What is Geoarbitrage? It is possible to keep the same level of income while moving to a place with a lower cost of living. In a relatively short period of time, this strategy can be used to improve one’s financial situation.
Income could be from self-employment, retirement income, or a traditional job transfer. You can plan for your financial future if you understand the various sources of income. It is easier to stretch your income if you low the cost of living. This can lead to a better quality of life.
Geoarbitrage can bring financial freedom and independence sooner. You can save money by moving to a place with a lower cost of living. It is possible to gain financial freedom and have more control over your future.
Quality of life can be increased by more time for the people and things you love. It is possible to find greater satisfaction in life if you have more balance between work and play.
You don’t have to relocate permanently. Before making a long-term commitment, you can always take a short-term stay to test the waters. If you want to increase your savings rate, you need to move somewhere for a few years. By taking the time to research the cost of living in different places, you can find a place that will provide the greatest potential for financial growth.
The compounding of those extra savings will bring you more freedom later in life. Even small contributions can make a difference and it’s never too late to start saving.
Nomad List has put together a geoarbitrage calculator to highlight how early you can retire if you move to another place. You may be surprised by the numbers. This is a sign that the results may be unexpected.
Types of Geoarbitrage
A common strategy is to move from the United States to an international destination. The goal is to find a place where you can live a better life while spending less money.
Moving from the US to an International Desitnation
The lower cost of living and affordable health care options in other countries make living abroad an attractive financial choice for anyone with independence.
One couple (Nic and Court at Modern FImily) moved from Florida to Canada to start a family and retire in their thirties. Canada has family-friendly policies regarding extended parental leave, health insurance, college, and even child tax credits, which can be a big boost to young families looking to work less. Canadian families can use these policies to ensure the financial security of their loved ones.
Moving from US State to State
You can shave years off your career if you move from state to state. Incentives such as tax credits or deductions are offered by some states.
Florida has no state income taxes because they derive their tax base from the tourism economy. A lot of money can be freed up by moving across state lines. You can save money on taxes and living expenses if you move to another state.
Geoarbitrage can be as simple as moving a few miles down the road to lower your property taxes, moving to another country to lower your expenses, or even traveling forever to live outside of inflation.
If you are currently living in the city, relocating to the county can save you thousands of dollars a year. Living in the county can provide a more peaceful atmosphere than living in the city. Lower monthly rent would be realized if you are not a homeowner. If you choose a place that is within your means, renting can be a great way to save money.
We met in graduate school. We were both shocked by the high cost of living in the San Francisco Bay area. We had to make some changes to our budget, but we were determined to make it work.
Pros & Cons List
When applying for our first full-time professional jobs, we made a list of pros and cons of California compared to Florida. The warm weather and plentiful job opportunities in California made it the better choice for our first professional jobs.
We started our careers in Orlando because we wanted to start a family, own a home, and have larger paychecks due to no state income taxes. For the past five years, we’ve been living in Florida and have enjoyed it.
Paid Off Debt & Maxed Out Retirement Contributions
We lived in Florida for eight years. We will always remember it as an amazing experience. We paid off all of our debts during this time. We were able to save a significant amount of money each month, which allowed us to make smart investments and build our net worth.
We invested extra for our future and maxed out our retirement contributions each year. By planning ahead and living within our means, we were able to ensure that our retirement savings were growing steadily over time.
Started a Freelance Engineering Business
I began working from home full time when I started my own online engineering business. I was able to expand my team and hire more engineers as my business grew.
Quit the 9-5 and Launched a Remote Consulting Business
My husband was able to leave his full-time job and become a stay-at- home dad because of our financial freedom.
Geoarbitrage Helped us to Gain Financial Freedom
We gained more financial freedom by moving to Florida. Saving money on taxes and living expenses is increasing our financial freedom.
We were able to take more risks in our careers because of financial freedom. We looked into our next move once we weren’t tied to Florida for jobs. In a new place, we decided to explore the possibilities of life.
We researched small mountain towns with access to nature and great schools for our daughter because we wanted to leave the big city and the heat. The perfect fit for our family’s needs was found in a charming, rural mountain town.
