Affordability versus Quality of Life: Strike the right balance as an expat

If I had a dollar for every time Vancouver got rated as one of the top 5 livable cities in some world ranking, I’d probably be able to buy a family home with a yard in the city. I’m joking, even that won’t be enough! Don’t get me wrong, Vancouver is the most beautiful city I have ever lived in and I’m never leaving. But that doesn’t change the fact that I have to keep working hard and smart to truly extract the quality of life this expensive paradise has to offer. That too is only possible because I’m lucky enough to work in the tech industry.

These Livability Rankings only tell you half the story. They tell you how great a city or country is to live in but obscure the fact that you have to pay an arm and a leg to truly enjoy what that country has to offer. And vice versa, a lower average quality of life ranking for a country obscures the fact that higher affordability could still unlock a great life for you and your family in that country relative to your current circumstances. In this story, I will provide you the tool to make an informed decision on where to live and why.

Thanks to Numbeo, there is relevant data available for 80+ countries to make an informed choice. So, I used multiple indexes from Numbeo to come up with an easy to understand visual — Quality of Life Index, Cost of Living Index and Local Purchasing Power Index. I divided the Local Purchasing Power Index by the Cost of Living Index to arrive at an Affordability Index and then created a Scatter Plot of countries with Quality of Life Index on the Y-axis and Affordability Index on the X-axis. While higher is better for both of these indexes, one needs to maintain a balance between the two. You can hover over the dots on this plot to look at country names and their respective values for both indexes.

Least Desirable: If you are looking to settle in one of the countries in the bottom left quadrant (lower affordability and lower quality of life), make sure to thoroughly investigate your income projections in that country and set realistic expectations on the quality of life to expect, as life can be more challenging depending on where you are coming from. In addition, ensure that you aren’t taking a big hit on both quality of life and affordability. I often read articles about Canadians who moved to Mexico to improve life affordability and are indeed living a good life there, despite this visual showing that they may have degraded their quality of life. Happiness is subjective, so what worked for them may not work for you (or the other way around). Therefore, go with eyes wide open about the trade-offs you will need to make.

Some Highly Affordable Growth Spots: Most of the developing world is in the bottom right quadrant (higher affordability and lower quality of life). In these countries, your earnings can go a long way in giving you a comfortable lifestyle. I have lived in India for 30+ years and I wasn’t surprised to see India, and Malaysia, on the far right of this chart — very high affordability coupled with not that bad quality of life (see that they are close enough to the top right quadrant). This means that you can use your earnings to create a better quality of life for yourself even if the average quality of life for the population may not be stellar. Another interesting observation is that fabled European tourist destinations like France and Italy offer the same quality of life as India and Malaysia but are much less affordable. While historically, people from India have emigrated to Europe, North America and Oceania, these observations present the case for the reverse movement of people to destinations like India & Malaysia, provided they have some savings and have secured employment to ensure they can create their little bubble of a high quality life in these countries.

Expensive Paradise: The top left quadrant is where most people want to be but probably shouldn’t be. Or should be only when certain financial conditions are met. These are the countries which are on the top of most livability rankings, creating high expectations for early career professionals and leaving them prone to disillusionment when the reality of affordability crushes these expectations. Portugal is all the rage these days amongst expats thanks to its pristine shoreline, perception of cheap real estate and favorable immigration policies. But low affordability makes sure that only the rich can truly enjoy the sunshine in fancy villas. However, the good thing is that for every egregiously unaffordable small country like Portugal or Iceland, there is also a somewhat unaffordable large country like USA and Canada. Remember that I’ve presented country level average data above, so within large countries there are cities like San Francisco and New York with extreme unaffordability as well as cities like Atlanta and Austin with acceptable affordability driven especially by relatively low housing costs. Therefore, when considering an international move to a country close to the inner edge of a quadrant, choosing the right city is critical. You can review city level indexes as well for about 200 cities around the world on Numbeo to decide for yourself. Going a level deeper here will help you become sharper with your decision. Here’s a snapshot of the top cities across US, Canada and India. An analysis like this illuminates insights that Bangalore or Hyderabad can offer you a similar average quality of life as Miami or Chicago at a fraction of the cost and that Pune beats Vancouver hands down in terms of affordability while offering the same average quality of life. The key word here is “average”, as it leaves room for expats to decide which quality of life factors matter more to them. For example, if you compare Vancouver and Pune head-to-head (see comparison on Numbeo), the choice would come down to the financial feasibility of a comfortable life in Vancouver and the high pollution in Pune. Depending on individual circumstances and preferences, a case can be made for either option.

Crème de la crème: While I was expecting to see European countries like Austria, Germany, Netherlands and Luxembourg in the top right quadrant, I want to draw your attention towards countries that I was pleasantly surprised to see closest to the top right corner of this visual. Middle East features quite prominently here namely Oman, Qatar and UAE. I’ve always known that these nations are rich but thought of them as closed societies which may be great for locals but not so much for expats, with the exception of UAE. With UAE leading the way to welcome more tourists and expats, these countries have opened up in the last two decades and are building infrastructure for societies of the future. I expect that as more expats take the leap of faith and move to these countries, cultural homogenization will follow, attracting even more expats, thereby worsening affordability. Therefore, investing in these countries now could be beneficial. So, if you are up for a bit of adventure now for the sake of your future generations, it might be beneficial to put down roots in one of these countries.

Conclusion

If you are lucky enough to have an option to move between the countries mentioned on this visual, think about the trade-off you will likely need to make between affordability and quality of life. Once you are clear on the trade-off, then look at city level data to shortlist your city options and then bring in other persona factors to actually make a decision. While there are some no-brainers jumping out of this data, there are multiple close decisions as well. Let me share a personal example of my family’s move from Bangalore to Vancouver in 2021. If I go just by this data, it is clear that a move from Bangalore to Vancouver resulted in a small improvement in quality of life by 8% (158 to 172) but our affordability dropped by a whopping 83% (9.97 to 1.66). Since the quality of life metric was driven down heavily due to the high cost of housing in this city, the decision to make such a move just seems so wrong (and it is for a lot of people). In Bangalore, we would have enjoyed much better affordability and would have been able to make up for the loss in quality of life (essentially pollution and high traffic) with the additional savings. We chose to experiment with a different lifestyle in Vancouver because we could move with our high paying jobs intact. There was no big disruption in our income or degradation in our career growth. We didn’t spend a penny to move. If things don’t work out for some reason, we wouldn’t have to spend a penny to move back to India either. That’s why we felt comfortable enough to take the leap of faith, and I’m so glad that we did. I talk to many early career professionals in India (less than 25 years old) who have well paying jobs in India but want to move to Canada and start fresh in hopes of a better life. My general advice to them is to sort out their finances before moving so that they have enough funds to truly enjoy what Canada has to offer, else the stress of low affordability would just erode the satisfaction derived from improvements in quality of life. Most of my close friends have chosen to stay in India (especially in Bangalore) and are leading fantastic lives they are content with. There is no single approach that serves everyone well. So, please use this data when considering your international moves and apply your judgement on top of it to decide what is right for you.

Data Source: Huge kudos and thank you to the Numbeo team for publishing the Cost of Living Index and the Quality of Life Index! This analysis is possible only because of their hard work in collecting this valuable data. If you have requirements to present deeper analyses on this topic, please leave a comment.

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