Geoarbitrage: The Pros, Cons, and How To of Moving to Save Money

I was into geoarbitrage before I knew there was a word for it. 

I spent 10 years living in Los Angeles, but upon discovering the FIRE movement, I realized I couldn’t stay there and achieve financial independence. So I took a massive risk and moved across the country to Savannah, GA. 

But even that wasn’t cheap enough, so I bought a fixer-upper in cash in the middle of nowhere, PA, to live mortgage-free and save even more money. 

Geoarbitrage worked for me, and it might help you reach your financial goals, too! Discover how moving can help you save money in the long term. 

What is Geoarbitrage?

Geoarbitrage is the act of moving from a high-cost-of-living area to a low-cost-of-living region to save money. 

Housing remains the number one expense for most people, so lowering housing costs allows you to save more money and focus on building wealth.

However, the cost of housing is not the only thing to consider when pondering whether geoarbitrage is the right decision for you.

Here, we reveal the pros and cons of moving for financial reasons to help you decide whether it’s right for you. 

Advantages of Geoarbitrage

Geoarbitrage has a lot of advantages, especially if you want to embrace frugality and retire early. 

The main advantage is a lower overall cost of living, but many people choose this life for the tax advantages or other bonuses of living in cheaper cities. 

Lower Cost of Living

The most significant benefit of geoarbitrage is the copious amount of money you can save on living expenses. 

Although I loved living in Los Angeles, the harsh truth is I could never achieve my dream of financial freedom living in the expensive city. After a ton of research, I realized I could save thousands of dollars a month by moving to the East Coast, so I transferred to Savannah, GA. 

But even that wasn’t cheap enough. I decided to take geoarbitrage to the extreme by moving to a tiny town with a bargain-basement cost of living. My monthly costs plummeted, allowing me to pay off debt faster and shuffle more money into my investment portfolio. 

Ability to Buy a House

The rising cost of living is most apparent in housing costs. Buying a home is out of reach for most Americans living in the hottest US markets. Only 15 of the 50 biggest markets have average home prices less than $300,000. The median home price in the Los Angeles area is over $700,000, while properties in Northern California soar above a million dollars.

You’d have to earn well over $100,000 to “afford” a home in most of these markets.  And I put afford in quotes because that’s with paying most of your income to your mortgage every month. 

The so-called experts think that’s affordable, but I do not.  

However, the US abounds with small towns where homes are still affordable. Most of these towns are too small to make any lists of “cities with affordable homes,” but a search through Zillow can help you find them. 

You can find homes outside Tulsa, Kansas City, and Little Rock for less than $150,000, or move to the farmland in Central Illinois, Iowa, or Nebraska for close to $100,000. 

If you’re willing to buy a fixer-upper, you can score an even better deal. I purchased my home in PA for just $52K. 

If you dream of homeownership, geoarbitrage may help you achieve it. 

Taxes

Income taxes are a massive burden. Many people choose to geoarbitrage to states without income taxes, like Texas or Florida. 

However, Daniel M. Yerger, MBA, CFP®, ChFC®, AIF®, CDFA®, and CCO of My Wealth Planners, warns to look a little more deeply before making that leap. If moving to a state with no income taxes, such as Florida, he advises being wary of other places where taxes can be hiding. Property or sales taxes may be higher to offset the lack of state income taxes.

If you’re moving to afford a home, consider areas with low property taxes. Although housing is expensive in California, property taxes are relatively low. In contrast, Illinois (especially the Chicagoland area) has some of the highest property taxes in the country. States with lower housing costs and low property taxes include Arizona, Utah, Wyoming, South Carolina, and Louisiana. 

Crowds

The lack of crowds in cheaper areas is an unspoken advantage of geoarbitrage. Generally, lower-cost-of-living areas tend to have fewer people. Although it’s not a financial advantage, it feels incredible to go into almost any restaurant and be seated in less than 30 minutes.

Fewer people make the commute easier as well. With fewer drivers battling me on the road, I can get to wherever I need to go in less than half an hour. 

Living in an area with smaller crowds may not have a financial impact, but it can positively impact your quality of life. 

Adjusting to Small Town Life

Many people are hesitant to move because they don’t want to lose out on the conveniences that big cities offer. 

I thought I’d have difficulty adjusting to life in a smaller city. I grew up in Chicago and lived in Los Angeles for most of my adult life, so I always considered myself a city girl. But small towns can be just as lively as big cities.

Savannah was the best of both worlds. There are tons of things to do in Savannah, it has a hopping downtown scene, nearby beaches, and all the amenities you would need, but with small crowds and little traffic (Compared to Los Angeles – people from Savannah may fight me on this!)

Much of Pennsylvania is much more rural, but the state has a few incredible cities to visit, like Philadelphia and Pittsburgh. My small town has everything I need within walking distance, including a grocery store, a few bars, and a handful of restaurants. 

