Does Geographic Arbitrage Make the American Dream Irrelevant?

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Photo by Kevin Lanceplaine on Unsplash

“The American dream is a sham. Because I had the house, the cars, the kids. I did all of that, but even achieving those things, it still seemed like it wasn’t enough,”

Adalia Aborisade, a 48-years-old former teacher from Texas

I recently watched a CNBC video called “Why Americans Are Relocating to Mexico for a Better Life” and it really resonated with me.

The story that jumped out at me the most is of Adalia, a 48-year-old former teacher from Texas, who made a life-changing decision to move to Mexico City back in 2017. Even though she took a pay cut, going down from $60,000/year as a teacher to $38,000/year as an entrepreneur, giving up a 3,623-square-foot house in Texas with a $2,612 monthly mortgage made her much happier.

Also, despite not having a 6-figure job, she managed to save $545,000 USD over the 19 years she worked as a teacher, which would generate $21,800/year by the 4% rule. Given that the average salary in Mexico City is only $20,000 USD/year, this is easily enough for her to live on. Her $38,000 USD/year business income gives her lots of wiggle room, even though it’s a 37% pay cut from her job.

While everyone else is complaining about inflation and the cost-of-living crisis, Adalia improved her quality of life despite giving herself a major pay cut!

And the benefits of geographic arbitrage, isn’t just financial. Adalia says her quality of life in Mexico is much better than the US because her anxiety has gone down. Despite Mexico’s high crime rate, she feels less stressed about racism and dying from gun violence from a routine traffic stop. Plus, she no longer worries about medical bankruptcy, since she pays $1800/year for Mexico health insurance, far less than what she paid in the US.

She says: “the amount of peace and ease that I have in this life — I would not trade that for the world.”

“The thing in my life that has changed the most is how I think about work and how I think about leisure. Things are just a lot more laid-back than in the U.S.”

And she’s not the only one. Keith Brown, another teacher featured in the video, even gave up his 6-figure paycheck in NYC to move to Mexico. After the murder of George Floyd, he said, as a Black man, he didn’t want to live in “a country that is so steeped in negativity and racism.” His dream is “to be treated like everyone else, to be treated fairly, equally, and to have peace”. Mexico City is where he’s been able to achieve that, and now he has time for himself.

It’s not just visible minorities who no longer believe in the American dream. Families no longer do as well—like this family who moved to Portugal from the US to give their kids access to a safer education, without the constant worry about school shootings.

They lived in Austin Texas and decided to move to Portugal with their teenage daughter and son in 2021 after both experienced anxiety from constant active shooter drills at their school. Despite the adjustments from having to learn a whole new language and culture, their lives have become less fearful, more relaxed, and their kids say they would only return to the US if things improved.

All these expats have learned that they can improve their quality of life while beating inflation by using the power of geographic arbitrage. To see how it reduces your time to FI, let’s look at an example.

Let’s say you live and work in NYC. The average gross salary in NY, according to CNBC, is $78,000 USD/year. The average cost of living in NY for an individual, according to Numbeo is $1,639.7 USD/month (cost outside of rent) + $4,081.75 USD/month (1 bedroom in city center) = $5721.45 USD /month or $68,657.40/year.

This means that after taxes, you would only make $56,339/year, which wouldn’t be enough so you’d never become FI.  

However, if you were to work remotely and live in Mexico City, the cost would drop dramatically to $746.5 USD/month (cost outside of rent) + $997.14 USD/month (1 bedroom in city center) = $1743.64 USD/month or $20,923.68 USD/year.

This would allow you to save $56,339 – $20,923.68 = $35,415.32/year and your FI number would be $20,923.68 * 25 = $523,092, which means you would reach FI in:

YearBalanceContributionsROI (6%)Total

11 years!

So, by moving to Mexico and working remotely, you’ve gone from never being able to retire to retiring in just 11 years!

That’s how powerful Geographic arbitrage is. An average person making an average salary can pull off FI in about a decade, without needing a high-paying engineering job, or cutting your expenses to the bone. By moving, the FI dream becomes a reality.

We’ve realized the power of Geographic Arbitrage years ago and have been touting its benefits ever since, but not everyone’s job is as portable as ours. All that’s changed in the past few years.

As horrible as the pandemic was, the one silver lining that came out of it is the normalization of remote work. Back in 2015, when we left our jobs to travel the world, digital nomadism was unpopular, and it was legally in a gray area. Most digital nomads simply travelled around on tourist visas, and there were stories of co-working spaces being occasionally raided by the police. Now, countries have realized that digital nomads don’t steal jobs from locals, and are willing to spend money and pay taxes, so there are now more than 25 countries that have created some form of long-term stay visa for remote workers, including Mexico. Plus, remote jobs are popping up more and more as work increasingly moves online.

