If your job isn’t tied to a location, you have the unique opportunity to choose where you want to live. You could pick up and move across the country, or grab your passport and head abroad to join the tribe of globe-trotting digital nomads.
While this lifestyle has a lot of obvious benefits — the freedom to explore the world, for instance — it also has a perk that isn’t so obvious: Moving to a new city or country could save you tons of money.
If you choose a destination where the cost of living is low, you could spend significantly less while experiencing the same quality of life you normally enjoy — or even improving it. Wherever you’re thinking of going, here are five ways moving could be a major boost to your personal finances.
1. You could seriously lower your cost of living
Cost of living varies drastically from one city to another. San Francisco and NYC, for instance, have some of the highest rent prices in the country, with a one-bedroom apartment going for a median of $2,478 and $2,104 per month, respectively, according to ApartmentList.
But head north to Portland, Oregon or south to Austin, Texas and you could reduce that rent to $1,136 or $1,151 per month — $1,000 less! You don’t have to go to the middle of nowhere to save a big chunk of change on rent, groceries, or other consumer items.
And if you go international, you could head to an awesome city like Chiang Mai, Thailand, where you can get an hour-long Thai massage for $6 and the world’s best curry for $3. According to Numbeo, you could rent a one-bedroom in the city center for less than $350 per month. In NYC, by contrast, rent prices are 769.63% higher.
If you’d prefer to go to Europe, you could choose a city like Budapest or Berlin over Paris or London to save money. All these places offer high quality of life without the high prices of some of their urban counterparts.
As a result, you can save more, work less, and still have money left to spare in your bank account.
2. You could take advantage of “geo-arbitrage”
Geo-arbitrage is an idea Tim Ferriss popularized in The 4-Hour Workweek. Basically, you take advantage of the differential in the cost of living between two places.
If you’re used to NYC or San Francisco prices, for instance, you could move to Panama or Thailand where your dollar will go far. This could be useful for retirees looking to stretch their savings, or for younger professionals who choose to take “mini-retirements” throughout their careers.
It’s especially effective if you’re a digital nomad earning money in a strong currency, like the U.S. dollar. If you’re working for a remote company and making $60,000 or $70,000 per year, just think how much further that would go in Southeast Asia than it would in New York.
Although picking up and moving to Thailand might seem irresponsible to some people, it could actually be the most financially savvy thing you could do.
3. You might reduce your tax bill
Another way moving could save you money is through reducing your tax bill. If you’re working for a foreign company, you might have little to no taxable U.S. income, so your income tax bill could be close to zero.
You could also move to a state with no income tax to save a few thousand each year. There are seven states in the U.S. that don’t charge income tax:
- South Dakota
Plus, Tennessee and New Hampshire don’t tax wages.
If you’re out of the country long-term but working for a U.S. employer, you could consider establishing residency in one of these tax-free states before you leave. That way, you’ll be able to keep even more of your salary as you wander the globe.
4. You could crush your student loans or other debt
With all the money you’re saving in your less expensive location, you could accelerate repayment of debt. Even if your student loans are on a 10-year term, for instance, you can pay them off ahead of schedule without penalty.
If you’re making money for a foreign employer, you might alternatively put your loans on income-driven repayment. Without a U.S. salary, your adjusted student loan bill might get reduced to $0. If you stay out of the country long enough, your balance could eventually be forgiven.
Of course, if you return to the U.S., you’ll be facing even more interest. So instead of stretching out repayment, it could be a better idea to take the extra money in your budget and throw it at your student loans (or other type of debt) to move closer to financial independence.
5. You could accelerate your savings goals
Just as you can pay off your debt faster, you might also move a lot closer to your savings goals. I’ve known several ESL teachers, for instance, who moved to an inexpensive location, got a full-time salary, and had housing and flights covered by their school.
The result? They saved between $20,000 and $40,000 in one year. And they weren’t cutting corners, either. On the contrary, they had unforgettable experiences traveling to far-flung locations on the weekends and learning about a new culture and language during the week.
Even though their salary was slightly lower than it would have been at some public schools in the U.S., other factors, like location and extra benefits, left them with major savings at the end of the year.
Consider cost of living when choosing where to live
There are lots of factors that go into choosing where to live, such as climate and culture. But don’t forget to consider cost of living when choosing your destination.
NomadList is a great resource for comparing cities around the world based on factors like cost, WiFi, air quality, safety, nightlife, and walkability.
In the end, you want to choose a destination where you’ll love to live, but hopefully that place will also have the extra perk of securing your finances.