The idea behind geographic arbitrage is that you can earn money in a strong currency (such as US dollars) and then spend money in a weaker currency (like Thai Baht). With remote working on the rise, it’s now easier than ever to take your work abroad. You could be earning a decent salary in a Western country – but in a much cheaper country, such as Thailand, which offers you so much more spending power. Instead of dealing with ridiculously high renting or house ownership prices in cities like San Francisco or London, you could spend a fraction of that for an equally nice place in Chiang Mai or Ho Chi Minh City.
The Rationale Behind Geographic Arbitrage
Let’s say you’re working in London, and your role or skillset is such that you could easily do your job remote full time, part time or as a freelancer. For the sake of the discussion, you could be earning £30,000 a year as a fairly experienced professional. You may still, nonetheless, be struggling to get on the property ladder. So, in order to save money for a deposit on a house – or just because the cost of living in London is so high – you end up flat sharing.
Living in a studio apartment in the city centre is out of the question, since that is going to eat up most of your salary. Indeed, London is the most expensive city to rent in Europe. In Chiang Mai, on the other hand, you could live a comfortable life as an expat for around £550 a month (according to Nomad List). This includes having your own apartment in the city centre. So you would be living on less than what you would be spending on rent alone in London.
The incredible money-saving benefits of geographic arbitrage can help you save for a deposit, an early retirement, a long travelling stint or a Master’s degree. Plus, you get to enjoy the privilege of living in a new country, one that may offer better weather and food, a more appealing lifestyle, and a higher standard of living. Being immersed in a new country and culture can be beneficial in a variety of ways; you can amass countless, unforgettable experiences, learn a new language, broaden your horizons, and expand your professional network.
The Downsides to Geographic Arbitrage
It may seem blindingly obvious that, if you can, moving to a cheaper country to work is the best thing you could for your wallet. Financial stress and anxiety could be a thing of the past. However, while moving to a far-flung destination like Hong Kong could indeed be an exciting, positive, and life-changing experience, moving to a new country also entails some challenges that can’t be ignored. Many expats may feel expected to live up to people’s expectations that their new life abroad is leagues better than life back in their home country. Yet, a move abroad can be a risk factor for mental health issues – such as depression and anxiety – through the many stresses involved, the loneliness, and the fact that you are now without your taken-for-granted support system.
On paper, working remotely in Thailand undoubtedly sounds ideal, like a guaranteed path to unshakeable joy and happiness. But don’t let hype and fantasy colour your judgement. Be honest about whether saving money and living abroad matters more to you – and will ultimately be better for your well-being – than being in a familiar culture, close to friends and family.
Of course, sometimes you can only find out the correct answer by testing the waters. As an experiment in an alternative way of living, you could try living in a new country for a short, fixed amount of time – then you may decide to stay longer or conclude that the remote working or expat life is not for you. Furthermore, geographic arbitrage is not restricted to exotic countries. You could move to a country closer to home or simply to a more affordable city in your own country. An optimal situation exists. As always, though, the right path is highly individual and takes time to discover.