Case in point, Wanderer was contacted recently by a recruiter for a data analyst job, despite not working for the past 10 years and having a resume gap as wide as the Grand Canyon. Remote jobs are out there and more attainable than ever.

This makes me more confident that even if you haven’t reach full FI, you can use that FU money you’ve accumulated to switch jobs, work remotely, and use geo-arbitrage to not only have a more relaxed life but a safer one. That way, even if the remote job goes away or your business income fluctuates, your FU money portfolio will provide enough income to live abroad comfortably.

As Adalia says, “It’s not about accumulating wealth. It’s about having control over my time.”

What do you think? Would you be willing use geo-arbitrage and remote work to have more control over your time? What would be your biggest fears? What would be the top 3 things holding you back?

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30 thoughts on “Does Geographic Arbitrage Make the American Dream Irrelevant?”

  1. last year i moved back to UK .. my original home … . i am retired and its way way cheaper than the ultimate Canadian city ; Victoria BC …

    all of the SETTLED countries are now so over priced ; NZ AUS etc …

    so many expats are moving back ..

    the healthcare , the travel , the amazing supermarkets … yes .. the best in the world . … the ease of language ; English

    1. As a Vancouverite with British heritage and a strong love for the UK, what area do you find much lower cost please? Any towns/cities is helpful please.

      1. Hi Tracy. Cost of living in the UK is broadly about distance from London. So the South of England is pretty expensive while the North gets cheap.

        A friend of mine is currently house-shopping in Louth, a small town in Lincolnshire. Not much employment and bright lights there but for the retiree it’s fine.

        Other ideas: Whitehaven (Cumbria), Guisborough (N Yorkshire), Wrexham (N Wales), most of Scotland outside of Edinburgh and most of Northern England in general.

      2. hi i moved to cheshire . wirral .. much cheaper in the north and friendlier .. i have free medications and free transit in entire region ( for over 60 ). food is best i have ever seen in supermarkets and so cheap . and cheap holidays .
        we go to Tunisia next week for peanuts .
        our big 3 bed house with big garden was 225K uk pounds .

  2. This is exactly what I did a few years back. I realized that I would spend a lot less money, and have a healthier lifestyle, if I moved to Mexico. Then, I test-drove Asia, and loved it too — all while putting more money away than I ever could have in Canada. I’m now 18 months from FIRE, and will never move back.

  3. We’re six years out from a paid-off home in a walkable bit of the US, at which point we’ll be 50M/48F and just about ready to FIRE. Our neighborhood is a ridiculously great place for us to live but we’re deeply interested in only spending shoulder seasons here, maybe leveraging Home Exchange to chase temperate winters in Mexico and summers in Europe.

    If we were starting over, without the benefit of buying a house we love in 2010? Merida is LOVELY (at least in January). Both of our jobs are stable and fully remote. The only thing keeping us in the US would be our nephews.

    1. Hey Adam,

      I’m wondering why even have the house at all? Sounds like you don’t want to live in your area even half the year. Pretty sure you could sell the house and be FI today. Then you could do your plan and come back to visit family whenever you wanted.

      Granted, you probably bought at a good price with decent interest rates and that likely factors into your equation. Also, years of being a homeowner leads many to not being able to consider being anything else. That and homeowners tend to get lazy with accumulating way too much which leads to anxiety when having to think about what to do with all that stuff.

      All that considered I’m still not convinced that your setup is the right thing for your desired lifestyle with your work skillset. Something to ponder…

  4. I’d love to see you guys dive deeper into this topic – specifically about some of the ethics of geo-arbitage and your experience of it in conjunction with any available data about how workers paid in more valuable currency affect local economies and cultures. I think there’s a knee-jerk reaction that can either be favorable or unfavorable depending on how you look at it and a more nuanced take from someone who’s done it and has experience with analyzing data to sift through initial biases would be a lot of fun to read.

  5. Geo arbit sounds good on paper.

    But the majority of people would like to stay in an area where their friends and family live so they can help each other out when needed.

    When a family member gets sick, for example, dropping everything and flying back half way around the world isn’t exactly a convenient thing to do.

  6. Life is so hectic and stressful in the U.S. It’s a good place to make money, but the quality of life isn’t that great. If you can work remotely, geo arbitrage is the way to go. IMO.
    Life is easier and less stressful in many other places.

    1. Life can stressful or not. Your choice. It’s not the geographical location that causes that. It’s the mindset.

      The lady who went to Mexico cut her ties with her old life in the US and decided to create a new perspective. She could have easily done the same where she was. She made a conscious choice. I applaud her for that while at the same time point out that many people in the US (and elsewhere) feel stress free as well making less than she did there.

      We travel nomadically (staying in one location between 1-2 months at a time). It opens up your eyes. What I’ve realized from it all is that is that there are issues everywhere you go. It’s up to you how you want to manage them.

