Geoarbitrage is the practice of taking advantage of lower costs of living in different parts of the country or even the world. By spending less, you can make your money go further, whether you are looking to change your lifestyle or just meet financial goals. Individuals may choose to live in a location with a lower cost of living while earning an income from a higher-cost location. It’s a great way to live the life you want while saving and growing your wealth.
Arbitrage is a financial term that means taking advantage of different prices for the same assets in different markets. For example, say a piece of souvenir costs £5 in Manchester and £20 in London. This would create an arbitrage opportunity where someone could buy the souvenir in Manchester and sell it in London for a tidy profit. Geoarbitrage extends this idea to the costs of living. For example, at the time of writing, the average rent on a one-bedroom apartment in Manchester is around £1,169 per month. In London, you could get the same apartment for just over £2,200. Simply by moving from one city to the other, you can cut your rent in half, effectively increasing your monthly spare income by more than £1,000.
We can take that idea further. In Chiang Mai, Thailand, a two-bedroom apartment will cost just over £300 per month. Half of that will pay for the same space in Vientiane, Laos. In Athens, Greece, you can rent a fully furnished one-bedroom apartment for less than £600 per month, and a house in Oaxaca, Mexico can cost approximately £400 to lease. These examples illustrate a broader point; by being willing to move around the country and the world, you can dramatically change your financial options. Costs of housing, food, insurance, medicine, and all other day-to-day factors of life can change radically depending on where you live and which currency you spend in. Choosing lower-cost places to live lets you keep more of your income and savings, putting substantially more of that money back in your pocket.
The ultimate goal of geoarbitrage is to achieve the same or better quality of life that you currently have while spending less. By spending less you can make your money go further. If relocating to a different country or city sounds too disruptive, why not explore different areas within your current city? This way, there will be minimal disruption and maximum cost-saving benefits. You won't have to take a salary hit either. You will be surprised how much money you can save by moving just a few short miles away.
Is geoarbitrage for you?
About Nike
Oyenike Adetoye (aka Nike) is an impactful speaker, author, and personal finance expert. A Chartered Management Accountant by profession. Nike is the founder and CEO of LifTED Finance, a private financial firm that educates, coaches and supports people on their journey through financial fitness and wealth management.