Geoarbitrage is the practice of moving to another country with a lower cost of living while earning income from a wealthier country. In recent years, it has caught on as a popular lifestyle philosophy for its financial, cultural, climate, and tax benefits.
In a world where remote work is becoming increasingly common, many Canadians are exploring opportunities to relocate abroad and embrace a lifestyle of geoarbitrage. But while the advantages are clear, there are some potential issues to consider before packing your bags.
Let’s dive into what geoarbitrage is, the benefits it offers, potential obstacles, and why it’s important to have the right mindset when considering this kind of lifestyle change.
What Is Geoarbitrage?
Geoarbitrage refers to the strategic relocation to a country with a lower cost of living while continuing to earn a salary or generate income from a higher-cost country. For Canadians, this might mean earning in Canadian dollars while embracing remote work opportunities based in Canada, and enjoying the financial perks of living in countries where housing, food, healthcare, and even leisure activities cost significantly less.
This concept is especially appealing in the era of digital nomads and the rise of remote work, where the barriers of location are often removed. Geoarbitrage isn’t just a financial strategy—it’s an opportunity to experience new cultures, improve your quality of life, and take advantage of favorable climates and tax structures, all while reducing stress and financial pressure.
The Key Advantages of Geoarbitrage
For Canadians considering geoarbitrage, the most significant advantages generally fall into four broad categories: financial savings, lifestyle improvements, better climate, and tax optimization.
1. Financial Benefits
The most obvious advantage of geoarbitrage is the ability to save money. In many countries, the cost of living can be a fraction of what you would pay in Canada. Housing is often the biggest expense for many people, and in destinations such as Latin America, Southeast Asia, or parts of Europe, you can enjoy affordable accommodation that would be far out of reach in Canadian cities like Toronto, Montreal, or Vancouver.
Healthcare in Canada is often free at the point of service, but the downside is the long wait times and, increasingly, declining quality of care. In contrast, healthcare abroad is often immediate, with shorter wait times and a higher standard of service. In many countries, the cost is often so low that it’s not a major concern for Canadians. In fact, many expats find that the quality of healthcare received abroad exceeds what they would have experienced back home, and they can access it without the stress of long delays.
Even day-to-day expenses—food, transportation, and entertainment—are much cheaper abroad. For Canadians tired of the high prices in their home country, geoarbitrage offers a golden opportunity to enjoy a more comfortable lifestyle without breaking the bank.
2. Improved Lifestyle
Living in a place with a lower cost of living doesn’t just save you money—it can enhance your lifestyle as well. With a smaller budget, many people find they can afford luxuries they wouldn’t have back home, such as dining out frequently, traveling, hiring help (like cleaning services or chefs), or indulging in recreational activities that might otherwise be unaffordable. How many Canadians do you know who can afford a weekly house cleaner these days?
This lifestyle shift can significantly improve your work-life balance. Instead of working long hours to cover the high costs of living in Canada, geoarbitrage allows you to work less and focus on passions and hobbies that bring more satisfaction. This is exactly how Emily and I were able to find the time and resources to start Freedom Abroad.
The point at which you can consider yourself partially retired can come much sooner living abroad, allowing you to dedicate entire weekdays to your hobby or side interest. Plus, with affordable costs, you can explore more destinations and experiences in your region, leading to a richer and more diverse life.
3. Climate and Environment
Another key advantage of geoarbitrage is the opportunity to live in more favorable climates. Whether you’re seeking year-round sun, temperate weather, or a chance to escape harsh Canadian winters, geoarbitrage offers a world of options. Moving to a warmer climate can improve your mood, health, and general well-being. For those suffering from seasonal affective disorder (SAD) or simply tired of snowy winters, relocating to a tropical or subtropical destination can offer much-needed relief. For those living in parts of Canada that don’t experience much sunshine in the winter, such as BC’s south coast, winters can take a massive toll on one’s mental health.
Countries like Mexico, Thailand, or Spain boast warm climates with stunning natural beauty. Not only does this improve your overall quality of life, but it also provides access to outdoor activities like hiking, swimming, and exploring nature that may not have been as accessible back home year-round.
4. Tax Optimization
For Canadians seeking to optimize their taxes, geoarbitrage may provide tax benefits depending on the destination country. Some countries have more favorable tax regimes for expats, allowing them to reduce their overall tax burden or take advantage of tax treaties between Canada and their new home country.
Countries like Portugal and Panama, for example, offer tax incentives for foreign residents, such as tax exemptions on foreign income or low-income tax rates. By strategically choosing a location with favorable tax conditions, Canadians can further maximize their financial gains. In Panama, for instance, if you put in the work and money to obtain a residency visa, your income tax burden in Canada can drop to zero.
