés is an absolute must. Cluj has them. Check. And why not pick the beautifully decorated Urania cafe (see below)?
What Cluj also has is old soviet style residence areas. A vast number of low-cost, concrete-paneled apartment buildings. They exist in many cities in eastern Europe and Cluj is no exception. Instead of calling them ugly and looking away, I find them interesting. It is part of the city’s history and these structures tell their own story. If seen in the proper context they form a fascinating contrast to the city center.
Anything I say will be seen as a cliche I guess, but I have met Romanians. And my firsthand impression is that they’re warm and friendly people. Not only is their door always open, they will even insist you use their entire apartment while they use alternative accommodation. They do everything to make you feel at home.
Cost of living
According to the website expatistan.com Cluj has a cost of living index of 75. This means it is 25% cheaper than the reference city (which happens to be Prague).
Compared to New York, London, Amsterdam and where I live, however, the cost of living is more than 60% lower. Below you can see the differences per category:
That’s significantly cheaper in all categories (especially housing). If we use the rule of thumb that housing costs should not exceed 30% of your total budget, then a monthly budget of around $1200 would be more than sufficient (as you can rent a decent 1 bedroom apartment in the center for $400).
If you are willing to live outside the center, for example in Florești, which is part of the Cluj-Napoca area and connected to Cluj, you can (still) find cheaper places. I believe a monthly budget of $1000 would be realistic.
I know some people in Romania and they confirm that these numbers aren’t far from the truth. Note however that Cluj isn’t a cheap place by Romanian standards. It’s a booming city and house prices have been soaring during recent years. Yet it remains a significantly cheaper destination compared to many other cities.
Cost of coffee (CoC)
In Cluj you can get a cappuccino for a little more than $2. More than 60% cheaper compared to what I pay in my hometown.
And now that we are at it, a dinner for two at an Italian restaurant, including appetizers, main course, wine and desert would cost you $30.
Inflation levels have really settled down after the hectic nineties, although its current rate (5%) is above EU average.
Cluj offers long, warm summers and short, but cold winters although the temperature only rarely drops below -10 degrees Celcius (14 Fahrenheit). If you like snow, you’re in a good place. There is ample opportunity for winter fun.
Public healthcare doesn’t quite live up to healthcare standards found in many other European countries.
There are plenty of excellent private clinics however. Depending on your personal situation, you may need a private healthcare insurance so you are covered in case you need to seek medical help.
For expats this is typically arranged by their employer. If I retire early and emigrate to Romania (or any other place for that matter), I will have to arrange the insurance myself. I will probably dedicate another post to this topic as there are many possible – more or less costly – scenarios.
Romania is generally safe. It is NOT a dangerous country to live in. The best way to get this message across is present some statistics. Let us compare Cluj with London for example.
|Level of crime||High||Very Low|
|Crime increasing in the past 3 years||High||Moderate|
|Worries home broken and things stolen||Moderate||Very Low|
|Worries being mugged or robbed||Moderate||Low|
|Worries car stolen||Moderate||Very Low|
The list is much longer, including aspects such as violent crime, people dealing drugs, etc. But the pattern is the same. Cluj is the safer place to live compared to London.
The one area where Cluj scores higher than London is corruption. This is a problem in many eastern European nations, but it is not something that would affect me when drinking my cappuccino in a cafe.
I can definitely see myself living in Cluj. The city is youthful, vibrant, historic and has everything I want from a city. The food is great, there is a long lineup of coffee places and its people are warm, open and friendly (the people I met were).
The costs are so low compared to where I live, I’d be able to reach financial independence much earlier than currently projected.
For example, if I assume the cost of living would be $2000 per month in Cluj (that’s probably too high an amount, but I’m including a buffer in case health insure costs turn out to be high), I would need $24K per year.
Assuming returns of 4%, it means that $600K in assets would be sufficient to retire and have a life long income of $24K per year. My current net worth is around $330K (including my mortgage-free home), so I’m well on my way. And I haven’t even included my pension.
Or, I could sell my home ($300K), my shares ($60K) and take a lump sum from my pension ($100K) and move today. And I wouldn’t have to worry the next 20-25 years.
You know what, I’ll let it sink in a bit. And look at other possible destinations for early retirement in the meanwhile.
What do you think?
Do you consider cutting costs by moving to a cheaper place?
Would you ever consider emigration to achieve financial independence earlier?