We’ve all read articles telling us that random Mexican beach towns are cheaper than living in New York. Or that you can enjoy a low-cost lifestyle in Thailand. But these articles barely scratch the surface. That’s why I’m sharing three essential economic factors to consider before moving overseas.
These issues can make or break you if you’re not careful.
Read on if you want to make sure that your new home is worth living in long-term.
1. Currency Exchange Rates (This Is Huge)
Currency differences are what give you a buying advantage abroad. They’re one of the driving economic factors behind geoarbitrage. However, what goes up must come down. And currency fluctuations swing both ways.
When Rubles or Dong strengthen, your buying power decreases.
Recent example: Thai Baht. For many years the exchange rate hovered around one US Dollar to 33 Baht. A 330 Baht lunch would cost you about $10. Now, one US Dollar equals 28 Baht. So that same 330 Baht lunch is roughly $12. Not a big deal, until you realize this applies to everything from groceries to housing.
The best way to hedge against currency swings is to invest in the local economy. Open a local bank account, buy a house, invest in the national stock market, etc… When cost of living goes up, you make money.
2. Local Taxes (The Biggest Economic Factor To Consider)
(Tax-Free Breakfast)
In certain countries you will never pay one penny in taxes. A one dollar coffee in Vietnam costs exactly one dollar. It’s great! Other countries set their taxes so high it bleeds you dry.
This summer I did some travel and ended up visiting a city where I ended up paying 22% in taxes. That’s absurd, especially once you consider that one-fifth of your money is going to the local government, drastically reducing your buying power.
Always check the tax rate before moving abroad. It’s one of those sneaky economic factors which can absolutely destroy you if you aren’t careful.
3. Utilities (It’s Not What You Think)
(A One-Way Bus Ticket Saves $45 Over Hiring A Private Car)
Some countries have terrible utilities. What’s worse? They overcharge for these subpar services. Latin America is pretty bad for this, I am not a fan of how Internet is handled in The Philippines. Having a power outage or spending the week without WiFi might not sound like a big deal. Unless you depend on it.
If you work online or have a remote job, this can have a huge impact on your earnings potential. Especially if it starts cutting into your deadlines or causes you to miss meetings.
On top of this, some places have awful public infrastructure that limits your options greatly. I’ve visited a few Central American countries where you wouldn’t dare ride the bus or take a train because of pickpockets and crime. This means you’re spending a lot more on taxis or private cars (if you’re traveling long-distance). In contrast, you can take a safe bus ride from Ho Chi Minh City to Vung Tau for $4.50. Or you can ride the subway in Bangkok for $3.00.
That’s way better than paying $100 for a private car to drive you to the next town.
Always remember that some places are cheap for locals (think Haiti or parts of Africa) but expensive for outsiders.
Final Thoughts
(A Good Location Will Look Like Home, Without Costing Huge Amounts Of Cash)
It’s fun to base a country around its cheap beer or coffee prices. And you can always run cost of living calculations on various websites. But, this broad data ignores some serious economic factors worth considering. If you’re going overseas you really want to look at how to protect yourself from currency swings, high tax rates, and expensive or ineffective utilities.
Doing so saves you money in the long-run and ensures that you move to a fun new environment that you actually enjoy.