Potential Challenges in Relocating Abroad
While the benefits of geoarbitrage are appealing, it’s important to be aware of the challenges that come with relocating abroad. For all its financial and lifestyle advantages, geoarbitrage requires careful planning and a willingness to adapt to new environments. Here are some potential obstacles:
1. Homesickness and Missing Family/Friends
The emotional aspect of relocation is often the hardest to navigate. Being far away from family and friends can lead to feelings of isolation and homesickness. Canadians value close-knit family bonds, and being removed from that support network can be difficult, especially in the early stages of living abroad.
Technology, like video calls and social media, can help bridge the gap, but there’s no substitute for the comfort of being physically close to loved ones. Additionally, certain events or holidays might leave you feeling disconnected, which can impact your overall happiness. This is why it is so critical to make expat or local friends in your new community.
2. Culture Shock
No matter how prepared you are, adapting to a new culture can be jarring. Every country has its own customs and way of life. What’s considered normal or polite in Canada may not be the same in your new home country. The adjustment period can be challenging, particularly if there are language barriers or significant differences in social norms.
The Culture Factor country comparison tool is great at comparing many cultural elements you might not have thought about, such as individualism and uncertainty avoidance.
It’s important to approach culture shock with an open mind and a sense of curiosity. The learning process can be rewarding, but it requires patience and a willingness to adapt to new ways of living. It also takes time. There’s a break-in period where things that once bothered you about your new home become commonplace and don’t stand out anymore.
3. Not Liking the Destination
It’s easy to be seduced by the idea of a cheaper lifestyle or a better climate, but sometimes the reality of living in a new country doesn’t meet expectations. Perhaps you find the local bureaucracy frustrating, or the pace of life slower than what you’re accustomed to. Maybe you’re not as enamored with the culture as you thought you would be, or you miss the amenities and convenience of life back home. It is important that you are honest with yourself about the specific reasons you don’t like your new home, rather than painting the entire country or city with a broad brush.
In some cases, expats return to Canada after a short period because they realize that the destination they chose doesn’t suit their needs or lifestyle. This can be costly—both financially and emotionally—and should be factored into any geoarbitrage plan.
The biggest piece of advice seasoned expats can give to Canadians showing interest in buying real estate internationally is: rent for at least six months before you purchase a home to make sure you actually like living there!
4. Legal and Financial Complications
Navigating legal requirements for living abroad can be a challenge. Countries have different visa and residency requirements, and failure to comply can lead to fines or deportation. This is serious! You could potentially become permanently barred from countries if you repeatedly disrespect their rules and procedures.
Additionally, managing finances while abroad—such as paying taxes, understanding local banking systems, or handling retirement funds—can be complicated. Doing thorough research on visas, taxes, and financial management before making the move is crucial for long-term success.
Beyond the Financial Benefits: The Importance of a Genuine Desire for the Expat Lifestyle
While geoarbitrage can be a lucrative way to improve your financial situation, it’s important to remember that relocating abroad isn’t just about the money. To truly succeed in geoarbitrage, you need more than just a financial strategy—you need a genuine passion for travel, cultural exploration, and new experiences.
Cultural Curiosity and Openness
Geoarbitrage is about embracing new ways of life. Whether it’s learning a new language, adapting to a different way of working, or simply experiencing the daily rhythms of a new country, you need to be open-minded. This is about broadening your horizons and growing as a person. You will become a better, more well-rounded version of yourself.
Willingness to Adapt
Adaptability is key to success in geoarbitrage. Moving abroad requires patience, resilience, and the ability to embrace uncertainty. Things won’t always go smoothly, especially when you first arrive at your destination, and you’ll encounter challenges that test your flexibility. If you’re not genuinely excited about experiencing life abroad, those challenges might feel like insurmountable obstacles rather than opportunities for growth.
The Reality Check
If your primary goal is simply to save money, you may find that the financial benefits of geoarbitrage are not enough to outweigh the emotional, logistical, and personal costs of moving abroad. People who don’t truly embrace the expat lifestyle often end up spending more than they save due to failed relocations, moving costs, and, ultimately, returning back to Canada. In 2023, Emily and I neglected several of these areas and inevitably decided to return to Canada. Although we saved a good amount of money in Ecuador, the move back and subsequent costs required to re-establish ourselves in Canada ate up all of our savings.
To truly thrive in geoarbitrage, you need to have the right mindset. This lifestyle works best for those who enjoy the challenge of relocation, are excited by new experiences, and have a genuine desire to build a new life in a different part of the world. Without this passion, the financial rewards might feel hollow, and the transition could become overwhelming.
Making Geoarbitrage Work for You
Geoarbitrage offers a wealth of benefits for Canadians seeking a more affordable and adventurous lifestyle. From financial savings to improved quality of life, there’s much to gain. However, success in geoarbitrage requires more than just a good financial plan—it requires a mindset of openness, adaptability, and a love for travel and new experiences.
Before making the leap, ask yourself whether you’re truly ready for the challenges and rewards that come with living abroad. Do your research, plan carefully, and reflect on your motivations. If you’re ready for the adventure, geoarbitrage can be a transformative way to live the life you’ve always dreamed of.
Featured Image Source: Photo by Nick Seagrave on Unsplash.
