Let’s begin by stating the apparent; the costs of items and services vary across different locations. While this may sound obvious to all and sundry, you cannot witness the real power of geographical arbitrage until you’ve travelled across the world.
And then, it will dawn on you that cost of living, particularly in main cities vary significantly—by 500% or 1000%— based on how you prefer to live. You’ll also realize that it’s nearly impossible to cut living expenses to a minimum by leaving the country and living overseas.
Moving out of your country (the U.S. for example) to live overseas, and settling abroad (in a place you deem right) is the one best thing you can do to cut spending. Though it also requires you to make sacrifices and changes in your lifestyle, it is still the right remedy for those who want adventure and drastically reduce spending.
Saving on expenses is not merely about moving to a cheap place, instead; it is the act of staying in a foreign country that will transform your lifestyle to a less demanding one, which in turn leads to additional savings. If you need help in obtaining a mortgage overseas, start by clicking here.
Costs of Living
Some agencies deal with price variations in different locations and provide a list of some of the costliest places for American emigrants to live. But this list doesn’t specify how much the costs of living in these cities differ. Here’s our detailed review for more information.
For example, the cheapest apartment you would rent in New York goes for $1,500/month. But this would be an unequipped room in a remote part of the city without an internet connection. On the other hand, you only part with $400/month in Bangkok in exchange for a neat, well equipped, bed-sitter with an internet connection.
You can also buy food from local vendors across the street for $1-2/meal, which is economical if you never want to cook. Fresh vegetables and fruits are much cheaper at a street vendor’s shop than in a store.
Other destinations (cities in the world) westerners consider apart from cities in Southeast Asia include Panama City, Buenos Aires, Bogota, Kuala Lumpur, Istanbul and Cape Town. There are many other cities where the cost of living is affordable like most towns in Eastern Europe.
If you own a place overseas, a straightforward way to earn money is to rent your home to a local or a foreigner like you. Depending on its worth and where you are, the income you receive from renting could easily cover most of your living expenses abroad.
Cut Taxes by Moving Abroad
About taxes, it makes complete sense to consult with a professional before acting. But here’s what to expect;
Living abroad (outside the US) reduces the number of services that eat into your money in the name of taxes. As a result, you enjoy great tax benefits by moving overseas.
The starting $80,000 on income for an American Citizen is not taxed if they spend 300 successive days overseas. Residents of other countries are not entitled to any income taxes if they exit the country.
Imagine how much you could save? Tax matters could justify movement, and even make the cost of living in an expensive city (like London or Paris) reasonable. For others, the cut in taxes could boost up income from 30%-50%, based on location and your tax group.
Another tax cut tip for you to consider: change your location to a state without income tax like Texas or Florida, so you do not have to waste the amount.
The Costs of Owning and Operating a Car
Have you ever calculated the amount your car pulls out of your pocket in just a month? Well, depending on your city of residence, you’ll be surprised how high the figure can go. I’m talking about all costs considered including gas, parking fees, repair and maintenance costs, and insurance covers.
Moving to another city can help you get rid of such costs if you can start using public transportation. A taxi in Bangkok takes $2-5 to drive you to almost any destination. Still, you’ll notice significant price variations in the costs of operating an auto from one city to the next.
Do Away with Your Stuff
Another advantage of moving to a city with lower living costs is you get the opportunity to get rid of most of your items by selling them. It doesn’t make sense travelling with all your luggage from one country to the next, so you’ll naturally want to get rid of most of it in exchange for some dollars.
That way, you do away with larger household items like furniture and electronics (by either selling or giving away) and remain with little luggage. For most travellers, three to four suitcases crammed with possessions, e.g., clothes and personal effects is enough baggage.
We are not saying you must plan a journey abroad to reduce your belongings, but it is the most rational choice if you are considering moving out of the country for a cheaper life overseas.
Plus, a little luggage will cut the costs of carrying and transporting them around. What’s more, it will limit whatever you buy on the street knowing well you’ll need to spend on extra carriage space.
The Bottom Line
You are probably not considering moving out of your country now given the buzz of activities going on in your life from business to family and things like mortgages and loans. Well, that’s understandable. After all, exiting the country for another city is a process that requires time to plan and execute.
Nevertheless, geographical arbitrage is a strategy you should have somewhere at the back of your busy mind. It might not seem feasible right now, but with more research, you may find it necessary and more economical to move abroad than to stay. You could even schedule it for after retirement when you’ve finished your service and would like to live a cheaper life as you age with grace. Isn’t it a smart way to reduce how much you spend to live?
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