Table of contents
- Best countries for geographic arbitrage
- How can I make money while living outside of my home country?
- How to retire early with geographic arbitrage
- What are the benefits of geographic arbitrage?
- What are the downsides of geographic arbitrage?
- How can I use geographical arbitrage for financial independence?
Best countries for geographic arbitrage
The best countries for geographic arbitrage come in two main categories:
- A country for geographic arbitrage that allows you to be in a very different type of environment yet in the same time zone as your home/business.
In our experience, we have remained on the New York/Eastern Standard Time time zone and lowered our monthly cost of living by choosing destinations in Mexico, Colombia and Peru.
- A country or place anywhere in the world with the lowest-possible cost of living.
In our experience during remote work and travel away from home, we’ve chosen the lowest-possible cost of living (paired with a reasonable level of safety) in Central & South America, Eastern Europe, Myanmar, Vietnam and other parts of Southeast Asia.
It will depend on your goal and reason for choosing geographic arbitrage as a main feature of your next destination, place to live, or place to set up your business.
How can I make money while living outside of my home country?
You can make money while living outside your home country in a variety of ways!
For us, we’ve made money both working for companies in the US, and for our own business, when we’ve been outside our home country (the USA).
During 2016-2017, Dan traveled with Remote Year and worked a full-time job remotely as a digital nomad. He pivoted to a freelance career halfway through his year of arbitrage, somewhere between his months in Africa and South America.
Later, the two of us left together for a trip around the world, with very few plans, only knowing that we wanted to engage in the theories of geographical arbitrage to keep costs down. We also wanted to keep time zones rather convenient.
We both worked part-time for companies in NYC. The other half of the time, we worked on our content creation at this website.
For you, you can make money while living abroad by working remotely full-time, or part-time. You can also freelance, or do contract work. You can do gig work! You can start your own company. Or, you can focus on investments and maybe you’re already living off of dividends.
How to retire early with geographic arbitrage
Many people who are interested in financial independence and retiring early will look into geographic arbitrage to save money.
This is so that they can maintain the same level of income or investment gains, while lowering costs of living in terms of food, rent, transport and entertainment.
If you’re interested in the FIRE movement and you’re able to work remotely or live outside your home city or country, look into an arbitrage location that’ll lower your expenses.
For example, there are big differences in the costs of living when you compare a place like Norway or Singapore, with India or Guatemala. The difference in the cost of a restaurant meal, a taxi ride, a month of rent and a liter of gasoline will be extensive.
What are the benefits of geographic arbitrage?
The benefits of geographic arbitrage are using location to your advantage in a way of continuing your way of life, with lower costs.
The main benefit is being able to save more.
When you’re able to save more, you are able to invest more. Maybe this is one of your biggest goals: investing in the stock market, in real estate, in a business or in yourself.
Another benefit of geographic arbitrage is synonymous with the benefits of working remotely and traveling. When you can do the same job and live a similar life, but with lower costs, you can have more freedom to travel and see the world.
Geographic arbitrage, while working our jobs and freelancing, has allowed us to live in Hanoi, Vietnam. It has allowed us to spend 45 days in Mexico City. It has also allowed us to spend time in Colombia, in Peru, in Taiwan, in Estonia and in Portugal.
What are the downsides of geographic arbitrage?
The downsides of geographic arbitrage will range.
For one thing, living in another country comes with its own set of challenges. If you choose to lower your costs dramatically by living in India, you may also deal with frequent internet outages, dealing with pollution, dealing with food safety or dealing with really hot temperatures in summer.
You may also experience challenges when it comes to time zone, or communication.
If you choose to settle in Southeast Asia, and your family or company is located in the US, you can assume that you may spend some nights in meetings, taking calls, fielding emergencies or finagling a schedule around those hours at home.
Geographic arbitrage will also require some research into taxes, banking and more, especially if you are engaging in business from another country.
How can I use geographical arbitrage for financial independence?
You can use geographical arbitrage quite simply when it comes to financial independence goals.
There is simple math for reaching financial independence.
You have to save enough money to invest, and continue doing this until you reach your FI/RE number, or enough amassed investments to withdraw at a rate per year that satisfies your cost of living.
If you are living in San Francisco or Tokyo, known for high costs of living, and your income is set, you could save a lot more of your paycheck by relocating to Colombia, Mexico, Thailand or Bali. This is especially helpful when you have a high-paying remote job that will bring home lots of cash while your expenses stay low.
Once you save more, you can invest more. Once you invest more, you’ll reach financial independence more quickly.
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