Geoarbitrage is the practice of moving to a country with a lower cost of living while working remotely, starting a business, or retiring abroad. Some people move to experience a new country, but many want to cut living expenses or pay less taxes.
Living is expensive, which for many people, means putting off doing what they really want to do with their lives. Traveling or even partaking of the local food and entertainment scene is too expensive. Especially since the pandemic, many people have solved this dilemma by working in foreign countries where the cost of living is lower. This practice, known as geoarbitraging (or geographic arbitraging), allows those willing to move for a fulfilling, lower-cost lifestyle to do so.
Anyone who works a location-independent job might consider packing up and joining the nearly 17 million Americans who became digital nomads during Covid.
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What Is Geoarbitrage?
In practice, those willing to move to different areas of the country can choose locations in the U.S. with lower costs of living. If you head to Bismarck, North Dakota or Cheyenne, Wyoming, for example, you can live much cheaper than you could in San Francisco, California or New York City, New York. What’s different now is that many people look toward foreign countries to locate temporarily.
The concept of international geoarbitrage or geographic arbitrage was first voiced by Tim Ferriss in his book 4 Hour Work Week. By moving to a lower-cost area, you can increase your spending power as well as your quality of life. You spend less, so you have more free cash to feed your long-term goals or be able to maximize your experience abroad.
Geoarbitrage can be a good plan for you if you love to travel, like to work online, and have an income from your online job, passive income, or savings to support yourself. Most locations do not allow you to pick up extra income by waiting tables or filling some job openings in the local economy. You can achieve financial independence through remote working abroad and come home with no debt.
Where Is The Best Place For Geo Arbitrage?
Some locations target more affluent digital nomads or investors, but there are many affordable destinations. Popular destinations with low cost of living for these traveling workers are currently places like Thailand, Mexico, Columbia, Portugal, Vietnam, or Bulgaria.
Information about the costs in other countries is readily available on the Internet, so someone who wants to live more cheaply can review their options and make a plan. Given that many foreign destinations have restrictions on how long foreigners can stay in the country, even if they are workers, those who geoarbitrage may have to move to another foreign location when their time is up in one place.
Geoarbitrageurs are usually people who want to experience a foreign lifestyle for a limited amount of time. Once their business is booming or their online income is increasing, their student loans or credit card debts are paid off, or they have amassed considerable savings, they want to go back to their previous home in the US or elsewhere. Some who want to retire early have increased their savings this way, although experts advise that taking early retirement in a foreign country can be risky as local conditions can change.
6 Pluses To Georbitrage
By careful selection of the location where you wish to you arbitrage, you can see several quick benefits.
- Your housing costs decrease.
- Your expenses for food, utility, and public transportation go down
- You can locate in an area that offers you the geography, natural features, and attractions you want such as mountains or beaches, urban or rural, etc.
- You can access excellent healthcare at lower-than-U.S. prices. (You need global health insurance though!)
- You can affordably pursue the lifestyle, entertainment, and pleasures you enjoy.
- You can potentially save money for your future back home, pay off debt, or prepare for retirement.
To realize the benefits of geoarbitrage that will lead to financial freedom, you must be committed to living modestly. The advantage of living in a low-cost area is that you can splurge on a few things that are important to you, take some trips, and still meet your long-term goals if you are committed to doing so.
SmartAsset shows the possible cost savings in housing the picking location by the cost of living in a recent article. Similar cost savings might occur in other areas of life; based just on housing savings, someone who moved from Boston could save over $2,000 a month in Southeast Asia or get much more real estate for 75% less in Greece or Mexico.
| Area | Accommodation | Cost |
| Boston, Massachusetts | 1 bedroom apartment | $2,450 |
| Orlando, Florida | 1 bedroom apartment | $1,200 |
| Chiang Mai, Thailand | 2-bedroom apartment | $300 |
| Vientiane, Laos | 2-bedroom apartment | $150 |
| Greece | 1-bedroom furnished apartment | $600 |
| Oazaca, Mexico | House | $500 |
Your chosen location will likely reflect lower food, insurance, transportation, and entertainment costs too.
Is Your Job Suited To Long-Term Remote Work?
Can anyone geoarbitrage?
