Geoarbitrage – Holy &#!% that’s cheap!

by Jason -- December 24, 2009

Geoarbitrage is a popular term used by the travel community, one that I was familiar with but never truly grasped until we arrived in China and now Vietnam. In this post, I give a little background on the term, the amazing way it’s been affecting us, and why it means that traveling may actually be a good way to save money!

After doing some research there seem to be multiple definitions for “geoarbitrage”. The term was popularized by Tim Ferriss, in his “4-Hour Workweek” book.

One definition is to leverage cheaper labor in other countries by outsourcing one’s personal and business tasks. This, in turn, frees up time to concentrate on only the highest value activities. Essentially this means hiring a virtual personal assistant to get rid of the mundane time-sucking tasks you don’t really want to do anyway. This post won’t be focused around this definition–unfortunately, I have yet to hire a personal assistant (other than my free Asian labor, Sharon).

My favorite definition and the focus of this post is this: earning an income in a country with a higher-standard of living and living in a country with a lower-standard of living. To use examples: earning your income in a country like the USA, Canada and Western Europe, but then actually living in South East Asia, or  South or Central America.

Not until I’d traveled through China and now Vietnam did I realize how amazing geoarbitrage really is. Vietnam is especially cheap. Nice hotels are $7-$15 a night. A particularly nice hotel on Cat Ba Island was only $8 a night. Good meals can be had for less than $2 USD. Souvenirs, clothing, electronic accessories, cab rides, fruit–all of these things are much cheaper here, it’s incredible.

What’s funny about how cheap things are is that it has started to mess with our heads. $200,000 Vietnamese Dong (~ $11 USD) for dinner for two is now REALLY expensive. If we walk into a restaurant and prices for a meal are in that range, the place needs to be really special. It’s rather amazing that for most restaurants, two good dishes, rice and a couple beers for $100,000 Vietnamese Dong (~$5.50) is average.

We are now firm believers in geoarbitrage. Imagine working for 40 years in the USA saving for retirement and then moving to Vietnam or Argentina. Your money would go 2x-5x further than it could in America. What would be a modest retirement in America could suddenly be a lavish retirement in Chile.

As a personal example, the past few weeks in Vietnam, Sharon and I have combined to spend around $50 per day. This includes all transportation, hotels, food and other purchases. Granted we’re not buying clothing, electronics or anything like that, but that’s $1,500 per month for two people. It’s difficult to find a decent place to rent in the Bay Area for that amount of money. Not only are we traveling the world, but we’re saving money while doing it.

So what does this mean for you?

Traveling isn’t as expensive as you may think. For us, it’s turning out to be FAR cheaper than we’ve budgeted. Surely, you can make travel expensive, by jetting all over the place. But the benefits of long-term travel mean you can stay in destinations longer reducing your transportation cost. You can take a bus or a train instead of an airplane (a better environmental choice anyhow).

Putting off a long-term vacation because you think it will cost too much? Our finding thus far is it’s just not true. Granted you may not be able to travel to Western Europe, but don’t worry, it’s not going anywhere. See Central and South America first, or India or South East Asia. Save money and travel. I’m starting to sound like an infomercial…

Photo from Vin60.


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16 Responses to “Geoarbitrage – Holy &#!% that’s cheap!”

  1. Very interesting post. I decided I will be retiring to another country. Hopefully within the next few months. Sharon, Happy birthday my friend. Brian and Nicole had there baby last sunday. Also, you’re site should be called “life after cubicles.” “life after cubes” sounds like a site for kids who think they no longer need geometry. I’m really bored. Kisses!!!!

  2. That’s really interesting how cheap it is and I’m glad you’re having a wonderful time. I will tell you this right now though and abosolutely sticking to it. If you fucking decide to move to another country (I consider what you’re doing now as traveling experience), I will 100% cut you off as my freakin brother. Mark my words. I love you :)

  3. How does one save money if you don’t have a job? There must be a Chinese proverb about it

  4. Could we ask Sarah to speak in more civil tones.

  5. Ben – I see no flaws in your early retirement plan. Thank you also for the site name recommendation…dick.

    Sarah – Your comment was hilarious. I think Sharon laughed for 10 minutes after reading it.

    Uncle Louis – Good question! The reason I feel like I’m saving money is, I’ve wanted to try to do something on my own for a while. And now I have ample time to do it and get to travel at the same time. We’ll see how it goes!

  6. Also, the biggest critical assumption is children, grandchildren and family. Unless they lived in the location you decided, you would rarely see them.

    How about just buying a house wherever you decide to stay TOO and go there during the summer months, maybe skipping a year or two return to the states?

  7. I really enjoyed your informacial. There are a lot of Chinese people moving back to China (sea-turtle, overseas-returnees, Hai Gui). The major concerns are health care and education. Health care, especially for elderly, could be inconvenient and expensive. For kids to receive decent education to compete in the global market, the cost could be similar to the bay area. I believe it’s always cheaper to live in most parts of the world on a bay area, high tech, income. Gotta make that money first …

  8. Burns – The beauty of Skype is you can see your children, grandchildren and family at any time. Granted it’s nowhere near the same as being in the same room, but it makes being so far away a lot easier. And I like your two home idea, hopefully I’ll be able to afford it one day!

    Vivian – Thanks! Haha…making money is certainly a challenge!

  9. Hi! Great post! Just a quick comment. I don’t know if you’ve been to Argentina or Chile lately but it’s definitely not as cheap as Vietnam or Thailand. Glad to see SEA looks as cheap as when I went in 2007 but I was in Argentina a few months ago and with 20-40% inflation per year, it ain’t that cheap anymore. A meal will be between 5-15$ and we rented a small studio for 300$ per week so it’s not like back in Tim Ferriss’ day. And I was told Chile was about a lot more expansive than Argentina. It was still a lot cheaper than where I live in Canada and I would definitely go back anytime, it’s an amazing place :) .

    Enjoy Vietnam!

  10. Thanks Alexandre! I did get a chance to go to Argentina a couple years ago and loved it! My first experience of seeing the dollar go much farther!

    But wow, that’s a crazy amount of inflation. It certainly doesn’t sound as cheap as it was even when I was there, $300 a week for an apartment is similar to the US.

  11. [...] But I re-read it two years ago and it truly clicked with me. He might not have invented the idea of geo-arbitrage or lifestyle design, but the combination of many different concepts inspired me to rethink the [...]

  12. [...] I will be taking these courses from Riga Latvia, as I can take advantage of a little geoarbritraging, where I am currently living as I travel around the [...]

  13. [...] But I re-read it two years ago and it truly clicked with me. He might not have invented the idea of geo-arbitrage or lifestyle design, but the combination of many different concepts inspired me to rethink the [...]

  14. [...] actually very extreme: people that quit their jobs, establish 10 sources of passive income, and use geo-arbitraging (living in countries where things are really, really cheap, like Vietnam or Thailand) to save [...]

  15. Great post! I will definitely look into this idea. Could answer a couple of questions about Vietnam and any other countries you have been to?

    1) Is it easy and inexpensive to send/receive mail and packages there?

    2) What are the options for internet service like?

  16. Thanks Avery!
    1) While it’s been about 3 years since I’ve been to Vietnam — yes, it was fairly inexpensive and send and receive packages there.
    2) I’m sorry, I’m not familiar with the options for Internet service.

    Thanks again!

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