The price of luxury and lifestyle
For Prateek and Neha, a luxury car like their Mercedes Benz A-class, costing 43,000 euros, is a feasible purchase in Luxembourg, a far cry from the hefty ₹55 lakh price tag for a similar model in Bengaluru.
“I wouldn’t easily buy a luxury car in India priced over ₹50 lakh,” says Prateek, a senior analyst with Amazon. “But, these German luxury cars are priced much lower here in Luxembourg and are easily affordable vis-à-vis my income in euros.”
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The car’s 43,000 euro price tag, when adjusted for Purchasing Power Parity (PPP), equates to about ₹10.3 lakh, whereas the same model costs around ₹55 lakh in Bengaluru. PPP compares the cost of goods between countries, and according to the OECD, it equalizes purchasing power by accounting for differences in price levels.
“For the same reason, holidays in Europe are also affordable as we spend in the same currency we earn in. Of course, the proximity between different countries also makes it cheaper as we can just drive around,” Prateek said.
Prateek and Neha, who now works as a finance manager for a German real estate company, moved to Luxembourg in pursuit of a better quality of life. Neha had previously worked for one of the Big 4 firms in India.
“Continuing in India or moving to the US would have given us more career and earning opportunities. But we wanted to taste the superior quality of life, which Europe offers,” Prateek explains. “Working class Indians don’t come to Europe for more money. We can easily earn 1.5-2 times more if we move to the US or Dubai. Needless to say, net savings would also be higher.”
This choice also means that career growth and income progression are relatively slower compared to peers in India or the US. For instance, annual salary appraisals in Luxembourg are typically 1-2%. Over the four years they’ve lived in Luxembourg, this modest rate has created a noticeable gap between their salaries and those of their counterparts in India and the US.
“Appraisals are low because there is no inflation. Also, unlike India, you don’t get to switch jobs every two years to get 20-50% hikes,” said Neha.
But do they feel left behind? Not for a moment, both Prateek and Neha assert.
In fact, the couple embraces Luxembourg’s slower pace, as it allows them to focus on their health and hobbies.
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“The labour laws of the country gives residents a good work-life balance, probably one of the best in Europe,” Neha adds. “We regularly go to the gym, pursue other physical activities, travel more thanks to generous paid leave, and have time for ourselves—something that would be difficult back in India.”
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Higher living expenses
The better quality of life in Luxembourg comes with the trade-off of a slightly higher cost of living. The couple is careful not to compare the standard of living between India and Luxembourg using simple currency conversion.
“We compare in percentage terms. For instance, we pay about 30% of our income on rent. In Bengaluru. rent of a similar house would not demand more than 15% of our salaries,” said Prateek.
According to Numbeo, an online database of quality of life metrics, the cost of living, including rent, in Luxembourg is about 230% higher than in Bangalore. To maintain the same standard of life, one would need approximately 3,564 euros (about ₹3.33 lakh) in Luxembourg compared to ₹1 lakh in Bangalore. This estimate aligns closely with the World Bank’s PPP data, which suggests that a salary of ₹87,000 in India offers a similar quality of life as a 3,564 euro salary in Luxembourg.
Neha notes that Luxembourg’s standard of living is relatively higher than in other European countries with similar career opportunities, such as Germany and France. However, the difference in salaries is not substantial.
“Luxembourg is like the Mumbai of Europe. You pay more for rent, groceries, and other lifestyle expenses, but salaries are only marginally higher than say, Gurgaon or Bengaluru,” she says.
One area where the couple has cut back is dining out, due to the high costs.
“Since it’s a small country, there are fewer options with limited price range. We have to spend at least 15 euros (approx ₹1,400) per head, whereas in Bengaluru, good options start at as low as ₹200. Even big cities across Europe like Paris or London, offer more variety at different price ranges starting at 7-8 euros,” says Prateek.
