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…
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:
“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.
If you are still reading, I bet you are thinking either:
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:
NOTE: Tim Ferriss has a much more detailed plan for making this happen in his book, “The 4-Hour Workweek.”
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.
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.
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.
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.