What is Geographic Arbitrage & 7 Interesting Ideas to Get Started

Feb 7, 2019 · 6 min read
Sloww Geographic Arbitrage
Sloww Geographic Arbitrage

I may be a little late to the game on this one, but it seems like everyone in the FIRE community (Financial Independence Retire Early) has posted about the concept of “geographic arbitrage.”

Before we get into what geographic arbitrage is, let’s quickly cover what it’s not — turns out that it’s not equivalent to “strategic relocation.”

Strategic relocation is a concept that appears to have been popularized by Joel Skousen’s book Strategic Relocation: North American Guide to Safe Places. Strategic relocation is primarily concerned with relocation for security — the safest places to live considering natural disasters, potential terrorism, social unrest, economic collapse, modern threats, and more:

When you relocate or retire your prime concern should be long-term security, not recreation. Sometimes you can have both. This book is designed to help you relocate around serious threats and to develop contingency plans when you can’t relocate due to work or family ties.

Anyway, I digress. A topic for another day! Back to why you’re really here…

What is Geographic Arbitrage (or Geoarbitrage)?

I like how simply this kicks things off:

Let’s start with the obvious: Costs aren’t the same everywhere. — Get Rich Slowly¹

After reading a number of posts on geographic arbitrage, here are my favorite definitions (bold added for emphasis):

  • “The basic definition of geoarbitrage is taking advantage of the difference in costs between two geographic locations, while having the same kind of lifestyle.” — Birds of a FIRE²
  • “Geographic arbitrage is essentially earning in a strong currency and spending in a weaker currency. It’s taking advantage of a cheaper location’s low cost structure, all while still earning as if you live in a more expensive location.” — Mr. Free at 3³³
  • “Geographic arbitrage means taking advantage of the differences in prices between various locations. You earn money in a stronger economy (San Francisco, maybe, or the U.S. in general) and spend it in a weaker economy (South Dakota or Ecuador, for instance).” — Get Rich Slowly4
  • “The idea behind geographic arbitrage is that you earn money in a strong currency (like the US Dollar) and then spend money in a weaker currency (like the Thai Baht). For those of us who can work from anywhere (or who have investments and/or side businesses that earn money regardless of where we are), moving somewhere with a weaker currency could drastically reduce the time it takes you to achieve financial independence.” — Mad Fientist5

The “Wow Factor” of Geographic Arbitrage

These are the geoarbitrage quotes that made me raise my eyebrows and want to investigate more. You may have a similar reaction:

  • “Traveling the World is Cheaper Than Living in the US” — Birds of a FIRE²
  • “How We Used Geographic Arbitrage to Retire 9 Years Ahead of Schedule” — Retire by 456
  • “I’ve found that it’s almost impossible to reduce your living expenses as much as you can by living overseas. Leaving the U.S. and choosing to live abroad (assuming you live in the right place) is the single biggest thing you can do to reduce the amount of money you spend. Period.” — Get Rich Slowly¹
  • “If you want quality of life and low prices, think differently. We didn’t plan on leaving the US for ever, but we are so spoiled now (and continue to grow our nest egg as we roam) that it would be hard to move back there now. It’s never been easier to live abroad and tech makes it so easy to stay in touch with business, family and friends ANY where.” — Soul Travelers ³¹
  • “Said another way, you could double or triple the value of every dollar you have in terms of what those dollars can now buy you when everything (from rent to food to healthcare) costs substantially less…That supercharges the value of your money without actually increasing the amount of your money.” — Mr. Free at 3³³

7 Interesting Ideas for Geographic Arbitrage

1) Geoarbitrage doesn’t always require an international move (or even a far domestic move):

The shortest geographic arbitrage real-life example I found was posted on Retire by 456 — the author moved just 10 miles from San Francisco to Oakland and saved $80,000 per year. Incredible! Think about ways you can save money on housing in your current local area (housing is the #1 expense for most Americans).

2) Geographic arbitrage can be paired with other money-saving strategies to maximum its impact:

For instance, you could try combining geoarbitrage + downsizing + downshifting + voluntary simplicity + slow living. The possibilities are endless.

3) Consider remote work options and locations for geoarbitrage:

Check out Nomad List: “The best places in the world to live, work and play. Every second, it collects 1,000,000+ data points on 1,000+ cities around the world, from cost of living, temperature to safety. With that data, Nomad List gives you an idea of where it’s best for you to live, work and travel.”

You can go even further by doing this:

Taking it to the extreme is having a business that deals with HCOL (high cost of living) clients while living in extremely LCOL (low cost of living) international cities. — Birds of a FIRE²

4) Domestic geographic arbitrage opportunities may be in your backyard (or across state lines):

It’s amazing to see the money hacks people have come up with depending on their physical location. For instance, you could have a lower cost of living and no state income tax by living in Washington instead of California. And, across the state line in Portland, OR there’s no sales tax. Win win.

5) Internationally, there are many amazing places to practice geoarbitrage in this wonderful world:

Check out The Earth Awaits: “It’s the world’s most flexible cost of living calculator. We track tons of information for over 600 cities around the world. Tell us about you, your family, and the life you lead, and we’ll show you something like this (except with budgets built to suit your specific situation)…You can create custom lifestyles, share cities with friends and family, and much, much more! We want to help people travel the world, live better, retire early, and have amazing adventures.”

It sounds like Southeast Asia has been a popular choice for a long time. I’ve read some recent stories that say cost savings aren’t what they used to be one to two decades ago, but you’ll still find plenty of people who now call Thailand home.

Another is Portugal:

After living in Germany for 5 years, I know I wanted to live in Portugal. I currently earn about $1,700 per month, and I live off of $600. That is enough for me to have a reasonably good life, as I do not refrain myself from anything. To generate $1,700 with a 4% annual withdrawal rate, you need just a little bit over $500,000. Mind blowing, right? That means that you ‘only’ need half a million bucks to retire if you are willing to cross the ocean and get to live in the sunniest country in Europe. It seems like a tough decision, right? That was the decision I had to take a few years ago when I decided to retire early. Today, I can see a number of advantages of having chosen Portugal. — Early Retirement Now7

6) A couple strategic tips before picking up and moving across the planet:

A big move will require plenty of research. Some recommend changing your residence to a state with no income tax before moving internationally.

Others recommend studying up on the Foreign Earned Income Exclusion (FEIE) which may allow you to exclude over $100,000 in income earned in a foreign country from income reported on your U.S. federal income tax return. Side note: That’s more income than you need for emotional well-being.

7) Remember that it doesn’t always have to come down to money:

Money is just a tool. Don’t forget to live:

I did not come to save money, I came for the adventure. The increased standard of living along with lower prices is just a happy side effect. — Blog comment¹


  1. https://www.getrichslowly.org/geographic-arbitrage-save-money-by-leaving-the-country/
  2. https://www.birdsofafire.com/geoarbitrage-20s-geographic-arbitrage/
  3. https://www.mrfreeat33.com/is-geographic-arbitrage-the-answer-to-your-early-retirement-dreams/
  4. https://www.getrichslowly.org/geographic-arbitrage/
  5. https://www.madfientist.com/early-retirement-preview/
  6. https://www.retireby45.com/how-we-used-geographic-arbitrage-to-retire-9-years-ahead-of-schedule/
  7. https://earlyretirementnow.com/2017/10/16/guest-post-geographic-arbitrage/

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