As is common in many Western countries, labour-intensive services like handyman work, housekeeping, and cooking are relatively expensive, so the couple handles these tasks themselves.
“Even a simple men’s haircut costs 35-40 euros. But since it’s a necessity, we have no choice but to pay,” Prateek adds.
“I finally mustered the courage to splurge on my first haircut after two years of living here,” Neha laughs.
Lower taxes, free transport and healthcare
Despite the higher cost of living in Luxembourg, Prateek and Neha haven’t seen a dip in their savings rate since moving from India. While they face higher rent, grocery, and lifestyle expenses, these costs are offset by savings on free public transport and subsidized healthcare.
“We have to mandatorily contribute 3% of our individual incomes towards government-sponsored health insurance. At just 3% cost, healthcare is entirely free for us, barring dental care,” Neha explains.
Additionally, the couple is required to contribute 2% of their respective incomes towards the unemployment fund. “Under this scheme, if someone is fired, the government pays 80% of the last drawn salary for two years or until they find another job,” says Neha. “Think of it this way: at 5% of my annual income, I’m covered for two major emergencies—medical and job loss. We don’t have to separately build an emergency fund,” she adds.
It’s important to note that the 2% and 3% contributions towards the unemployment fund and health insurance, respectively, are included in the employees’ annual cost to the company (CTC) and not deducted from their post-tax in-hand salary.
Essentially, the couple saves on commuting costs, healthcare, and the need to accumulate extra funds for emergencies.
When it comes to taxes, the couple pays about 28% of their income, which is 2-3% less than what they would pay in India. However, Neha notes that this doesn’t feel burdensome, as the state-sponsored services and infrastructure offer a comfortable lifestyle. “We don’t have kids yet, but another big benefit is the free public schools. That’s such a massive benefit you get in return of the tax you pay,” she says.
In Luxembourg, there are no uniform income tax slabs; tax rates vary depending on whether you’re single, married, or married with children. “The tax rate for a couple with two kids is the lowest among all categories,” Neha notes.
Luxembourg is also one of the few countries with zero tax on capital gains. “When we move out from here, I’ll liquidate some of my ESOPs to save on taxes,” says Prateek.
Investing in Indian stocks
The couple invests about 20-25% of their monthly incomes, focusing entirely on India. Around 70% is allocated to direct stocks, 20% to mutual funds, and the remaining 10% is spread across provident funds, the National Pension Scheme, gold bonds, and digital gold.
For stock picking, they take a do-it-yourself approach. “We do our own research to pick stocks and mutual funds. I mainly look at the industries that have potential in the future, such as renewable energy, electric vehicles and associated industries, speciality chemicals etc,” Prateek explains.
Prateek says they focus on the Indian stock market because they understand it better. “In the US, we just know about the blue chips. But beyond that, since we don’t follow the economy or stock markets closely, we can’t pick value stocks. We believe the Indian stock market has better investing opportunities currently,” he says.
The couple’s primary investment goal is wealth creation. “We have an equity focused portfolio as we can take higher risks with age on our side. We want to save enough to become financially independent so that we can take more risks in our careers and probably build our own business,” Prateek says.
They use a Portfolio Investment Scheme (PIS) account to invest in the Indian stock market and utilize a money transfer platform that offers mid-market exchange rates to send money to India.
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“We use Wise as the exchange rate is much better compared to banks. Wise charges a fixed 1.11 euro and 0.61% of the total amount as fee for each transfer. It works out to less than 1% of the transaction amount,” Prateek explains.
Future plans
When asked whether they plan to settle in Luxembourg, the couple is clear: “We will move back to India or a nearby country, like Dubai or Singapore. We want to be close to family,” says Neha.
For this reason, the couple has decided not to buy a house in Luxembourg.
“Home loan interest rates here were about 1% three years back. But despite that, we decided against the purchase as we don’t intend to settle here, and we won’t buy property for investment,” Neha says. “Even in India, we will buy a house only for self-consumption.”
