The developed world has become too expensive for everyday people. In pricey cities, even “well-paid professionals” struggle with daily expenses.
For example, it costs an average of 50 USD per day to park in Manhattan. Daycare will run you 4,000 USD to 22,000 USD – per child. The average one bedroom apartment in New York starts at 1,600 USD /month – in the Bronx.
Meanwhile, in vibrant developing world cities like Bangkok, everyday expenses are a fraction of these amounts. 700 USD/month will get you into an apartment far nicer than the one you currently call home. Pre-K and nurseries (Thai equivalent of daycare) start at 1,500 USD – per year. Parking at Lad Prao, a park-and-ride for Bangkok’s transit system, costs less than 50 USD/month.
If you have a digitizable skill set, setting up shop abroad can offer huge savings. In this post, we’ll examine the pros and cons of such a move.
The American Dream has packed up and moved to Asia
Remember when we could count on robust economic growth? Not that long ago, America posted GDP growth figures between 5-10%. However, we haven’t seen activity on this scale since the 1990s.
From the 2000s to today, 4% growth is about as good as it’s gotten. On average, 2-3% YoY GDP growth has become the new normal. What happened? Effectively, outsourcing and streamlining have sucked the marrow out of many developed world economies. Slow economic growth has led to wage stagnation, all while the cost of everything from education to real estate has skyrocketed.
Unsurprisingly, our current generation of young people is looking for a way out. Many have found their feet in Asia. By relocating to places like Bali and Chiang Mai, they have found the American Dream – albeit, a half a world away.
When you look at growth numbers abroad, it’s not surprising why ambitious people are flocking there. According to the OECD, Indonesia’s GDP should grow by 5.2% in 2019. Economists expect this rate to hold, with 5.3% YoY growth expected through 2023.
A similar story is playing out across ASEAN. The Philippines will grow by 6.6%, and Vietnam by 6.5% every year over the next five. If Thailand’s political situation stabilizes, its five-year growth forecast of 3.7% YoY may turn out to be a conservative estimate.
As lucrative as the economy is over there, most westerners are relocating for two reasons: the low cost of living and the lifestyle it enables. But how cheap is Southeast Asia? We’ll dive deeper into this subject in the next section.
How much money can I save by relocating abroad?
Despite anecdotal stories of overseas markets being cheaper, your average person on the street remains skeptical. They’ll reflexively spout platitudes about these kids having wealthy parents, or that they aren’t telling the whole story.
When you look at the numbers, though, you’ll quickly learn it isn’t just hype. Not only is Southeast Asia cheaper than the West, but the comparison often isn’t close.
Let’s start by making the business case for relocation. Back in NYC, office space costs 6.16 USD/square foot, on average. If you were to rent a 2,000 square foot office in Hudson Square, you’d pay over 12,000 USD/month – yikes!
Meanwhile, in Canggu, Bali, entrepreneurs pay a fraction of that. At Dojo Bali Coworking, an Unlimited Membership grants access to an air-conditioned boardroom, 16 hours in the Skype Booth, and a beautiful swimming pool. The cost? 2.9 million IDR – or 200 USD/month. That’s 2,000 USD/month for a ten-person team or 83% less than that office in Lower Manhattan.
Not only can you do business overseas for less, but it is also easy to collaborate with peers to grow companies. Harsha Kiran owes the success of his business to this. He runs Coupofy.com, a coupon and deals site targeted at American consumers. Making Bali his base contributed massively toward its success. It allowed him to keep costs low during launch, and he met many of his current employees at coworking spaces.
While these companies often pay lower wages than back home, employees still come out way ahead. Even if you’re only making 2,000 USD/month, you now have the income to live like a king/queen.
Let’s use Chiang Mai as an example. If you’re bringing in 2,000 USD per month, you can:
Have world-class Thai food every night. You know that restaurant back home that charges 17 USD for Khao Soi? You can have one that’s better from a street stall for 1.50 USD in Chiang Mai. Western food, while pricier than that, is often cheaper than back home, too. At The Duke’s, an American restaurant, fish and chips costs around 8 USD – compare to 12-14 USD in the USA!
