Geographic Arbitrage or Geo Arbitrage isn’t just a buzzword; it’s a financial strategy that has the potential to revolutionize your lifestyle.
Rooted in the age-old economic concept of arbitrage, this practice allows you to maximize your purchasing power by living in one location while earning income from another.
In this post, we’ll explain the basics of geographic arbitrage, and explore how it can be a cornerstone for your Unconventional Life.
What is Arbitrage?
Before diving into geographic arbitrage, it’s crucial to understand the concept of arbitrage itself. At its core, arbitrage involves leveraging price differences in different markets.
In traditional financial settings, this might mean buying an item at a lower price in one market and selling it at a higher price in another. The principle is to pocket the difference without much effort or risk.
Arbitrage is a common business model for resellers on Amazon. They source low cost items, either at local shops or from bulk purchases from manufactures in low cost countries like China, India, Vietnam, etc., and then resell them at a higher price on Amazon.
What is Geographic Arbitrage?
Geographic Arbitrage takes the principle of traditional arbitrage and applies it to the realm of personal finance and lifestyle. It’s the art of leveraging differences in cost of living between cities, states or countries to maximize your financial standing.
If you earn online income or you’re retired with a pension, you can leverage Geo Arbitrage by moving to a lower cost of living area in your home country or abroad.
The difference between what you earn and what you spend can be dramatic, leading to accelerated savings or an enhanced lifestyle.
Some people in the U.S. are choosing to leave high-cost states like New York and California for lower-cost states like Texas, Oklahoma, Idaho, and Nebraska.
However, there is still the issue of absurd healthcare costs, regardless of where you live in the United States. If this accounts for a large percentage or the majority of your monthly expenses, moving to another country with high quality healthcare for a fraction of the cost may be your best option.
Why It Matters
As compelling as the concept of geographic arbitrage may be, its true value lies in the tangible benefits it brings to your life.
From amplifying your financial security to enriching your day-to-day experiences, geographic arbitrage serves as more than just a financial hack; it’s a lifestyle enhancer.
Here are some of the key reasons why understanding and leveraging geographic arbitrage can be a game-changer in your quest for a higher quality, Unconventional Life.
- Financial Freedom: One of the primary benefits of geographic arbitrage is the potential for accelerated financial freedom. Your money can go further, allowing you to save more, invest more, and potentially reach financial independence sooner.
- Enhanced Lifestyle: Not only can you save money, but you can also afford a more luxurious or comfortable lifestyle than you could in a high-cost location.
- Flexibility: Geographic arbitrage offers the flexibility to travel, explore new cultures, and enrich your life experiences without the financial strain.
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How to Make It Work
The successful execution of geographic arbitrage requires careful planning and consideration. The concept may sound straightforward, but the practicalities can be complex, involving various factors from currency exchange rates to tax implications.
Here are some actionable steps to guide you through the process, enabling you to utilize geographic arbitrage as an effective strategy in your Unconventional Life journey.
- Research Locations: Understand the cost of living in different places and how they compare to your current or potential earnings.
- Understand Currency Values: Keep an eye on currency exchange rates as they can affect your purchasing power.
- Get Health Insurance Quotes: Health costs can vary significantly from country to country. Shop around for local or international health insurance quotes and consider factors like coverage limits, inclusions, and exclusions.
- Remote Work: Choose a job or type of work that allows you to earn online income.
- Test the Waters: Consider a short-term move initially to see if the lifestyle suits you.
- Optimize for Tax Efficiency: Consult a tax professional like Taxes For Expats to understand the tax implications of your chosen strategy (you might qualify for huge tax deductions if you’re a US citizen).
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Our Case Study
When we lived in Denver, CO before we moved abroad to Ecuador, we brought home about $5,500/month after taxes. The only problem was that our American lifestyle was costing us $6,000/month even after we downsized into a 1-bedroom apartment and sold one of our cars.
After moving to Ecuador in 2017, we rented a 3-bedroom / 3.5-bathroom house with a courtyard in a nice neighborhood in Cuenca for $800/month. ALL of our expenses, including rent, food, health insurance, etc. that first year totaled a whopping $1,500/month!
By taking advantage of geographic arbitrage, we immediately shaved $4,500/month off our expenses, which we used to pay off our mountain of debt and save for retirement.
- How We Paid Off $60K of Debt in 3 Years
- REAL Cost of Living in Ecuador
- Our Ecuador Healthcare Experience
Geographic Arbitrage isn’t just for the nomadic or adventurous; it’s a viable financial strategy for anyone looking to amplify their financial resources and enrich their life.
By harnessing the power of different economies, you unlock a world of possibilities, from travel and cultural immersion to accelerated financial independence.
If you’re committed to living an Unconventional Life, understanding and leveraging geographic arbitrage might be your secret weapon.
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Hola todos! Welcome to my author bio page! Let's see. Where to begin... I grew up in the country on a lake outside a small Kansas farm town. As soon as I could, I got the hell outta there! Since then, I've lived and/or worked in Kansas City, Washington D.C., Denver, San Francisco, and Ecuador. I started and sold a dotcom, wrote a book about it, started a YouTube channel, and now I write a lot. Amelia and I have embraced the Unconventional Life and we want to help you do it, too!