If you’ve ever dreamed of quitting your day job to travel the world, then you’re not alone. Many of us can only imagine having enough time and money to travel to our hearts’ delights, but rarely do we actually try to make it happen. There’s a reason why those stories about couples quitting their corporate jobs to live on sailboats or solo globetrotters living in different Airbnbs every week make the news. It doesn’t happen to most people!
So how do these people do it? Do they have millions of dollars stashed away in investment accounts and inheritance funds to financially support themselves while traveling? In many cases, these extraordinary travel tales involve a little-known concept called geo-arbitrage, which essentially means living in cheaper areas while making money on-the-go.
This can be as simple as living in the suburbs and working at a high-paying job in the city or as complicated as living in Thailand or Costa Rica while earning American dollars from an online job based in the U.S.
Contrary to popular belief, you don’t have to wait until retirement to begin traveling. If your current career allows for flexible and/or remote work locations and you have no problem finding Internet access while abroad, then here’s everything you need to know about geo-arbitrage before making this enormous lifestyle leap.
What is Geo-Arbitrage?
Perfect for Travel Lovers
If traveling is one of your favorite hobbies, then the typical two-week vacation offered by U.S. employers may not fully satisfy your travel bug each year. Rather than making the most of your vacation days, geo-arbitrage allows you to embrace a nomadic lifestyle by performing location-independent work and living in countries with significantly lower costs of living compared to the U.S.
For instance, if you’ve always wanted to go backpacking through Europe, you can fund your journey along the way with freelance work. Or, try home-sitting. Or, use your current job if you’re able to complete all your assignments from a laptop and phone.
Why wait until your 65 or older to see the world when you can start traveling more extensively with geo-arbitrage strategies? Sure, it’s not as simple as quitting your job and hoping to find flexible work elsewhere. You need an extensively-researched plan before taking the leap. However, if you’re more of a “work to live” type of person, then geo-arbitrage is perfect for making your travel dreams come true without having to wait until retirement.
Save Money with Geo-Arbitrage
Even if you’re not particularly driven to travel, geo-arbitrage offers additional advantages, such as massive cost-of-living savings. If you can telecommute to your job, then why would you live in an area with $2,000/month one-bedroom apartments when you can just as easily live somewhere with $700/month one-bedroom apartments or $1,500/month three-bedroom houses? The whole purpose of geo-arbitrage is to use your residential location to your advantage, whether you choose to move to a rural area or out of the U.S. entirely.
Many American ex-pats engage in geo-arbitrage by earning income from U.S.-based employers while living in countries with low costs of living, such as Vietnam, Mexico, Belize, or the Philippines. If you’re making $50,000 annually from a U.S.-based job, then you could quite easily find a beachfront home or large property in one of these countries and live in relative luxury compared to what you would be able to afford back home.
Even if you only plan to do this temporarily, you could save thousands of dollars by living in an area with a low cost of living for a few years, then return to the U.S. and purchase a home of your own with the money you saved up thanks to geo-arbitrage.
Can Geo-Arbitrage Help You Retire Sooner?
Maybe you’re not interested in traveling too much and spending all your extra income on nondiscretionary expenses like dining out, tours, and scuba diving. If you simply want to save money faster so you can achieve financial independence and retire early, then geo-arbitrage is an ideal strategy for accomplishing these goals.
If you maintain a modest lifestyle while living in an area with a significantly lower cost of living than what you had back home, you could save as much as 50% or more of your yearly income and put that money into investments after maxing out your retirement accounts.
Geo-arbitrage is perfect for anyone who isn’t too dependent on a single location and wants to retire as quickly as possible.
Is Geo-Arbitrage Right for You?
If you have children, pets, or other dependents, then geo-arbitrage might be difficult to achieve. If there’s no way you could possibly perform your job adequately from a computer and laptop, then geo-arbitrage also might not be for you.
However, if you aren’t determined to stay put where you currently live, you have relative freedom to work wherever and whenever you want, and you want to take drastic measures to save money and live better, then planning a long trip overseas could transform your lifestyle as you know it.