Exploring Geographic Arbitrage: Living and Retiring Abroad
This article discusses the concept of geographic arbitrage, using Kuala Lumpur (KL), Malaysia, as an example. We recently returned from a trip to KL for a birthday celebration, and the experience led us to consider the financial benefits of living in a country with a lower cost of living while earning a higher-value currency.
The Cost of Living Comparison: Singapore vs. Kuala Lumpur
While reviewing our credit card bills, we noticed a significant difference in expenses between eating out in Singapore and KL. In Singapore, even a brief outing can easily cost $200 SGD. This led to the observation that dates and dining experiences were much more affordable in KL. This difference highlighted the concept of geographic arbitrage.
Understanding Geographic Arbitrage
Geographic arbitrage involves earning income in a country with a strong currency and spending it in a country with a weaker currency and lower cost of living. This strategy is popular among digital nomads who earn USD or pounds and reside in countries like Thailand, Malaysia, or Vietnam, where their money goes much further. For those of us not "crazy rich", it's a way to enjoy life more without solely focusing on day-to-day survival. This explains why many Singaporeans travel to Vietnam, Bangkok, Malaysia, or Bali, where the Singapore dollar has considerable purchasing power.
One example highlights the difference in ramen prices: a bowl of ramen at a Pavilion restaurant in KL costs around $10 SGD. However, in Singapore, a similar meal can cost $20+ per bowl.
The Question: Should We Retire in Malaysia?
This cost comparison sparked a question: would it be beneficial to live in Malaysia while earning Singapore dollars? This thought aligns with our goal of retiring by 40.
Retirement Goals: Beyond Financial Independence
Our vision of retirement is not about doing nothing. It's about having the freedom to pursue our passions without the daily stress of earning money for basic expenses. Many people dream of making money from passion projects. But for many, passion projects do not earn any money.
Passion Project: Fostering Cats
For the past five to six years, we have been fostering rescue kittens in Singapore through a spare room in our HDB. Collaborating with animal rescuers, we provide shelter and care for vulnerable kittens infested with fleas and ringworm, before they are placed for adoption. Thankfully, we have successfully rehomed over 50 cats and kittens, excluding the one or two "foster fails" that we adopted ourselves.
Our dream is to create a larger sanctuary, but the cost of land in Singapore is prohibitive. This leads us to consider retiring in Malaysia, where purchasing land for a non-profit animal sanctuary is more attainable. We’ve seen examples of successful sanctuaries in Malaysia helping many cats and dogs.
Exploring Living Options in Kuala Lumpur
We've been discussing the potential of living in KL, considering factors like housing, food, and transportation. Research on YouTube revealed that condo prices in KL are comparable to HDB prices in Singapore, with added amenities like swimming pools and gyms. While foreigners face restrictions on buying properties under a certain price point, the overall cost of living remains attractive.
The High Cost of Living in Singapore
Living in Singapore involves significant expenses, including electricity, water bills, housing mortgages, car ownership, and renovation loans. These combined costs can be daunting.
The Big Question: Relocating for a Better Life?
This comparison prompts a critical reflection: what would our lives be like living in Malaysia while still earning Singapore dollars? We're curious to know if others have considered relocating to leverage geographic arbitrage. We encourage you to share your experiences and thoughts in the comments below.