Our first trip was to North Carolina. We enjoyed visiting the local attractions and taking in the mountain views. We took a long weekend to explore the natural surroundings as well as the neighborhoods and schools. We stopped at some of the local attractions to learn more about the area’s history and culture.
We learned that Saluda was too small for us. We decided to look for a new home. We felt like the town was too remote for our growing family because of the need to get on an interstate highway to grocery shop. We moved to a larger city that had easy access to all the amenities we needed.
We turned to the west coast to find our runner-up. The balance of city amenities and outdoor activities was offered by the small city of Ashland.
We went to the national park in the summer. We were able to take in the amazing views of the lake and its surroundings. The air was clear, and we had no idea of the wildfire smoke that would affect our lives over the next two years. We didn’t know that our lives would be changed so quickly.
After visiting southern Oregon three different times, we decided to move there.
After living in Oregon for two years, the cost of living caught up with us. We moved back to our home state to save money. We wanted more downtime because running two small businesses and raising a kid in a high cost of living area was exhausting. We decided to downsize our lifestyle and move to a more rural area where we could enjoy a slower pace of life.
The high state income taxes, high housing costs, property taxes, regulatory barriers for business owners, and increased travel costs were impacting our quality of life.
Tax optimization was a top priority for business owners. We worked closely with the accountant to take advantage of all the tax deductions. The biggest bang for our buck was moving back to a state without income taxes.
We looked at Alaska, Washington, Nevada, Wyoming, South Dakota, Texas, Florida, New Hampshire, and Tennessee. Each state has unique advantages and disadvantages that we need to consider when making our final decision.
Our criteria for our next hometown included the following:
- Close proximity to a public university (for our daughter to attend while living at home)
- Lower housing prices than southern Oregon
- Skiing within an hour’s drive
- Safe neighborhood (i.e. I felt comfortable going into Walmart alone after dark)
- No estate taxes
Washington, South Dakota, Texas, Florida, and New Hampshire could be removed from the list. We would have five states that meet our criteria.
We went to Alaska, Nevada, Tennessee, and Wyoming in the spring of 2019. It was great to visit all the unique attractions in each state. We now live in Wyoming, which was the last place on our list to visit. We love living in this state and can’t imagine living anywhere else.
Things to Consider when Comparing Locations
It is important to carefully examine what is important to you when deciding where to live. Long-term implications of your decision include the cost of living, job opportunities and the local community. Some questions will get you started. What topics do you like the most?
- What types of educational opportunities might your children seek? There are educational opportunities for children such as online courses, tutoring programs, and private school options.
- What are you looking for in a natural environment? Do you want to hit the ski slopes, learn how to surf, or enjoy the outdoors?
- What is your entertainment style? It’s important to make sure you have fun, no matter what your entertainment style is. Is it more important to be in a city with mainstream concerts or free family activities? There is something for everyone in this city, no matter what activity you’re looking for.
- How often would you like to visit your extended family? I would like to learn more about how you maintain your relationship with them.
- Do you need to be close to a major airport if you travel frequently? Having easy access to a major airport can make a huge difference in your overall travel experience, so if you’re a frequent traveler, it’s worth considering whether proximity to an airport is important for you.
- Do you want to do more in your new location? I’m excited to explore the city and find new things to do that I haven’t done before. What do you want to eliminate from your daily life in a new place? I’m looking forward to the chance to start fresh in a new location.
- What kind of environment are you looking for? I’m looking for a city that has something for everyone.
More hiking and outdoor recreation opportunities were what we wanted for our family. The national park had the perfect balance of things to do for all ages. It was necessary for us to be a direct flight from our family. The airline had to give us reasonable prices for our tickets. The two-hour drive to the Denver airport was a good compromise. The cost of tickets was too high so we decided not to fly.
Cost of Living Index
You can compare the cost of living index to the US Household when you are building your budget for your new hometown. It’s important to remember that the cost of living index is an average, so your individual expenses may be higher or lower than the index suggests.
You can get an estimate of yourFI Number with these calculations. It is important to remember that these calculations are just estimates and should not be used as a definitive guide to retirement planning. To support your cost of living, you need to invest a certain amount.
The size of your nest egg can grow or shrink depending on where you live. It is important to be aware of the cost of living before moving, as this can affect how quickly you can save and build your nest egg.
