The Geographical Arbitrage Game
What is Geographical Arbitrage?
In a nutshell, moving to a more affordable country and spending less than you would in your home country is geographical arbitrage. It allows you to increase your quality of life while spending the same amount of money.
The Problem
The idea of saving 25x of your expenses and quitting your job is very liberating when you first hear about it. But, when you have a low paying job that you hate and the days just seem to go on forever, it’s normal to ask much longer can you handle this? You start doing the math on the minimum amount of time you have to work. When you see that you have years to go it’s hard not to feel discouraged.
If this is you, I know how you feel. Let me try and help out just a little bit. One mental trick I personally like to use to help me stay motivated during this journey is thinking about possibly retiring to another country. Apart from the cheaper lifestyle, it would give you the opportunity to see the world and experience new cultures, foods, people, language ect…
The Game
As everyone knows, the cost of living changes based on the county you live in. As of this writing, on the extreme low end, you have Pakistan costing on average $332/month to pay living expenses. On the other extreme end of the scale you have Monaco costing on average a whopping $5621/month! Ouch!
What I like to do is create a simple google spreadsheet having all the countries from most expensive to least expensive arranged in a table. Then on the right side of this table I place the safe withdrawal rates from 4% down to 0.5%. I then highlight in green the places I could hypothetically see myself trying to retire in, if I absolutely needed to. I’m not necessarily saying I would want to retire to some of these places, but it could be an option of last resort. Lastly in blue I highlight all the values up to my current net worth. In the image below my net worth is $173,000, so all the values less than this are highlighted in blue.
Doing this is almost like unlocking levels in a game. I feel like I’ve unlocked the ability to live in countries such as Pakistan, India, Turkey, Ukraine, Paraguay and Indonesia. All of these countries I think would be interesting to visit and perhaps even live. The more my net worth increases the more countries I unlock. So instead of turning the slow increase of net worth as a tedious and boring exercise, now I can have a little bit of fun along the way.
Conclusion
Hopefully you have found my little geographical arbitrage game somewhat useful. By opening yourself up to the possibility that you could live abroad opens doors and gives you options. The last thing that you want is for all your options being in the hands of someone else. I feel playing this game gives you back some of that control, at least mentally. The road to FI is hard and long, but stick with it and the results will start to.