That’s impossible to find in a city for $52K!

Are There Any Disadvantages to Geoarbitrage?

Nothing is without its drawbacks, and geoarbitrage is no different. The limitations prevent a lot of people from pursuing this path to freedom. 

The most glaring negative is the lack of jobs, but lack of family support and the cost of moving can also be significant deterrents. 

Jobs

If you aren’t financially independent yet, you need to know what jobs are available in your cheaper destination of choice. Unfortunately, high-cost-of-living areas usually have the highest-paying jobs. Median incomes in cities with the most affordable houses are staggeringly low – it’s easy to see why houses are so cheap. No one in the town would be able to afford them otherwise!

The poor job market doesn’t mean that geoarbitrage is unattainable. People with in-demand skills in finance, medicine, and law can likely find positions with high incomes (for the area). 

If you don’t have an in-demand skill, consider remote work. Although it’s getting harder to find remote opportunities in today’s job market, they still exist, with smart companies recognizing that lower overhead and happier employees are a boon to business. 

Finally, consider taking a pay cut. I know it sounds bad, but it might be worthwhile for the savings. I took a ten thousand dollar per year pay cut to move to Savannah, but I still took home more money. Consider your income potential vs the cost of living before deciding. 

Childcare

People rarely discuss childcare in conversations about geoarbitrage, but it’s a crucial aspect of life that must be considered. The exorbitant cost of childcare makes moving impossible, especially as many parents rely on nearby family to assist. 

Parents may also need to weigh the pros and cons of forcing their kids to transfer schools, differences in school quality, and after-school opportunities in their chosen area prior to moving. 

However, that doesn’t mean you have to dismiss geoarbitrage entirely. Kids don’t stay young forever, so you may want to revisit the idea when they’re older. 

Unexpected Expenses

Although most costs will typically be lower in a low-cost-of-living area, some prices may be higher, which may blow your budget in unexpected ways. 

The rural town in Pennsylvania I moved to was very cheap, but my home used oil heating, which cost a bundle come wintertime. As someone used to warmer climates, I wasn’t prepared to pay over $1000 monthly to stay warm. The cost of utilities varies by region, so consider the possibilities before planning your move. 

Food prices may also be a shock. If you live far away from ports where fresh food is imported, you may pay more in transportation fees for the same food. Gas prices can vary wildly by state, as can restaurant prices, medical insurance, vet bills, and everything else we need to live. 

That’s not to say these costs will necessarily be higher. In many cases, they are lower, which means that moving can save you even more money! It’s imperative to do your research first, so you know what to expect. 

Family & Friends

The hardest thing about geoarbitrage is moving away from friends and family, even if you don’t need them for childcare.

 I’m not going to lie and tell you that it will be easy. It’s not. Yes, technology has made it more accessible. We can FaceTime, talk on the phone, and text, but none of those things is the same as being there.

I’ve been away from my family in Chicago for over ten years, and I miss them daily. I’d love to go to my niece and nephew’s birthday parties, see them for the holidays, and do everyday things with them. But I can’t, because I live too far away.

It was even harder to move away from Los Angeles. The friends I made there will be my best friends for the rest of my life, I’m sure of that. We’ve already visited each other quite a few times. 

But I miss being able to go to my best friend’s house for a video game night, and I miss listening to my sister’s mental gymnastics over our favorite strawberry lambic. I miss the ethnic food nights, the weekend getaways, and the random happy hours.  

You will miss things too, and it will be painful. Only you can decide whether it’s worth it or not. 

The Moving Part

Moving sucks. I’ve moved twice in less than two years, and it’s miserable. Packing, cleaning, and transferring services are all colossal nightmares. Finding a new place to live and deciding what to do with your old home can be even worse.

If you rent, you have to worry about breaking a lease or moving at the right time, and if you own, you have to decide whether to sell it or rent it. It’s all taxing and time-consuming.

It’s also expensive. No matter how you look at it, moving long-distance will cost you. Even if you pack your own stuff and use a U-Haul, you’re looking at over $1000. Pods, storage, and moving companies cost even more. Then, you have to pay all the fees for either buying or renting a new place, and good luck finding one if you have pets!

After all that, you still have to pay security deposits, first/last month rents, pet fees if you are renting, closing costs, and down payments if you buy.  

Whatever way you look at it, a big move is expensive, which may be prohibitive for some. 

International Geoarbitrage

Because many places outside of the United States are far cheaper than the US, a lot of people retire overseas to maximize their retirement income. 

International destinations such as Costa Rica, Thailand, and even the Czech Republic are in high demand for retirees looking to make their nest eggs last. 

However, you don’t necessarily need to be retired to take advantage of the low cost of these fantastic places. Instead, you can freelance, work remotely, or even sign up to teach English in foreign countries. Another option is to achieve financial freedom first, so you can work if you choose, but you can enjoy your time if you don’t want to work. 

