Have you ever wondered about saving money while living in a different country? The thought never crossed my mind until I was 30 years. Have you wondered what your financial impact would be by living in a Low Cost of Living place? These are things I started to think about at age 30. So I moved across the world and let geo arbitrage help me save money.
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What is Geo Arbitrage?
Geo arbitrage is a unique thing. It is moving from a high cost of living area to a lower cost of living area. Often, we are in High Cost of Living (HCOL) areas that can stop some of our saving ability. If you are not making a high enough salary, it can cost you a lot to live in an HCOL.
Moving to a low cost of living area (LCOL) is one of the most incredible hacks out there. People that are getting close to retiring do it all the time. They may buy a property in Belize or even move to Portugal to take advantage of the excellent and cheap living. Mexico is another great place to move to lower that cost of living.
If you break down the word of geo arbitrage, you get two separate words.
Geo: meaning to geography
Arbitrage: involving taking advantage of price differences in different markets.
In other words, geographic arbitrage.
You could be living in New York City, and you decide to move down to Greenville, SC. The food is much more expensive in NYC compared to Greenville, SC. The housing costs are much more. Transportation could be more if you were to own a car and have parking for it.
Suppose you moved to a smaller place with a lower cost of living. Suddenly, your food prices go down, housing costs go down, and you can save more money.
Who doesn’t like to save more money? I know I do.
What About Moving to Another Country?
Have you ever thought about moving to another country to save money? I never thought about this until I made a move. If you look at many other countries in the world, where would you want to live?
Living abroad can be a great experience to learn, save, and adventure. It may be something you may want to look at. Make sure that the place you choose fits what you want.
Australia seems like a beautiful, wonderful country to live in, but the cost of living is so much higher. Living in Europe can be a much higher expense as well. However, parts of Europe can be significant to live in at an affordable price, like Spain or Portugal.
I moved to Taiwan. Taiwan has many significant parts about it. It is a great place to live very cheaply. I work as an English teacher that gives me great middle-class pay, plus I try to live below my means. Being able to live frugally in this LCOL country gives me the ability to save so much more money.
You can do this too. The cool thing about geo arbitrage is that it brings massive savings to people.
My friends from home asked me just how much am I making. Then they give that look of “oh, that amount is so little.” Then they ask how much I am saving. I tell them I am saving 55-60% of my money every month. Their eyes open wide, and their mouths drop open. They are in awe that I am saving more money than they are while making much less.
That is the beautiful thing about geo arbitrage. You can make much less money, but you may be saving a whole bunch more due to the cost of living.
Factors to Consider For Geoarbitrage:
When moving abroad or even to a place with a lower cost of living, you must consider different factors to make it worth it to you.
First Your Income:
Income is a huge thing you need to consider. If you are retired, you will need to know if your current income can help you maintain a lifestyle you would like to live. Having the necessary amount of money to maintain a particular lifestyle can help in your transition.
You may also want to consider possible job opportunities. For example, in Taiwan, I can work as an English teacher. This gives me a high income to live an extraordinary life, plus I can save tons of money. There are many other opportunities in the tech industry here as well.
Looking for the best places to make an income is a great way to figure out where to go for geo arbitrage. You need to know if there is a good job market available as you search for a place.
Being able to work from anywhere is a huge bonus. For example, I had two friends traveling the world one country at a time. The biggest thing they needed was a connection to the internet. They could stay in a country for 2-3 weeks or a couple of months and work from their computers.
The beautiful thing was my friend’s wife was making more money on her digital nomad job than she was showing up in the office. So they could travel and work and enjoy a great life.
Cost of Living:
The cost of living is enormous when using geo arbitrage. That is the reason we want to use it. We want to move from an HCOL to an LCOL area. It is that easy. So it would be best if you looked at the cost of living in a specific area. Break down your living expenses by housing, food, healthcare, education, and even transportation.
These are all vital things to help you to make a good decision on where to live. If everything has a reasonable price that allows you to save a good amount of money, that would be an excellent place to move.