Rent a sick pad. Remember that rickety 1,600 USD/month apartment in the Bronx? In Chiang Mai, you can find smartly furnished condo units that start at 300 USD/month. You can find basic but clean studios with wi-fi, cable TV, A/C, and a work station for 200 USD or less. You can also rent a clean, modern home for 12,000 to 20,000 THB/month. That’s between 400-600 USD/month – in the US, it can be hard to find decent roommates at that price.
Elevate your social life while spending less. Want to go out to the movies? In Chiang Mai, your entire night will cost no more than 10 USD. In New York City, it costs 16 USD just for the ticket. What about nightlife? Hit up happy hour in NYC, and you’re still shelling out 6-7 USD for a pint. In Thailand? On average, 2-3 USD is what you’ll generally pay.
That’s just a small taste of what’s possible. Digital marketers, freelancers, programmers, and other digital professionals can make much more than 2,000 USD/month. According to the Bureau of Labor Statistics, the average web developer makes 62,000 USD/year, or over 5,000 USD/month.
On this salary, you could easily afford luxury condos, eat the best Western and Thai food, and go on regular trips around SE Asia. Let’s say you’ve decided Bohol is beautiful and you want to see it. On Air Asia, a round trip fare from Chiang Mai costs no more than 350 USD. And yet, despite all this “wanton spending,” at the end of the month, you’ll still bank more than you did back home.
If you don’t understand how digital nomadism has become so popular, now you know.
The digital expat life: Not all sunshine and rainbows
Despite appearances to the contrary, the digital expat lifestyle has its cons – chief among them are taxes. The USA is only one of two countries that taxes your worldwide income (the other is Eritrea).
However, there is a loophole that allows you to avoid all/most taxation while abroad: The Foreign Earned Income Exclusion. In 2019, those who make money overseas don’t have to pay taxes on the first 105,900 USD they make.
It comes with a big caveat, though – you must remain outside America for all but 30 days each year. This fact can be tough on familial relationships and friendships back home.
In other countries like Australia, you may also have to close bank accounts to claim non-tax resident status. To do this, you’ll have to transfer funds to an account in your new base of operations. However, performing this task through your old bank could cost you hundreds more than necessary.
Let’s say you’re moving 20,000 AUD from Commonwealth Bank to your new account in Bali. They give you a rate of 9344.5658, giving you 186.9 million IDR on the other end. But over on xe.com, the interbank rate is 9784.8700. If you could use this rate, you’d have 195.7 million IDR. That’s a 9 million IDR, or a 919 AUD difference!
Orbit Remit solves this difficulty partially. This money transfer firm operates online – as a result, its overhead costs are much lower. They pass on these savings to customers with exchange rates much closer to interbank. With a rate of 9751.769, you’d receive 195 million IDR, representing a savings of 827 AUD compared to Commonwealth Bank.
Geopolitics can change things overnight
Global politics can also wreak havoc with the lives of digital expats. In Bangkok, political protests have suddenly erupted into violence. The Brexit vote result in 2016 tanked the GBP, creating financial stress for British nomads everywhere.
And if a no-deal Brexit happens in October, the legal status of UK citizens may change overnight. Right now, they have the right to reside and work in EU countries. After a no-deal Brexit, they would have to leave the EU to apply for a work permit. Travel would fall under Schengen rules, forcing UK citizens to leave the area every 90 days.
As you can see, the passage/repeal of laws can affect digital expats in many disruptive ways.
Being a digital expat isn’t easy, but it’s worth the trouble
The logistics of making a living online can be headache-inducing. However, the pain of dealing with these issues is well worth it when you consider the payoff. Massive increases in disposable income, tropical locales, and a world of fantastic food – that’s a dream worth fighting for.