Geoarbitrage: The Live Here, Earn There Approach

As promised, I am going to describe various approaches to Geoarbitrage in some detail. We’ll talk about the approach and how it works, then cover the Pros and Cons. By the time we’re done, you will have a good handle on which approaches (if any) fit into your future.

Ready? We’ll start with…

What is the “Live Here, Earn There” Approach

The “Live Here, Earn There” approach is my favorite approach to geoarbitrage. That’s because it is the approach that allows me to lead the wonderful life I have now. Consider this:

  • I live in the city that is frequently described as the best place in the world for North Americans to retire.
Live Here, Earn There

Living in a place like Cuenca, Ecuador can make you Freer Tomorrow.

  • I rent a nice 3-bedroom house not far from the ritziest part of the city.
  • My quality of life is much higher than I had before.
  • Because I live and work outside my home country, there are several completely legal ways I can reduce my US tax bill.
  • Over the 5+ years I have lived here, my average workweek has probably been 10 to 15 hours. I had over a year where I only had to work around 10 minutes a day to pay all my bills.

“So how the hell can I pull this off?,” you ask. It isn’t that hard to do if you apply the Live Here, Earn There approach to geoarbitrage. The idea is that you earn your money someplace where the cost of living is high. But you live someplace where the cost of living is much lower.

For example, I earn most of my money doing work for companies based in the United States, where the cost of living is pretty high. So the companies I work for pay me what they would pay someone who is based in the USA.

But I live in Cuenca, Ecuador, where the cost of living is a fraction of that in the USA. So my expenses are much lower than they would be up north. This allows me to live nicely while only working a fraction of the time I would in the US.

For example, according to Numbeo, the cost of living here in Cuenca, Ecuador (excluding housing) is less than half that of living in NYC. And the cost of housing is only about 11% that of NYC! Adding to the fun, Cuenca is one of the most expensive places to live in Ecuador, due to all the publicity it gets internationally.

The high cost of living in a place like New York City means you can get paid a lot more than people living in less expensive places.

How to Implement the “Live Here, Earn There” Approach

If you are still reading, I bet you are thinking either:

  • This sounds great, I wanna see how to do it, or
  • This sounds like a crock, I’ve gotta see how he claims this is possible

It really is possible to live here, earn there if you set things up right. In fact, it is much easier than it was even a few years ago when I started. These days, companies are frantically outsourcing work, hiring contractors, basically doing anything they can to reduce headcounts. The old style job (where you had to be in your desk at 9am every day so the boss could see you and lord over you) is quickly disappearing. You might even be able to convert your current office job into remote work and implement the plan without changing gigs.

Let’s take a look at how you could take advantage of this form of geoarbitrage. You implement this approach as follows:

If You Work a Normal Office Job

  1. Start busting butt at the office so your boss sees how valuable you are to the company.
  2. Begin thinking about where you might want to live.
  3. After a few months, talk to your boss about working from home one or two days a week.
  4. Once you can work from home, make sure not to slack off. If anything try hard to be more productive on your days working from home. You want your boss to be impressed with the results.
  5. Make short trips to the locations you are considering moving to. You need to get a first-person feel for what they’re like. No point in going through all this then moving someplace you are going to hate!
  6. Gradually increase the number of days you work outside the office until you never have to be physically present.
  7. Move someplace cheaper and enjoy the benefits of living here and earning there!

NOTE:  Tim Ferriss has a much more detailed plan for making this happen in his book, “The 4-Hour Workweek.”

If You Make Your Living with a Location-Independent Business

This is pretty easy. You know how much money you are making now, and how much you are likely to make in the next few years. So all you need to do is figure out a few places where you might want to live and can afford to live. Then go scout out your top choices and pick the one you’re going to move to.

If You Have Both Regular-Job Income and Location-Independent Business Income

This is the situation I was in. I had a full-time job and a side business that was location-independent. In this situation, it should be just as easy as if all your current income is from a location-independent business. But it can get tricky.

Assuming you plan to live on your location-independent business income, you have to be careful of your assumptions. It is easy to assume you are going to increase your income a lot once you move. After all, you won’t be wasting most of your days at your office job anymore.

This can be a dangerous assumption. You would be much better off assuming that your income is not going to go up. Plan to live on what you have been making with your side gig. If you do make more, that’s great. But if you don’t, you could find yourself in a strange place with not enough money to pay your bills. Imagine getting evicted from your apartment in some foreign city with no friends, no options, and not even enough money to buy a plane ticket home. That would really suck.

The Pros and Cons of the “Live Here, Earn There” Approach

With all that out of the way, let’s take a quick look at the pros and cons of this approach before wrapping up for the day.

Pros

  • You can buy far more lifestyle if you earn someplace expensive and live someplace inexpensive. This can mean more free time, more money in your pocket at the end of the month, a higher standard of living, or any combination of the above.
  • You can choose the place you live based on what you like, instead of based on where your job is located.
  • You may be able to save on taxes.

Cons

  • You need a location-independent business that pays well enough to fund the lifestyle you are looking for.
  • You lose the camaraderie of the office environment.

Conclusion

In the next part of this series we’ll talk about the “Live Here, Retire There” approach. It is a form of geoarbitrage that my brother and millions like him are already taking advantage of. While the retiree lifestyle isn’t really a theme of this blog, the approach allowed my brother to retire at 52 instead of 65. The super-early retirement angle is definitely one way to become freer tomorrow, so we’ll talk about it next.