Living on a Portuguese Income

Yesterday — amid all the talking faces and social media gabbing about rising inflation, prices going up, the potential for recession, homeless shelters and food pantries being used more often by more people, the adjustments and do-withouts even the employed are forced to make, higher costs and the problems we’ll all soon be facing — I stopped to listen to my inner voice, that soul or conscience that asks me to consider not how we would be affected by all these dire predictions … but what impact they would actually have on others.

Specifically, the Portuguese.

You and I are privileged. We’ve retired on a comfortable enough income, public and/or private pensions, to not be that affected by economic downturns and political pressures. Sure, maybe we’ll put off that cruise and faraway vacation, or postpone the purchase of a new car. For many or most of us, we’re living on money earned remotely or Social Security payments from a lifetime of working abroad.

Come what may, our standard(s) of living won’t change that much.

But what about our Portuguese friends and neighbors?

The widow next door to us is somewhere between 90 and 100. She has only three teeth left, so understanding her speech is difficult beyond comprehending the language we’re learning. A couple of times, we’ve knocked on her door to bring her some homemade food–meals or desserts. She’s very stubborn, refusing our offerings by saying her “children” bring her food each week. Her door slightly ajar, I’ve followed my nose and peeked in. It’s obvious that mold and mildew live there with her. She has neither air conditioning in the summer nor heating in the winter–at least not according to our standards. Regardless of the temperature outside, her house is cold and barren. No kitchen cabinets, just a shelf or two. Old, worn-out furniture. mismatched and misplaced … wherever. Her husband died more than 20 years ago and she’s been living on a state pension (“social security”) of €250 per month. Even though her daughters bring her food, at least once a week she trundles to and from the mini-market several blocks away with her walker. We can shrug off that extra €15 euros we’re spending now on what’s in our grocery carts from our weekly excursions to Auchan, Continente, Aldi, Pingo Doce, or Intermarché. But she can’t. What does she do? She does without, putting on extra layers and several threadbare blankets over the sagging mattress of her cot-like bed set in the middle of her kitchen, opposite the rusty front door. She may be poor, but her pride is intact and her survival instincts are strong.

We live in the suburbs of a major city, a comfortable if not upscale vila of mixed housing–most are row houses of all shapes and sizes, although there’s plenty of upscale properties with huge houses and landscaped gardens behind magnificent gates (not fences) around the town. We moved here from a smaller village (aldea) of about 500 people, down from 1,200 or more during its glory days. Today, one corner market, two cafés, and a beautician who visits twice each week comprise its commercial corps. Except for three tremendous but decaying manor homes, still grand and stately, all of the other dwellings are attached. No, that’s not quite right: around the village’s outskirts are a number of quintas inhabited by daily commuters who work for the government (elsewhere) and dirt-poor people.

Friends of ours live on one of those quintas, shared with a zoo-full of beloved pets: dogs, cats, chickens, guinea pigs, and geese that bark and bite. He’s a construction manager (whatever that means) who’s held a number of positions over the years. I have no idea how much he makes, but I do know that she’s worked for the government more than 20 years and still earns little more than the average minimum wage. How are they getting by with the increased costs of … everything, including their wages?

It’s obvious there’s an increasing use of plastic — credit cards — with people borrowing now and paying later for many of their needs. I suppose those erstwhile professionals proficient in digital, artificial intelligence, and cloud-based solutions are Portugal’s middle-class. Others, who’ve inherited property from their families play the pyramid game by holding on and selling high.

Another Portuguese friend owns a business that sells electrodomésticos: refrigerators and ranges, washers and dryers, but mainly aircon and solar solutions to everyday customers and large installations. He’s got a great location right on the corner of one of the city’s primary streets, a loyal and growing clientele, and a handful of technicians working for him. Yet, in addition to not being able to escape “the busiess” 24/7, he’s got a huge nut to crack between rent, salaries, inventory, utilities, taxes, and an accountant responsible for assessing and reporting the complexities of his financial considerations.

How do these people earning less than my meager monthly Social Security payments afford to drive new cars, with minimum sticker prices of €25,000. Some of the same vehicles and models cost 150% or more here over their prices in other countries.

One thing the Portuguese have, especially those living in the campo, that we don’t are quintas that have been in their families for ages, where they work the land daily and reap its produce, sharing baskets full with others.

The Portuguese also patronize places different than we do because they know where to get the best buys. If only we’d ask them, they’d be likely to help … but it means that we must take our homework more seriously, practicing Portuguese.

Would you believe that we know “foreigners” (expats, immigrants, or whatever) who have lived here for ten to twenty years and still can’t understand the language? Why should they? They live in expat ghettos surrounded by others much like them, where Portuguese isn’t spoken except by those serving or selling to them.

Now that Portugal is firmly on the map as one of the best places to be if you’re looking to retire with a good quality of life at prices more affordable and politics more amenable than the places we’ve come from, (almost) everyone wants to live in Lisbon, Porto, Algarve, or the Silver Coast.

But it’s a small country with not enough properties to go around–especially in those areas.

So, locals are being forced out of their homes, unable to afford even their maintenance. Now, there’s a bidding war for the best located properties, no matter their condition, as many will be torn down and rebuilt. Is that what we refer to as “regentrification?” Such a fancy word for a shabby deal. Maybe replacing faulty with functional would be better …

Taxes are high here, starting with “sales” tax, which is 23%. The government takes a big bite of your pay, too, with some people paying as much as 50% of their income in payroll taxes. Then, there’s Social Security, which is next-to-impossible to figure out without the services of a knowledgeable and competent accountant.

