What is Geo-arbitrage & How can You Take Advantage?

Although it is not practical for everyone, it is possible to drastically cut your cost of living by moving to a different location. If moving is not for you, maybe because you love your home …


Although it is not practical for everyone, it is possible to drastically cut your cost of living by moving to a different location. If moving is not for you, maybe because you love your home country or having family and friends around – not to worry – you can still take advantage of “geographical arbitrage” or “geo-arbitrage” by outsourcing elements of your business overseas.

Get Paid in U.S. Dollars & Live with Thai Baht

The most obvious and direct way to take advantage of geo-arbitrage is to work online, get paid in Euros, sterling or U.S. dollars, and live in a country with a relatively low cost of living, such as Thailand. If you are a freelancer currently living in New York and working for U.S.-based organizations, for example, you could move to Thailand and live a much more luxurious lifestyle than is possible on the same wage in New York.

According to this blog, if you live in Thailand, it is possible to live comfortably on $800 per month. In contrast, according to this website, to live comfortably in New York City, you would need to earn at least $2,500 per month.

While the average salary in Bangkok is around $11,000, the average wage in New York is just over $110,000. If you are a “knowledge worker” or someone who works exclusively online, then it may well be possible to get paid a New York salary while living in Bangkok. This working arrangement is not always possible, but thanks to the mass adoption of remote-working and “work from anywhere” policies introduced by employers such as Spotify, it may be a possibility for many who previously lived and worked in major U.S. and European cities.

A U.S. salary will allow you to enjoy many of the luxuries the beautiful country of Thailand has to offer. Alternatively, you could save a significant amount of money while living in Thailand and getting paid in U.S. dollars, with the low cost of living making it possible to set aside several hundred dollars per month in savings. To do this in New York otherwise be impossible or require cutting back on expenses such as food and entertainment.

Cut Your Cost of Living

Countries have different currencies, and the relative cost of services and amenities varies dramatically. For example, it is estimated that if you were to move from Chicago in the U.S. to Bangkok in Thailand, your cost of living would be 44% lower with the same quality of life – if you don’t mind the heat! Another example is to move from Basel in Switzerland to Riga in Latvia – you could cut the cost of living by around 54%

If you want to compare the cost of living in your current area compared to somewhere overseas, the website expatistan.com has a simple calculator that compares and breaks down the cost of food, housing, clothes, transportation, personal care and entertainment in two cities or towns.

Relocation Complications

While many people enjoy the benefits of a much more affordable cost of living, there are some drawbacks. For example, many people are seeking financial independence. Still, unless you can take your U.S. or European job with you to Asia or South America, where the cost of living is usually a lot cheaper, you may need to become financially independent first – at least in some respect.

For example, many people look to retire abroad because they can enjoy a better way of life from their company or state pension. Other people who have invested in property can live more comfortably from the rental income while overseas. However, retirement and passive income from property rentals are not immediate or viable opportunities for everyone.

In addition, there are often complications when it comes to VISAs, residency and tax arrangements. Issues, including residency documents and applications, have led many geo-arbitrage entrepreneurs to live a nomadic lifestyle. “Digital nomads” never actually settle in one country. Instead, many of them travel and work from different locations across the world. They typically work remotely from countries where they can live comfortably with the income they generated working online, often as bloggers, programmers, coders, or digital marketers.

The most significant complication and a sticking point for many, however, is that they don’t want to leave family and friends behind. As this TedX Talk outlines, relationships are crucial to happiness, not money! (although it helps).

Running a Business Overseas

If you decide to move abroad, then if you cannot take your job with you, it could be worth exploring the option of starting your own business.

If you live in the U.S., for example, and work for a digital marketing agency, you could consider working freelance. In many cases, your clients will not care too much about where you reside, but investing in a virtual office address and a phone answering service is often a good idea for some business ventures.

By using a virtual office address on your website and business literature, and by using a phone answering service that employs US-based receptionists, you can, for all intents and purposes, as far as your clients are concerned, be based in the U.S. In addition, if you were to employ a 24/7 call handling service, you can mitigate any issues that might arise due to living in a different timezone than your clients and customers.

It’s not ideal to mislead any potential clients and customers, but if, for example, you are running a drop-shipping eCommerce store to customers in the U.K. and you live in Thailand, having a U.K. address. A local telephone number can help inspire trust and reassure customers before they make a purchase. As long as you go above and beyond to rectify any problems your customers may have, it should benefit you and your customers if you can offer products at a more affordable price.

Buying Services Across the World

If you live in Switzerland, it may be possible to jump on a tram or train, go to France or Germany and buy products for a much lower price than in Switzerland. However, another way to take advantage of geo-arbitrage is to purchase services from countries overseas when this is not possible.

For example, if you live in London and need help with video editing, you could hire a local agency that will typically charge you thousands of pounds sterling. Alternatively, you could go to a website such as UpWork or PeoplePerHour and hire someone in the Philippines. On UpWork, you will be able to find dozens of highly experienced and qualified video editors who typically charge $10 to $20 per hour. You will save significant amounts of money by hiring graphic designers, content writers, and developers in countries such as the Philippines.

Cross-Border Commuting

Finally, another way to take advantage of geo-arbitrage is to be a cross-border commuter. For example, with a lower cost of living, people who reside in France and Germany commute daily to Switzerland to earn a higher wage. This daily international commute is often seen in Switzerland.

This cross-border commute is also seen on the U.S./Mexico border. Thousands of commuters line up to cross into the U.S. to work for U.S. companies every day before heading back to Mexico in the evenings. Blue-collar workers, educated professionals, and students are known to commute to California from Tijuana every day.

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