Do you live in a high cost-of-living area where you pay a premium for your home, services and other amenities? If you’re willing and able to move, you can slash your cost of living in half or more.
What is geo arbitrage?
Geo arbitrage is simply picking up and taking your current earning power and moving to a lower cost-of-living area where it can buy more – get more living bang for your current bucks.
There are two types of geo arbitrage: domestic and international.
Do you want to lower your cost of living, but are not very adventurous, or not interested in living too far from your family and friends? You can still reduce your costs within the U.S.
The U.S. is a huge country and the living cost vary wildly from state to state and even within various areas in the same state. If you are lucky enough to have a fully remote work from home job, you can easily pick up and move to a less costly state within the U.S. This interactive guide is a good start to get a few ideas.
Some things to consider
Taxes. Some states like Nevada don’t have income tax, that alone can save you quite a bit coming from a high income tax state like New Jersey. But be sure to factor in other taxes like gas tax, sales tax, and property tax. In some states, those things combined may offset a good chunk of the savings.
Services and amenities. This is important. You want to save money. But you also want to preserve your quality of life. Saving money is no fun if you’re miserable and stressed out. Have an honest conversation with yourself. What services and amenities are essential for you to be happy? Do you really need to be within 5 miles of a gym or will you be happy with a treadmill in your spare room? Do you need to be near a variety of restaurants, or are you okay with home cooking with an occasional long trip to a restaurant?
Healthcare. Do you have health issues? Do you have small children or expect to start a family? Honestly evaluate your healthcare needs and ensure your new location has the access you will need. In some of the lower cost-of-living areas, you may need to travel a long distance to reach a specialist or a full service hospital. Keep that in mind as you narrow down your search for a new location.
Safety. Sometimes, you get what you pay for. Don’t sacrifice your safety and peace of mind to save a bit on rent.
International geo arbitrage can offer the biggest savings. The U.S. in general is a high cost of living country. If you are adventurous, moving overseas can slash your living expenses while still maintaining a high standard of living.
Some things to consider
Visas. No, you cannot just grab your suitcases and move to Thailand. Every country has residency requirements. In some countries, you can only obtain a short-term residency visa, in others, you can become a permanent resident. Some countries offer citizenship with certain requirements, while others, citizenship is nearly unattainable for foreigners.
Be intentional with your move and your lifestyle. Are you okay moving from country to country like a nomad, or doing “visa runs”? Or are you more someone that needs to put down roots? Deciding on your lifestyle needs will help you narrow down your list of target countries – no need to consider a country that will never give you a permanent residency if you want somewhere to settle permanently.
Working. Will you need to work? If so, are you bringing your job with you as a remote worker or freelancer, or will you need to find work in your new country? Some countries prohibit foreigners from holding certain classes of jobs. It may be difficult to get a job in your field, so you may need to be flexible with your employment requirements or find a remote job before you move.
Language. Do you speak the local language? If not, are you interested in learning? Be honest. If you’re not interested in learning a new language, or find new languages extremely difficult, you may want to select a country with a high English speaking expat population. A language barrier can be a big deal if you have a health issue or if you have a legal issue.
Sticking with places where English is common will restrict your choices, but it’s better to be honest with yourself about your interest and ability rather than have a failed move because your daily life is difficult because of a language barrier.
Stability and Safety. Is the government stable? Is there a high level of corruption where even local officials need their palms greased to get things done? Will you need security gates around your home? Do your research. Visit the location multiple times. And be really honest with yourself. Will you be okay with a bit less polish for big savings?
Infrastructure. Are you a freelancer or remote worker that needs reliable high-speed internet? Do you have health issues that require stable electricity to refrigerate your meds? Many of the lower cost-of-living countries may have infrastructure challenges, especially outside of the large cities. There may be rolling brown outs, black outs for hours or days, or even spotty water service. These issues do not have to be deal breakers for a location. But you will need to be flexible and resourceful to cope with these issues (buy a generator, have a water tank, etc.). Be honest with yourself about how much these issues may affect you and how flexible your are willing to be.
After you consider all your wants and needs, and have a short list of locations, take the time to research the location and visit. You want to be as prepared as possible for your move. And most of all, after your move, keep your standard of living the same. Just because you now only have to spend $1,000 a month on rent on a 3 bedroom home, doesn’t mean you should blow the housing cost savings and eating out at fancy restaurants every night. Of course, treat yourself. But don’t let lifestyle creep eat up all the savings you gained from your geo arbitrage move.