Jobs relying heavily on computer technology are often a good fit for location-independent remote work, especially in fields such as IT and design. Many 9-to-5 office jobs are not well suited to remote work. If you get yourself established in the remote work world, you are in a better position to consider geoarbitraging.
As a freelancer, you may have discretion about when and where you work so long as you complete the work in a timely manner. however, if you work as an employee or contractor for a company, you should clear it with your employers to verify that remote work will continue to be available or if they have any objections to your working abroad. Some jobs were made remote during the pandemic, but companies fully intend to call workers back to the office as soon as possible. (This is happening now.)
If they want you to be a hybrid worker who occasionally reports to the office for meetings, this won’t work if the company is in Memphis, Tennessee, and you are working remotely in Bali.
In looking for a country, you might want to find one in a similar time zone to make communicating with company personnel or customers easier.
What Is The Advantage Of Your Working In Certain Countries?
Many countries of the world allow foreigners to work for companies not based within that country or to start their own businesses. Visa requirements vary, but remote workers can use tourist visas, certain types of work visas, or the new digital nomad visas to legally work remotely.
The cost to live abroad varies by location. If you want to live somewhere where you can amass extra income to pay off student loans or other debt or save money for a down payment at a home in the U.S., you can carefully compare the cost of living in specific countries.
When thinking about countries with a high standard of living but a low cost of living, you will find that certain cities within a country are better values than others. Big cities often have a high cost of living in comparison to places further from the city center.
For example, if you have $40,000 in student loans and can dedicate two years to living abroad in a lower-cost country, you might be able to take care of the principal based on this formula:
Debt/ # of months = Monthly payment or $40,000/ 24 = $1,667
To pay off this loan in two years, you would need a job that would provide you with a surplus of at least $1.667 per month. Even if you want to accumulate savings, you would apply this same formula, where you divide the amount you need by the number of months you were able to stay abroad.
Accumulating yearly savings of $600 to $6,000 is common, but those who work full-time and stay on budget can save a lot more which makes paying off a big debt possible.
Your income potential and your budgetary needs might point you to economical Columbia or Mexico rather than Iceland, where living costs are high. If your preference is to work in a warm, tropical area or one with four seasons and access to plenty of winter sports, you would consider this variable when finding the best location.
If you choose a location where you can only stay 6 to 12 months, you will have to anticipate your next destination or plan on returning home after your time away.
How Do You Become Arbitrager?
If you are considering geographic arbitrage, there are four main steps to making that happen.
- Verify you can work abroad with your employer. You will need a letter a verification have you positioned any income for the past 6 to 12 months from your employer
- Set your financial goals. Are you attempting to pay off student loans or other debt, buy a home, save for retirement, or some other purpose where you need need a large sum of money?
- Using the formula above, figure out how much extra money you need to meet your financial goal in a certain period of time, such as 24 months.
- Pick a country with a strong currency and a low cost of living that you like that will help you further your financial goals
Before applying for visas and buying airline tickets abroad, you should first talk to a financial advisor to discuss your financial plans and double-check your math. They can also discuss your tax liability for federal and state income tax, sales taxes, and foreign tax provisions and let you know about applicable tax credits.
Excellent Sources For Prospective Geoarbitragers
As you plan for an exciting time of working abroad, you will want to plug into Internet sources that can help you know what to expect about living in specific countries, hook you up with local digital nomad groups, and get a handle on the cost of living.
Here are a few places to check out.
- BecomeNomad.com covers all the bases about the cost of living abroad with a “Western salary” in a place with a low cost of living.
- Numbeo.com gives up-to-date breakdowns for the cost of living in specific areas. Whether you want to know the cost of housing, a loaf of bread, or a beer, Numbeo offers the 411. This crowd-sourced global database even discusses perceived crime rates and the quality of healthcare around the world.
- Project Untethered offers statistics on digital nomads, along with resources on housing in hotels, hostels, and Airbnb, along with plenty of other vital information.
- Also, check out our article Digital Nomad Communities Enhance The Remote Work Experience for information on Facebook groups, meetup websites, and coworking spaces that will acclimate you to living abroad, offer leads on housing, and help expats meet colleagues.