How To Geoarbitrage

If geoarbitrage is in your financial future, you must prepare as soon as possible. Certified Financial Planner Grant Maddox, from Hampton Park Financial Planning, recommends analyzing the cost of living on a few levels: rent costs, median home price, and taxation of retirement distributions by reviewing government websites with comprehensive statistics. 

Once you’ve done a thorough analysis and determined where you want to live, you have to decide whether you will move before or after retirement.

If you are considering it as part of your retirement planning, you don’t need to worry about jobs or childcare, which can make it a lot easier, but there are items that everyone needs to consider. 

Deciding Where to Go

Your first step is deciding where you want to go. If international geoarbitrage is part of your retirement plan, check your chosen country’s entry and visa requirements. Some places welcome US expats, whereas others have stringent requirements for immigration. 

Knowing where you will live will help you determine how much money you need to have in your retirement nest egg before moving.

Each location has different costs to consider, so be sure to talk with a financial advisor with expertise in your chosen region to ensure your money will last.

Making Your Geoarbitrage Financial Plan

Once you determine where you are going and have spoken to a financial advisor about approximately how much you will need to live and thrive in your new community, you need to make a plan to ensure you have the required money.  

Retirees

Retirees should review all of their potential income sources, including a 401K account, Roth IRA, pension, non-retirement brokerage accounts, and even social security. Decide where the money to fund the move will come from and how to draw down your retirement account each year to ensure the savings last.

 If you need assistance managing your money upon your move, speak to a financial advisor. They can help ensure you have a long, happy retirement within your means. 

Pre-Retirement Geoarbitrage Planning

Planning for geoarbitrage before you retire is a bit more complicated, as you have to consider work, and you may not have as many financial resources as a retiree. 

Develop Your Work Plan

If you are moving before retirement, you must have a work plan. Does the area you are looking into have jobs available? Would making less money be worthwhile if you could save more? Can you make money in other ways or pick up some side hustles? What will you do about health insurance if you can’t find a job? These are all crucial things to consider. 

Ideally, you would secure a position in your chosen area before moving. Network in your favorite destination on sites like LinkedIn, and start pursuing job boards to see what types of work are available nearby. 

Preparing Your Finances for the Move

It’s imperative to ensure your finances are in order before taking the plunge. 

Everyone’s financial situation is different. Some might have hefty savings, allowing them to move and sustain themselves for a few months in their new home prior to finding a job. Others don’t have those resources. 

Start saving and budgeting for the big move. Spend less on things you don’t need now, so you can retire earlier and have enough savings for financial security when moving. Open a new savings account specifically for the move, and put money from your paycheck directly into it each month. Review your spending habits to ensure they align with your priority of moving. 

However, don’t get so obsessed with moving that you neglect your other financial obligations. You still need to save for retirement, pay those credit card bills, and consider your long-term financial goals. 

All these financial obligations can be challenging to manage. Create a financial plan to help you keep them all organized. Creating a savings strategy that prioritizes your top financial goals will prevent you from becoming overwhelmed. 

Finding Ways to Save

Saving money before moving is key to a successful move. However, finding extra money can be difficult when you live in a high-cost area. That’s why you want to move in the first place!

If you need help finding ways to save, check out our epic resources for saving money. There’s sure to be something in there that will help you save extra money for the big move. 

If you dream of geoarbitrage but know you won’t be able to move for many years, consider opening an investment account to fund your move. The rule of thumb is that you shouldn’t have money invested that you will need in the next 3-5 years, but if your move is planned for ten years in the future, it’s an ideal solution that will help your money grow. 

Moving

The final step is to move. Although it sounds straightforward, moving is always more complicated than it initially seems. 

You will need to secure housing, a moving company, and any special accommodations for pets. You’ll need to downsize, pack, cancel and start utilities, and handle all the random tasks associated with moving. 

If you’re moving to a foreign country, you must have a passport, a visa, and meet all entry requirements.

Is Geoarbitrage Right for You?

Only you can decide whether geoarbitrage is right for you or not. It was suitable for me because I wanted to decrease my costs as much as possible to achieve financial independence, and I’ve been fortunate enough to find good jobs in cheaper areas.

After three years of living in rural Pennsylvania, I got tired of having no friends or family around and of the cold weather and outrageous heating bills. I decided to move back to a high-cost-of-living area to be closer to my family. 

However, I’m forever thankful that I geoarbitraged twice. Selling my house in Georgia gave me a fantastic financial cushion, and living in Pennsylvania for three years allowed me to save and invest a lot of money. I can feasibly retire early to pursue my passions in about a few years even with living in a more expensive locale now. That wouldn’t have been possible had I stayed in Los Angeles. 

Your situation and values are unique to you. If you consider all the pros and cons of geoarbitrage before taking the plunge, I’m confident you will make the right decision for your financial future.