Doubling the Buying Power of My Money Overseas

Because my wife, Suzan Haskins, and I have been living and working abroad for 15 years, we’re sometimes interviewed by other writers and reporters about being expats. I spoke with a reporter from Canada a few days ago, and I was reminded of one of the most powerful economic principles of expat life.

The interviewer asked if living abroad really did make a difference to my finances and my taxes each year. I told him that being an expat didn’t affect my taxes much because all U.S. citizens are required to file tax returns each year no matter where in the world they live or work.

But, I told him, living abroad has everything to do with the rest of my finances, because no matter how much money an expat has, living in the right place can double it.

This startled him. He asked if there was a banking or investment scheme for expats he hadn’t heard about that automatically doubled their money without any work on their part.

“It’s not a banking or investment scheme,” I said, “but it is kind of like arbitrage.” (Arbitrage is defined as the purchase of currencies, securities, or commodities in one market for immediate resale in others in order to profit from unequal prices.)

“The difference is that I’m not actually buying currencies for immediate resale someplace else,” I said. “I’m not smart or daring enough to try that. I’m simply spending my own earnings and savings from back home in a place where the cost of living is half what it was where I lived in the U.S. It instantly doubles the buying power of my money.”

My reporter friend asked for an example, so I told him about my monthly expenses in Ecuador. Where Suzan and I live in the Andes Mountains, the climate is as perfect as anyplace I’ve ever seen…so perfect, in fact, that we don’t need heating or air conditioning. Ever. Back in the States, our utility bills for heating and cooling averaged several hundred dollars per month.

Take that right off the top of the monthly budget.

We also gave up our car…don’t need it any more. Public transportation is plentiful and inexpensive in our village. Take the cost of a car, including fuel, insurance, maintenance, and everything else off the top of the monthly budget as well.

Property taxes…back home, we often felt as if we were keeping our Nebraska county afloat all by ourselves to the tune of thousands of dollars a year. In Ecuador, where we own our condo outright, our property taxes each year are about the same as the cost of a dinner for two with a bottle of good wine in a fine restaurant. I’m not kidding.

Just taking these three items out of our monthly budget…monstrous utilities, the constant burden and expense of owning a vehicle, and exorbitant property taxes…and this has the effect of nearly cutting our monthly budget in half compared to where we lived in the U.S.

Which, I explained to my reporter friend, has the effect of making the money I do spend on my monthly expenses go twice as far compared to back home.

I’ve essentially doubled my money just by spending it in the right place. No tricky investment schemes or banking acrobatics. Just a great quality of life at half the cost.

I’m able to follow the old rule about doubling my money by literally folding the cash I save on monthly expenses and putting it right back in my pocket.

I call it “lifestyle arbitrage”, but really it’s just finding a place to live on the planet that gives you the best value for your existing resources.

We didn’t move abroad just to save money, though. We moved for the great year-round weather and to never shovel snow again, to explore exotic news locations and cultures, and to have the adventure of a lifetime.

All that has worked out great.

Doubling our money by using “lifestyle arbitrage” just sweetens the deal.

©iStock.com/AlexKalina

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