Living on Interest

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Living on Interest

Postby steveodp » Fri 10 Jan 2020 5:58 pm

I've seen and heard mention of people living in TRNC, funded by the interest on their savings.
What amounts were/are needed to be invested, to make it viable?
Is this less feasible now with the recently reduced interest rates?
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Re: Living on Interest

Postby cyprus2016 » Fri 10 Jan 2020 6:16 pm

As a retired former banker but by no means an expert on personal financial matters, I would have thought that with world interest rates on savings being at an all-time low, with some banks actually offering negatives rates (so that you pay them for holding your money!) the chance of earning sufficient interest to live on comfortably would be really pretty difficult. Inflation in the TRNC and Turkish Lira confidence difficulties would also be major factors to consider and I think some sort of back-up plan/ample savings would be essential in order to live without too many financial worries.
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Re: Living on Interest

Postby laptatony » Fri 10 Jan 2020 7:51 pm

Definitely less feasible, GBP down to 4% les 18% tax, TL 12% less 10% tax, you may get better, but these are coming down. Inflation probably around 10 to 15% min.
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Re: Living on Interest

Postby Keithcaley » Sat 11 Jan 2020 9:54 am

How much you need to invest in order to fund your lifestyle depends on your lifestyle!

Renting a 5 bedrom villa with 5 donums of garden, a large pool and a BMW to maintain?

Living in a small village house that you own, with a ten year old car?

I know people who spend more on Hairdressing/Beauty Salon visits and new clothes than my entire monthly budget ;)

Assuming that you are renting, and aiming for the TRNC Government-mandated '3 times the minimum wage' - i.e. currently something in the order of 11,000 TL per month / 132,000 TL per annum, then at a currently achievable 10% net return on a TL time-deposit account, you would need to deposit around 1.3 million TL.

Of course, you may have other income, the interest rates may rise and fall, the minimum wage will inevitably increase.

A downside of keeping a large amount tied up in a TL time-deposit account is that it may not be easily accessible in emergencies without penalty, and that it will inevitably lose value against other currencies due to high inflation in TRNC/Turkey. Also, the stability of TRNC or Turkish Banks may not be as good as UK-based Banks, and the Government 'guarantees' mean that you would need to split up your savings into separate accounts to stay within the guarantee amount.

As mentioned by laptatony, interest rates on GBP deposit accounts are considerably less, and if you have enough cash to be able to live on the interest from a GBP time-deposit account, then you would probably choose to live in Monte Carlo rather than TRNC, unless you are a Bank robber 'on the Lam' of course ;)
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Re: Living on Interest

Postby MVP » Sat 11 Jan 2020 10:08 am

In the medium to long term you can not live on interest.

Interest compensates you for inflation. I.e a loaf of bread costs 1 and a year later costs 1.10 but you got 10% interest on savings.

The overall effect if you spend all your interest is that your capital buys you 10% less than it did a year ago

All you are doing is slowly diminishing your capital
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