Yahoo Finance Washington woman gets more ‘bang for her buck’ living in Budapest — says quality of life is worth the higher taxes
After a year of working as a barista, Denae McGaha had managed to save around $4,000. She was living in Whidbey Island, Washington, at the time, but she wanted to move.
McGaha had two choices: move into her friend’s Brooklyn, N.Y., apartment, or go to Budapest to teach English to kindergartners.
“If I [move] to Brooklyn and I don’t get a job like that, my year of savings will get eaten up by rent in two months,” she told CNBC Make It. “I wanted to feel like I could get bang for my buck.”
After her application to the teaching program was approved, McGaha decided to make the leap and move to Budapest.
She left for Hungary back in 2017 — and she doesn’t plan on returning to the U.S. anytime soon.
Cheaper cost of living
McGaha’s favorite part about moving to Budapest is the improved quality of life.
“When I think about life here, it’s quite active and accessible,” the 30-year-old told CNBC Make It. Currently, McGaha earns around $2,400 per month ($28,800 annually) via her remote digital marketing and travel writing work.
In Budapest, that’s enough money to afford the $664 per month for rent and utilities for her one-bedroom apartment, as well as the $150 per week ($600 per month) she spends on groceries, dining out, and seeing friends.
On the flip side, McGaha couldn’t afford to rent an apartment with her $2,400 monthly income in Brooklyn. The cheapest apartment in the burrough is a studio apartment, which costs an average of $3,759 per month, according to Rent.com’s latest numbers.
Even if McGaha were to move to a less expensive part of the U.S., rents nationwide currently sit at a median price of $1,654, according to Redfin.
Although McGaha could probably make it work on her $2,400 income for rent and food, it would be tight and likely wouldn’t allow for opportunities to save money for her future.
Large service tax
Although McGaha has far more financial freedom in Budapest compared to America, one Hungarian commenter on her CNBC Make It interview warns viewers about this skewed perception.
“Please do not believe everything you see in this video,” the commenter wrote. “It[‘]s definitely a struggle for a lot of citizens to make ends meet now[a]days.”
The commenter added that Hungarians also pay quite a bit in taxes. He says that they pay 27% in taxes, which is how much the value added tax (VAT) rate is, according to the Tax Foundation.
This means that every time someone purchases something in Hungary — be it a product or service — they usually pay an additional 27% tax on top of the price (although a reduced rate of 18% is applicable for items such as eggs and certain dairy products, for example, and even admission to a concert). The Tax Foundation says that the 27% tax is the highest VAT rate of all OECD countries.
However, Hungary taxes everyone at a flat personal income tax rate of 15%, according to the Tax Foundation. This isn’t far off from the average federal tax rate for most Americans, which sits at 14.9%, according to the Tax Foundation’s analysis of the most recent IRS numbers (which are from 2021).
Ultimately, it’s the wealth disparity that’s keeping McGaha in Hungary.
“Could I have a better life if I moved back to the U.S.? It depends,” McGaha said. “I might be able to find a higher salaried job, but it would need to be a lot higher to improve the quality of life that I have now.”
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
