How become financially independent with mid-class income?

Since I’ve started to inform me about financially independence and read a lot of blogs and books I just asked myself how to deal it with a mid-class income? Who isn’t dreaming of being millionaer, being a public and famous person, being manager of a big company, start-up big business? Making dollars and dollars … are you one of those people? Congrats!

But the most people – including me – are working 40-60 hours, having a small apartment and living a normal life. While we are working 40-60 hours and keep alive the economy by consuming different stuff we do need and don’t need there are some people with an high income. In Germany we do have approx. 1m people with a wealth of more than $1m. The population in Germany is approx. 81,1m which means that approx. 1,2% have a net wealth of more than $1m. With an income of approx. 100k you are one of the top 15% in Germany. Crazy, right?

The average income before tax is round about 34999 EUR (approx. $38000). After paying tax its about approx. 2000 EUR (approx. $2150 per month or $25800 per year). The official retirement limit is 67 years to receive the full support by retirement center. What does it mean for me?

I’ve learned its not what your paycheck amount is, its up to you to live with the money you receive! If your paycheck shows $250k and you are living your life and only saving $1k per year, you have less than your paycheck shows $25 and you are saving $2k. So its up to you! How much is your life worth?

How become financially independent with mid-class income?

Based on an example I will explain.

Age: 25
Saving: $300 per month (saving rate 15% of net income)
Retirement: 65

As soon as you are saving $300 per month your saved capital would be $144000 in total. Based on a yield of 3% it would be $4320 per year (or $360 per year). Possible to live with $360 per month? I don’t think so! Hopeless? Let’s go ahead with investing every year by year with the savings.

1 year – $3600 = $3600
2 years – $3600 + $3708 = $7308
3 years – $3600 + $7527.24 = $11127.24
4 years – $3600 + $11461.05 = $15061.05
40 years – $3600 + $267844.54 = $271444.54

Your saved capital of $144000 is now $271444.54 which means that a yield of 3% will pay a passive income of $8143 per year (or $678 per month). Looks better but not amazing, right?

Having $271k is not amazing but better as nothing and probably more than other people.

What are the possibilities to increase the passive income?

In my opinion there are more than one possibilites. Living more frugal and save more than $300 per month would be one of these options. Refer to Dividend Mantra who is saving his money by this way of life. Saving extra income like bonus and trying to increase income from the full-time job. A saving of more than $500 would be total $452k and $1000 would be total $904k.

On the other hand a higher yield is needed? With a yield of 5% would be as follows:

$300 – $434k
$500 – $724k
$1000 – $1.4m

But it’s really good to keep in mind that a higher yield mostly depends to a higher risk.


A saving rate nearly to 50 % brings your capital nearly to $1m after 40 years. My personal goal is an income $25000.00 per year by dividends and age of 50 (20 years left). So it means that I need a portfolio of approx.  $833k (yield of 3%) or $500k (yield of 5%) and so and so. I need to save approx. $15k per year. Well, it seems to be really hard! Its not impossible but my hope never dies!

Thanks for reading and take care!!!


  1. CR says

    Hello Patrick,

    How much tax do you pay on your dividends? I´m from Portugal and was interested in a strategy similar to yours but paying 30% tax from US companies plus 28% from my country, discouraged me from that “plan”.

    Keep up the good work


    • says

      Hello CR,
      in Germany we are paying tax of 26,5%. For dividends from US we are paying 15% withholding tax. I’m sure you are paying the same as its an agreement between US and Europe. Isn’t it? Its a mess that the countries are holding a lot of tax from us. They are taxing it few times. A company will pay tax, then we are pay tax twice. Anyway, I will go ahead with it as it seems right to generate passive income.

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