Remember these factors for your living expenses.
Lifestyle is a great thing when you are looking for a place to move to. However, if you are working in a constantly stressful place and your life is deteriorating due to the poor lifestyle, then it is time to move again.
One of the most incredible things about moving to Taiwan was the lifestyle. We are a good 20-30 minutes away from the mountains. The beach is an hour or less away, and life feels good just living here. Health is a big thing here, so there are plenty of gyms and bike riding, so my wife and I stay healthy.
If I lived someplace else that was constantly stressful in my life, it would not feel so happy or good. I would feel worn down when I was looking for a place to relocate. I wanted to find a place that fits my kind of lifestyle.
Life is not about working 40+ hours a day to me. I want to enjoy nature and enjoy living life to its fullest. This is part of my dream life. Being able to travel, adventure, and explore while also seeking financial independence.
Steps to Find the Perfect Place:
Now it is time to take some steps and goals to find this perfect place. You can start with these three steps:
Step 1: Look at Locations
Now it is time to make a list of locations where you would like to go. This can be domestic or even international. This needs to fit your needs and wants. Look at the cost of living, income, and lifestyle. We are looking at saving money while living a great life.
Step 2: Time for Math
It is time to pull out your calculator and do some math. When I am looking at finances, I want the math to work out. You don’t just go into anything without calculating the risks, rewards, and opportunities. The math needs to check out.
Let’s look at if we can save a good bit of money. But, first, make sure that the income part will last a long time to make enough income to support your life.
Step 3: Visit this Place
This is the time to visit the place you would like to move to. Most people are not as adventurous as my wife and me so, I suggest going and visit. Finding a good fit is necessary for your new life. If you randomly pick up and move, you could be in for a disappointment, or the thrill of a new adventure could be awaiting you.
I never visited Taiwan. I just bought a ticket and was on my way. This can be stressful for some people and bring about many different types of shock with the various food, environment, and people
How Can Geo Arbitrage Boost Your Investments?
Many people will use geo arbitrage to help with their investments. For example, Jeremy, from gocurrycracker.com, talks about how he uses the 4% rule; he and his wife would travel to LCOL countries to live for a while for less than 4%. This could help them grow their net worth even more since they were spending less money than they had anticipated.
You could also use geo arbitrage if you are seeking financial independence. Using the ability to live and work from anywhere with remote jobs can help supercharge your investments. If you are getting paid your higher salary but choose to live in a lower living place, you can then save more and invest more.
Geo Arbitrage is Not For Everyone
Not everyone wants to move from a high cost of living place to a low cost of living area. On the other hand, some people enjoy living in a big city or a place they grew up.
My wife is originally from Melbourne, Australia. She loves being there. Melbourne happens to be a very high cost of living area. Currently, we live in a low cost of living area, but one day my wife would like to move back.
Some people also like to live in the big cities. Personal finance is personal, so people can make their own choices. With these choices, we can make decisions to help enhance our financial situations.
Some Final Thoughts
Geo arbitrage is a great way to enhance our finances. It gives us opportunities to live a better life at a lower cost.
We need to consider many things when looking to relocate. Our income, cost of living and lifestyle are factors we should consider when looking for a place to live. If you can save more, get paid a similar wage, and enjoy your new lifestyle, then it is a great choice to make for yourself.
At this point in life, living in a low cost of living place gives me some great benefits to save and invest a good bit of money. Geo arbitrage has given me a better lifestyle and enhanced it to the life I want to live. I made a choice. What would you choose?
Would you live life using geo arbitrage?
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” Spend less than you make, stay out of debt, and invest the rest”
I’m Steve. I’m an English Teacher, traveler, and an avid outdoorsman. If you’d like to comment, ask a question, or simply say hi, leave me a message here, on Twitter (@thefrugalexpat1). Many of my posts have been written to help those in their journey to financial independence. I am on my journey, and as I learn more I hope to share more. And as always, thanks for reading The Frugal Expat.