Taxes are the largest expense for many workers and business owners. Proper tax planning can help to maximize the return on investment. You can shave years off your career if you move to a state without income taxes. As a result of the tax savings, you may find yourself with more money in your pocket each month.
As of 2020, the states without income tax include:
- South Dakota
- New Hampshire
There are a number of tax strategies in place in 2020. Before making any major decisions regarding your finances, be sure to do thorough research and consult with a professional tax advisor.
For example, did you know that Portugal offers ten years without taxes through their “Golden Visa” program?
Additionally, for US expats living and working abroad, the Foreign Earned Income Exclusion (FEIE) allows you to exclude up to $100,000 of earned income from US taxation.
This was the spark that initially led me to research moving abroad for our location-independent working years, and I recommend it to readers who are more adventurous than us. Those with no school-aged children. There are many other ways for people without children to stay involved in the educational process.
You can use healthcare.gov to find prices in your hometown based on your income level.
Health sharing ministries are a popular option in the location-independent community due to the fact that these plans are low-cost and flexible with providers across state lines. Studies show that health sharing ministries can provide coverage for up to 90% of medical expenses, making them an attractive option for people looking for a cost-effective healthcare solution.
Programs that exclude coverage for pre-existing conditions will not be a viable option for everyone.
If you’re still a W-2 employee (i.e. You may be able to keep your employer’s health insurance plan. If you continue to work with the same employer, you can telecommuting. When you move to a different state, you should check with your benefits provider to see if there are any coverage issues.
World Nomads offers travel insurance if you want to move outside of the United States. It’s the perfect choice for your international adventure because World Nomads provides coverage for medical emergencies, trip cancellation, and more. Coverage for overseas medical and other services is included in travel insurance. Emergency evacuation and repatriation expenses are covered.
Since housing is one of the highest expenses in a household budget, it is usually the first thing I research when looking at new hometowns. I find out the types of housing available, average costs, and any incentives that might be available to make the transition easier.
It’s easy to research housing prices on sites like Apartment Finder. It’s much easier to find the perfect home for your budget.
You can use these resources to find your ideal housing situation. Subletting or house-sharing are other cost-saving measures you may want to look into.
The next expense category to be tackled is transportation. It is possible to save a lot of money by changing your transportation habits. When you’re looking at a new hometown, ask yourself the following questions:
- Will you need a car there? I don’t need a car because public transportation is easy to get to. Is it possible to move to a neighborhood with a lot of walking? It is possible to explore ways to reduce your transportation costs, such as taking public transportation or purchasing a more fuel efficient vehicle.
- Is it necessary to connect at a major airport to visit family or travel for business? When budgeting your trip, it’s important to consider the cost of flights and other transportation.
- Is public transportation effective?
- Is it possible to have bicycle infrastructure? Many cities are investing in bicycle infrastructure to make it easier for cyclists to ride.
- Are there toll roads? If you add $100/month for tolls, you can quickly lose your savings. When budgeting for a move, it’s important to consider this expense.
If you design your lifestyle in your hometown to minimize the use of automobile transportation, you can realize even more savings. You can reduce your ecological footprint by using public transportation.
There is a benefit to families sending their children to college. Reducing the cost of college tuition can help families save money, as it often allows them to take advantage of lower cost education options in other areas.
You could save a lot of money by researching in-state scholarships. Grants and other forms of aid are available to help students pay for college.
For a student with a similar academic record, the in-state scholarship program in Wyoming provides more financial assistance than Oregon or Florida. It’s especially attractive for in-state students who don’t have enough money to go to college.
If you are moving to a new hometown with an in-state university, consider moving close enough to campus that your children can live and eat at home. It’s a good idea to research affordable housing options that are close to the campus before making any decisions. The room and board savings add up quickly.
The Importance of Visiting a New Location
It is important to visit your new hometown before moving. It is so important to experience a place in person before you make a decision. It is possible to make the transition to your new home much easier by having a better understanding of the area.
Tennessee was visited during our exploring phase. Tennessee’s mountains and rolling hills were awe inspiring. The roads were so flooded that parts of the city were not accessible after a record storm. Many of the residents had to leave their homes. You would not know that kind of information if you went to Zillow. It’s a good idea to talk to a local real estate agent about the area.
