05 May Geo Arbitrage – Save money while traveling
Geo Arbitrage: Definition
The term describes the gap between income in a high-wage country (i.e.Germany, USA, Australia) and the low cost of living in a low-wage country like Malaysia, for example. Having a similar standard of living, your monthly expenses in Malaysia are far less than those in Germany.
If you can put yourself into a position where you can permanently earn your income by high-wage country standards while living in a low-wage country, you will have quite some money left over at the end of the month. Money that you might have put into the high cost of housing can now be put aside into savings or you could afford a higher standard of living. That’s up to you.
Reasons for the current trend of Geo Arbitrage
There have been developments in the last ten years that have enabled at least some professions to work from anywhere:
Internet and mobile networks are almost globally available and affordable
Transportation and travel costs have come down, especially airfares.
Networks across borders have been developed at a rapid pace and continue to do so
Conditions for using Geo Arbitrage
You need meet certain requirements to be able to benefit from Geo Arbitrage for long-term travel:
Self-employment or employment that is independent of location
Projects that don’t require you to be on-location all the time
Discipline to be able to work even in a “vacation-like” environment, possibly a different time zone
Low or no fixed costs in your home country
But that’s not all. If you really want to use Geo Arbitrage in a way that allows you to save more money through traveling, you may need to consider giving up some comforts.
You need to define what is truly necessary and give up some “nice things”. Ideally you may also invest some time in trying to set up a passive income.
Much depends on your fixed cost
You will have fixed cost in your home country as well as in your host country. The three major ones are always housing, food and transportation. No matter where you are in the world.
In places like Asia it’s somewhat easy to live on a low budget.
However, in western countries like the USA or Australia it’s a different ballgame. Here you need to truly focus on what is necessary and you may even need to deprive yourself of certain luxuries in order to keep your costs at a level below that of Germany.
An alternative way to staying in a hotel is couch surfing. Though, that’s certainly not for everyone especially if you need a quiet place to work and earn your income.
I usually calculate 200 Euro per month for food and that’s mostly adequate. As for transportation, the rule usually is: The longer you stay the better a deal you are going to get.
I recommend this video by TED Talk Hamburg where Tomislav Perko discusses the cost of travel:
Working in Paradise
There are travelers who claim that you can work on the beach, in the sand at 35 degrees Celsius. I consider that a myth. Naturally, it sounds so much better than the truth: working at a beach in the heat for several hours is trying and exhausting if you truly want to accomplish something.
Personally, I need a decent desk in the shade and headphones in order to cancel out any distractions. A proper office would be great but is not always feasible.
In most cases it will probably look something like in this picture taken at KoHub in Thailand. These are the stations of so-called Digital Nomads working their regular jobs.
Independence and Self Employment
In my opinion this is certainly one of the biggest challenges. It only seems possible if you have already established contracts and references ahead of time. You should always be able to meet with clients at short notice.
Therefore, it is absolutely necessary to keep a fund for this if you want to keep your customers and earn long-term contracts.
Before taking off, I would invest my resources into the basics: Establishing a business with long-term and stable relationships where your customers know that you are reliable at any time, no matter where in the world you are.
Is taking advantage of different wage levels immoral?
On the contrary: You support the local economy where you spend your money. As long as you are not taking jobs from the locals, which usually isn’t the case, it seems alright.
However, you should consider that wealthy customers do affect local prices. This is certainly a sore subject, even in countries with a highly competitive economy like Thailand. Prices there are quite stable, rising slowly and so are local living standards. In fact, they are rising at an even higher pace.
From this angle, it only seems logical not to simply act as a vacationer but as a long-term traveler. This way you can quickly integrate into the local way of life and save money.
Geo Arbitrage is a great option for those who love to travel and who also like to work.
You must like your job and you need to be highly motivated. Additionally, there is a lot of organizing and preparing which is no small feat. Ideally you are respectful of other traditions and cultures and will be able to make some personal growth. It also poses the questions: For how long is such a life sustainable? Is it one year, three years or more? Do I want to explore foreign countries or am I simply looking for a milder climate? Am I a nomad or do I prefer salty air?
Depending on your preference the associated lifestyle can differ greatly.
What do you think about geographically independent working and Geo Arbitrage?
Im happy to read your answer in the comments