Residents in Portugal for tax purposes — us! — are taxed on our worldwide income at progressive rates varying from 14.5% (€0-€7,112) to 48% (> €80,882) for 2021. That doesn’t include Social Security, for which we’re also responsible when working. In 2021, an additional “solidarity rate,” which varies between 2.5% and 5%, applies to taxpayers with a taxable income exceeding EUR 80,000. LOL!

Social security contributions are 23.75% of gross pay from employers and a further 11% from employees. Portugal does, however, have agreements with some other countries regarding social security ‘totalization,’ including with the United States. In the case of the US, employees of American companies sent to work in Portugal for less than five years only have to pay US social security. Those working “remotely,” however are deemed independent contractors and must pay both their income taxes and social security contributions.

That’s a lot of taxes! But the money is spent to provide free health care and education, and lower prescription drug costs (among other essential expenses) to residents.

The minimum wage in Portugal is regularly adjusted, and currently is €8400 per year. The monthly level varies because many employees in Portugal receive 14 paychecks each year (the 12 months of the year, a holiday payment in June, and a Christmas payment in December), in which case the minimum is €600 (approx. £540, $710) per payment. For employees paid 12 times a year, the minimum is €700 (approx. £630; $830) per payment. There is no mandatory custom for wage growth or bonuses. 

Portugal has the sixth lowest average gross yearly salary among Organization for Economic Cooperation and Development (OECD) states. That comes to about 28,410 dollars per year (24,557 euros). A far cry from the United States, which leads with 69,392 dollars per year (59,981 euros), or neighboring Spain, with its 39,922 dollars per year (34,508 euros).

Nonetheless, if you’re committed to living frugally, you can live for less in Portugal. Many locals and retirees get by on less than 750 Euros a month. A couple can live in one of Portugal’s smaller or interior cities for about $1,700 a month.

Of course, there are some who make much more than the “average,” as shown here:

The top 10 careers with the highest salaries in Portugal:

RankingJobGross Annual Salary in Portugal
1General Manager in the Health Sector120,000 – 150,000 euros
2Commercial Director100,000-150,000 euros
3Chief Information Officer (CIO)110,000-140,000 euros
4Shared Service Centre Director95,000 – 120,000 euros
5E-commerce Manager50,000 – 75,000 euros
6Cyber security Specialist45,000 – 60,000 euros
7Big Data Specialist35,000 – 50,000 euros
8Software Engineer+ 45,000 euros
9Digital Marketer35,000 – 45,000 euros
10Machine Learning Specialist+40,000 euros
Chart: Manpower

But let’s get real. Not many make that kind of money in Portugal.

Average wages in Lisbon are considerably higher than the official minimum salary. The average salary in Lisbon is around 1050 euros, the highest in Portugal.

The Construction Union of Portugal (SCP) has stated that “there is no shortage of manpower” in the construction sector, but rather a lack good salaries. “There is no shortage of manpower; people are not choosing to work in the sector because they can earn three or four times as much abroad,” said the organization’s president, Albano Ribeiro.

According to Ribeiro, in the last six years, 300,000 workers have left the sector, and 90,000 are currently needed to carry out public and private works in Portugal.

The Portuguese leaving Portugal for better opportunities are being “replaced” by people like us. We’re necessary to the country’s economic welfare and, by and large, are welcomed.

That’s one of the reasons we didn’t move to Spain — where we’ve had a vacation bolt for 15 years — instead of Portugal. All Schengen countries agree to use the same visa application for would-be immigrants and residents. But there are major differences in their interpretation.

For instance, the European Union and Schengen may agree that all visa applicants be self-sufficient, able to support themselves and their dependents.

In Spain, income requirements for a Non Lucrative Visa for people from the USA and UK are $30,453/€25,816 annually, plus $7,613/€6,454 for each additional family member. These minimum income requirements covert to roughly $2,550 per month for a single person or $3,150 for a couple. (An additional €537.84 per month is required for each and every dependent family member.) Most of the Spanish people we know outside the big cities don’t make anywhere near those amounts. In addition, Spain residency applicants cannot have loans or mortgages outstanding in the United States. We didn’t feel welcomed by Spain.

For residency in Portugal, however, you must show income or pensions amounting to 12 months at the minimum wage: €8,460 for the first adult; €4,320 for a second or more adults; €2,538 per child. Couples must document income of €12,780. A couple with two children require €17,856. You must provide 6-months of bank statements. There are no restrictions on whether you work — in Portugal or remotely — if you have or can find a job. Portugal, despite its bureaucracy, made us feel very welcomed by these numbers alone.

Quite a big difference between the two countries, huh?

Sometimes, less is more!

1 thought on “Living on a Portuguese Income

  1. Thank you for that, most informative, but there is a massive and healthy black economy here in Portugal, with taxes so high it’s not really surprising. The major problem here is that when Portugal entered the European union it (for reasons only known to the government) did not sign up for/to the European agricultural policy ie. no ECB grants for that area of operations, plus the top heavy and largely inefficient (Still using windows Xp phased out in 1996) Civil Service totalling 43% of Gov outgoings. However for all its faults it is a lovely country to live in.

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