      Also, with so many people travelling nomadically now, the cost of things in most places that were considered inexpensive previously, are not anymore. Thinking you’re going to get something for (next to) nothing is unrealistic. And if you really are getting it for (next to) nothing, you’ve got to wonder what else is involved that made that possible. In many cases, it’s dark and nasty and I don’t wish to support that via my wallet anymore now that I’ve seen it.

      Someone discussed the ethics of geo-arbitrage above in the comments. That is an on point topic that needs further detailing. Funny how it hasn’t been discussed on this blog. It’s been raised many times in the comments section but never by the blog hosts. Geo-arbitrage isn’t about first world saviours saving the rest of the world. It’s about exploiting the weak for personal gain and advantage. You know, like colonial times and slavery.

      Being nomadic has been an eye-opening experience and after this current month, we’ve made the conscious decision to no longer travel in a manner that exploits the disadvantaged (we were naive and now, we are no longer and can’t continue to ignore). Even though many of these people and non first world areas will be exploited unscrupulously by others, we won’t be part of that anymore.

      1. I’ll add that, I watched the video. It was good to see that unlike most sensationalized videos about digital nomads and geo-arbitrage, it felt much more balanced. The topic of gentrification was raised. Of locals being pushed out for economic reasons. Of other issues pertinent to exploitation by dominant non-local cultures.

        I appreciate that an effort was made to show things that are normally glossed over.

      2. I’m just wondering if you believe that living in Canada or the states there are no exploited workers.
        When you buy products made in those same countries or when you frequent your local anything these days which is reliant on poorly treated temp workers, “students” now numbering over 2.5 million who are also exploited in Canada.
        The global economy runs on cheap, poorly treated labour regardless of where you live.

        just one small example:

  7. The “American Dream” is not much different than the “Canadian” or other developed country “dream”. It’s a very personal dream. And, the money made in a developed country makes leaving for a less developed country (usually) possible. I think your title is odd and incorrect. And, as you well know, many people can’t leave or can’t retire because of lack of skills/knowledge/entrepreneurial skill. Does that make the “American Dream” useless to them? What is your definition of “American Dream”? What you accomplished??

  8. I’m as much of a *hot dog-eating Yankee Doodle Dandy as the next guy (2nd generation US Army, etc.). Having said that, I doubt seriously that I’ll move back to The Homeland from Taiwan any time soon (or not so soon). I speak much better Spanish than I do Mandarin Chinese (retired Texas Licensed Court Interpreter, etc.), but I do fine over here via weekly 1-on-1 lessons with 2 excellent teachers. Mexico would probably be my #2 choice of residences, should Taiwan become untenable for some unforseen reason, with Italy being # 3 (Italian mom, Italian language, possibility of dual citizenship, etc.). So there you have it! The US? For visits, reunions, or maybe to wave at my bank as I say goodbye on my way back to Taiwan on the airport. Life is good here, both economically and in so many other ways. I do relate to those Americans in the video.
    *Coincidentally, I just ate a hot dog at an undisclosed location where I’m doing some work on my laptop, sort of like those Americans at the internet cafe in the video! 🙂

  9. As I read this I’m literally at the airport on my way to Thailand to see how cheaply I can stay there whilst still being comfortable enough and having fun! I did the same thing in Spain and Portugal last year, I found that, whilst I couldn’t get by as cheaply as you two do, because I’m fussier and don’t have as much budget travel experience, I could get by more cheaply than anticipated – so much so that if I can spend only half as much in Thailand as I did in Spain and Portugal, I should be able to retire in about a year (though being brave enough to take the plunge is another story!)

  10. I have thought long and hard about this, not only because of financial benefits, but because I live in a land-locked city and I LOVE the sea.
    The thing is that in the end, personal relationships are central to my happiness. Here, I have a tight network of friends/chosen-family that I have known for decades in some cases. We got each other’s backs, and I want to keep doing life with them.
    I’m also part of a wider community that shares my values, and I participate in it as an event organizer, something that would be very difficult to do if I wasn’t based here for most of the year.
    So I scratch the sea itch by traveling and working remotely for 2-3 months a year, and I do house-hacking to keep costs low. Luckily, I live in an European country so healthcare is not a factor.
    But yeah, sometimes I still fantasize about renting my house in the city and move to a little seaside town in a sunny place… If only I could convince “my people” to all move with me!

  11. “ After the murder of George Floyd”

    Floyd was a junkie who OD’d. Because of political considerations, some cops were railroaded. That is all.

  12. The idea of G.A. is so appealing to me, however I have yet to hear of anywhere in the world that is a great fit for those that struggle with a severe anxiety disorder and/or Autism.

    While I imagine general mental health would improve with so many of the factors raised in the article, and though medical care and cost is similar or better in many regards to Canada, I don’t hear of Mental Health and ASD being given the same consideration for support, care and medication availability by foreign governments and those in charge of health.

