The path to living a free and fulfilling life is largely tied to our finances. Our financial levers generally fall into three categories:
(1) Earning more
(2) Spending less
(3) Investing wisely
For this Christmas and New Year’s, I will be working from Mexico. The internet has allowed more people than ever to work from anywhere in the world. For those dissatisfied with high cost of living cities like New York, L.A., and San Francisco, using geo arbitrage can boost your standard of living by 2, 3, or even 4 times.
Geographic arbitrage means taking advantage of price differences in various locations. You earn money in a stronger economy (like the U.S.) and spend it in a weaker economy (like Mexico or Colombia).
In fact, I know a diverse group of internet entrepreneurs who have settled in Shanghai. These folks sell their free-lancing services in the more lucrative U.S., while enjoying the lower cost of living in China.
That being said, I compiled a helpful graph that compares the cost of living across cities and what you can buy with USD abroad.
|New York||Chicago||Mexico City||Shanghai||Medellin||Sao Paulo||Budapest|
|Apples (1 Kg)||6.57||4.92||2.07||2.35||1.93||1.63||1.14|
|Apartment (1 Bed)||3,500.00||1,900.00||620.00||1,060.00||300.00||500.00||550.00|
Cities like Chicago, Denver, and Nashville are highly attractive places to live if you are making a salary appropriate for expensive coastal markets.
A lot of tech companies in particular are allowing some of their employees to work remotely. Even big banks are moving to the American Heartland. In 2014, Goldman Sachs moved over 1,800 compliance jobs to Salt Lake City and other less-expensive cities.
Income taxes in California are 13% for the highest tax bracket. State taxes in New York are 4%, and in Illinois 4.95%.
7 States (Alaska, Nevada, Washington, Wyoming, Texas, Florida, South Dakota) pay no income tax.
By moving to a state with lower or no state taxes, you can effectively save an additional 4% a year.
If you have been fortunate enough to buy your home in an expensive area, you can sell that property and redirect the proceeds a nicer home somewhere else.
As a hypothetical, let’s say you bought a home any time since the housing crash in 2008. The median home price in San Francisco is around $1.3MM. If you relocate to Chicago where the median downtown condo is $300K, you can generate $1MM in proceeds just by selling.
You may not get paid a San Francisco salary, but you will not have a $8,000 mortgage payment either. The 30-year difference in choosing to invest the surplus cash vs. paying a $8,000 mortgage is tens of millions of dollars.
Look at where you want to be in five years, and commit yourself getting there today! Want to learn a new language or earn a million dollars? We’re a community dedicated to help you getting there.
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