We fell in love with a small town in Tennessee that was perfect on paper. We decided to go there to see if the town lived up to our expectations. We discovered that the town was centered around a chemical plant when we visited as a family.
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If we hadn’t visited, we wouldn’t know about the environmental concerns. In order to protect our planet for future generations, we need to raise awareness about environmental issues.
Before Your Visit
There are a lot of things to consider before visiting your hometown.
Travel rewards can be used for airfare and hotels. Travel rewards can be used for rental cars, cruises, and other travel expenses. You may be able to cover most of the cost of your trips with travel rewards if you plan your visits months in advance. It’s important to plan in advance so you have enough points to cover your entire trip.
Business trips and exploratory trips can be combined. If you need continuing education for your profession, try to find a place that you are interested in living in. We went to an engineering conference in Alaska for this reason. The conference gave us the chance to learn more about engineering technology.
Take road trips during school breaks. You can make the most of your road trips if you plan ahead. Nine of the ten days of unexcused absences were used forgeoarbitrage trips.
You can get a feel for events, culture, and weather by following the places on social media. Locals can give you advice on the best things to do in the area. I learned how locals dress in the cold. Even in the cold, fashion still comes through.
Research environmental concerns. You don’t want to move to a new place and not be able to drink the tap water later, so reading online water quality reports is important.
A gas that builds up in the basement was one of the issues that came up in our research. If not addressed, Radon can cause serious long-term effects. In the buying offer for our new house, we included $1,300 for a radon mitigation system, which was new to us.
Make a list of things you want to see and note the hours of operation. You will make the most of your time when you plan ahead. You do not want to plan a trip and find out the main attraction is closed. If there are any renovations that might affect your plans, be sure to research ahead of time.
During Your Visit
Consider staying in an Airbnb inside a local resident’s house. The upstairs host was a teacher in our current school district. The teacher was very kind and helpful, always offering to answer any questions we had about the area.
She was able to pick out the ins and outs of the local public school system. She gave us valuable insight into the best schools in the area. You can’t get that kind of knowledge in a hotel. The inside scoop on where the locals eat, shop and play can be found in a vacation rental.
Go to everyday places if you take time to live like a local. We went to the library, gym, movie theater, grocery store, and Walmart in each town on our list. We were able to experience authentic flavors from around the world by sampling the local cuisine at restaurants in each town.
It is a good idea to schedule a visit to your child’s potential school. Before making a decision, it’s important to take the time to assess the school environment firsthand and ask questions of faculty and staff. This factor can look completely different online than it does in real life. Real life interactions can be more meaningful and enduring than online ones.
Take pictures of homes that interest you. Ask the real estate agent any questions you have about the property. You should note the names and phone numbers of the people who are listing the homes you want to visit. Before you leave, be sure to ask any questions you have about the property.
After Your Visit
Take some time to go back through your notes after you return home. You may be able to find some details that you missed. The areas you visited and the honest pros and cons of each place can be listed in a spreadsheet. It will help you remember the details of each experience and make your decision-making process easier.
Plan to visit again in the off-season if your places weren’t ruled out with the first visit. You will be able to make an informed decision if you get a better idea of the true character of each destination. In areas with extreme weather like Florida in the summer or mountain towns in the winter, this is important. It’s important to have an emergency plan in place during times of extreme weather.
If we had only visited in the summer, we might not have been able to exclude it from our list. The differences between the two cities were highlighted by the cold weather.
It is time to make a decision after you have done your homework. Before making a decision, take the time to consider all possibilities. The cost savings between your current town and your new hometown can be calculated. How much money will you save each month? You will be able to reach your financial goals more quickly if you save money each month. Every year?
If you use the 4% rule, how much will you reduce your retirement nest egg?
We were able to lower our retirement number by $250,000 by moving from Oregon to Wyoming. With the extra money we have saved, we are able to enjoy a comfortable retirement.
We shave years off our careers to spend more time with our loved ones. It feels good to have the freedom to make decisions about our finances and priorities.
Where will you go? Getting ready to see the world in a whole new way is an exciting way to live a life of freedom, adventure, and exploration.