    Happy to be corrected though so if anyone is aware, please chime in. This is what would hold us back.

  13. If you can’t make it in America, you move to a cheaper country.

    Lots of people can’t afford homes anymore because they don’t earn or save enough.

    Pretty sad to rent for life or have to move overseas.

    If you bought a house in Vancouver 10 years ago, you’d have made so much money. Oh well.

  14. Heya! So geo-arbitrage. I love the concept and once I have a sufficiently big portfolio, it’s definitely my plan. Just wondering: what are the tax implications of changing the country you live in? From what I know, if you live longer than 183 days in another country you become tax resident of that country. So how are your dividends as well as capital gains taxed? I know they are sourced in a different country (for you Canada, in the above example USA, for me Australia)? Thoughts?
    Love following your blood and journey. Enjoy the newborn! Seb

    1. Apologies in advance for this long comment, but it’s taxes…so you know how that goes.

      Moving to another country for even a short period can completely alter your tax situation, so this is a great question to be asking.

      A useful resource is EY’s worldwide tax guide. I’ll share a link to the 2023 version. Note that crucial tax laws change all the time (for instance, the UK’s incredibly helpful/favorable tax treatment for people living there but not originally from there just got torpedoed in the latest budget proposal — so all the parts in the EY document about different tax treatment for “non-domiciled” UK residents will soon *no longer apply*).


      Below, some of the things I’ve learned (many arise from research on European countries, but don’t assume that a less-expensive country doesn’t have some of this stuff!)

      —tax laws change frequently, so what you plan for now, may not continue in the future
      —it doesn’t take long to become a “tax resident” in many countries (mere months, in some cases, if not immediately, depending on how you get in the door)
      —the structure of many country’s tax and inheritance laws assume “traditional” lifestyles: married, heterosexual, with kids.
      —localities within a country may vary a *lot* for taxes (such as in Switzerland)
      —supranational entities can impose tax laws (the EU is seeing increasing talk about a wealth tax to help fund the energy transition)
      —the level of wealth that’s subject to some type of tax may be much lower than you expect
      —taxes on global income and global wealth could mean you’d need a somewhat larger portfolio (due to higher tax expense; but with luck, your new country allows for a less pricey lifestyle, which could offset the tax uptick)
      —tax-sheltered accounts (such as IRAs in the US) may not be recognized in your adopted country, so could be considered part of your taxable global income and/or assets
      —if you fail to declare an asset, you could face serious consequences. And countries increasingly share info about investment accounts and bank accounts, for instance.
      —taxes have different names in different places, which makes researching things difficult. You might think a country has no wealth tax, say, only to discover it functionally does have one, but it’s called something else.
      —inheritance and/or estate taxes may create unexpected issues for you, your heirs, and anyone you inherit with.
      —rules for inheritances are less flexible in many countries than in the US (where I live); you can’t always leave your money to the people you choose (even if they are relatives; just depends on who you had in mind and the rules for inheritance in your adopted country), and heirs may be taxed differently depending on their relationship to the deceased.

      I’ve been eyeing moving to Europe or the UK, and while I feel fine about paying into a system that includes excellent social services, I won’t be able to fully benefit from that system (such that drains on my portfolio won’t be offset by state pension benefits, for instance). So my portfolio size may need a re-think, depending on where I end up.

      Also, my relatives won’t be moving with me (alas!). They’ll still be in the US. This matters to me because a) they need as much of my cash as they can get if I get hit by a bus, so I don’t want a ton shaved off by my adopted country, and b) if my parent dies before I do (I never assume this!), it will create enormous problems for my siblings if I’m living someplace that will tax that inheritance heavily (we’d probably need to sell inherited real estate so I could pay my tax bill — what a fun convo to have!). So I’m re-thinking some of my destination ideas accordingly.

      I’m grateful to be in the position of having assets to protect, but it’s also amusing to me that I’m eyeing tax law with such interest and concern. Not my usual approach to picking my next adventure location.

      I hope my recent research into tax differences can help others! More developed countries tend to have a higher tax burden, but there are variations even there. And for some people, it may still be worth it. The biggest difficulty is how complex it is, and how prone to change!

  15. I think the big obstacle is friends & family. The driving factor for our current location is elderly parents, and at the point where that is no longer a consideration I think it’ll be tempting.

    As others have suggested, it’d be great to see an article on the geo-arbing options in more detail – places which are cheap, their costs, their visa situation.

  16. This is great for people earning in dollars for sure. I live in Guadalajara and is so expensive to live. And unfortunately because of people moving and buying houses here from the US. For people like me, that is earning in pesos mexicanos, its not nice at all. Healthcare is damn expensive, a house is out of reach, food is becoming more and more expensive, etc. If you think Mexico is cheap think twice especially big cities.

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