How To Figure A Budget For Your New Life Overseas
How much will it cost you to live in the overseas Shangri-la that’s calling your name?
The bulk of any budget is given over to housing–rent or a mortgage, if you have one–so start here. Are you going to rent or to buy?
I strongly recommend that you rent at least at first, for 6 to 12 months, to give yourself a chance to try the place on for size before committing. However, if you do eventually decide to invest in a home of your own, recognize that property ownership comes with carrying costs. As a home-owner, you’ll have maintenance and repair costs, insurance, in some places property taxes, maybe grounds-keeping, etc. As a renter, you have none of these liabilities, which is why renting long term can make a lot of sense for the retiree abroad.
The other key housing consideration has to do with where in a country you want to settle. In Panama, for example, your rent could be US$1,500 a month, for a two-bedroom apartment in a nice building in Panama City with a doorman and a pool…or it could be US$300 a month, if you choose instead to settle in a little house near the beach in Las Tablas, on the coast of the Azuero Peninsula, a beautiful, welcoming, more remote, and therefore much more affordable region of this country.
Here are other key expenses to factor into your retire-overseas budget:
Condo/Building/Home Owner’s Association (HOA) Fee
The monthly condo or HOA fee is your contribution to the costs of maintaining and managing the apartment building or private development community where you’re living. It covers your share of shared expenses, including security, grounds-keeping, internal roads, the swimming pool and other amenities, sometimes a concierge in an apartment building in Paris or Buenos Aires, for example.
You may incur this expense as an owner or a renter. It’s called different things in different places. In Paris, for example, the building fee is the “syndic” fee, and it covers the costs of maintaining the courtyard, the lobby, the elevator, the building façade, etc.; in Panama, it is referred to as the “PH” fee (that is, the propiedad horizontal), and, again, it’s to pay for the cost of maintaining and improving public areas, the elevators, and, important in Panama City, the building’s “area social” (or Social Area), which typically includes a pool, a game room, sometimes a gym, a children’s play area, and a bar-b-que.
You won’t be liable for any in Ireland or Croatia, for example, nor in Buenos Aires (though you will pay annual tax on property you own elsewhere in Argentina).
That is to say, not every country imposes property tax, and, for those that do, the cost to you will likely be less, perhaps considerably less than you may be paying for property tax now, either because the percentage is less, the value of the real estate is less, or both. If you intend only to rent, of course, property tax won’t be an issue for you anywhere.
Will you need a car where you’re thinking of relocating? If so, this likely will be your greatest expense after housing. In some places, in fact, the cost of owning a vehicle can be greater than the cost of your rent.
In the friendly, pleasant mountain town of Santa Fe, Panama, for example, you could rent a two-bedroom house for US$200 or US$300 a month. However, unless you’re comfortable with the idea of using your own two feet or a taxi to get around town and the national bus service to travel the rest of the country, you’ll need to invest in a vehicle. In a remote mountain region like this one, where roads can flood during the rainy season, maintaining your vehicle won’t be easy. It might seem as though you’re repairing tires and replacing shock absorbers almost as often as you’re filling the gas tank.
If you’re not up for the expense or the hassle of car ownership, consider less remote options and cities with good public transportation. Living without a car in many of the places I introduce you to in these pages, the cost of transportation could go from being one of your biggest expenses to a negligible line item in your monthly budget.
Often used for cooking and typically a negligible expense–a few dollars a month.
We’re spending as much for electricity living in Panama (where we run the air conditioning day and night) as we did for gas and electricity in Paris (where we needed both heat and air conditioning, depending on the season). The truly budget-conscious should think about places like Medellin, Colombia; Cuenca, Ecuador; and Santa Fe, Panama, where the weather is spring-like 12 months a year and you can get by most of the time without either heat or air conditioning.
This cost varies greatly country to country and region to region. France is a big winner when it comes to telephone expense. You can buy a phone package from Orange, for example, for about US$50 a month that includes unlimited free calling to the United States and Canada, much of Latin America and the Caribbean, and all Europe.
In most of the world, though, if you’re not careful, your monthly phone bill can be a shock, even the most costly item in your entire budget (including housing and transportation). Over the years, we’ve had phone bills of more than US$1,000 a month.
Finally, Lief put his foot down. Fortunately, this didn’t mean we could no longer stay in touch with family back in the States, because, by this time, Voice Over Internet Protocol (VOIP) technology had advanced to the point where it’s possible to use this strategy almost anywhere in the world. It is by far the most cost-efficient approach.
Many providers now offer VOIP service, but I recommend Skype, which I’ve found to be the most reliable. The only limitation is your Internet connection. If you have a good one, your Skype service will allow you to chat at will with friends and business associates anywhere in the world. You can call from Skype to a telephone for a few cents per minute, and Skype-to-Skype calls are free. Set your kids and grandkids up with Skype accounts (if they don’t already have them!), and you can speak with them whenever you want for as long as you like.
For local calls, maybe all you need is a pay-as-you-go cell phone. These are easier to obtain than a phone with a contract with a cell phone service provider. In Panama, a US$10 calling card for my pay-as-you-go cell phone lasts me all month.
The cost of Internet can be a significant part of your budget if you need uninterrupted access 24/7 and aren’t relocating to a city. In Panama City, for example, you can have wireless Internet for as little as US$30 or US$40 a month. But for reliable service in the interior of the country, at the beach or in the mountains, you’ll have to invest in satellite Internet. This would cost you about US$500 in hardware and set-up and then US$200 a month or more.
Again, this is a significant budget issue only if you’re living outside the cities and developed regions of most countries. In a main city, such as Panama City, for example, basic cable costs about US$20 a month.
This can be one of the big benefits of living overseas. You can arrange full-time help around the house for as little as US$150 a month in Nicaragua or Uruguay. The going rate for a good maid who’ll also cook for you and do your laundry in Panama City is US$250 a month, half as much in the interior of the country. A gardener can cost as little as US$100 a month (in Uruguay, for example). In Panama, you’ll spend US$500 a month for a full-time driver/Guy Friday.
Groceries are a hugely variable expense anywhere. Your monthly food spending depends on how you want to live and eat. Here in Panama, a couple could spend less than US$300 a month on groceries. On that budget, you could eat well, but you’d be eating like the locals.
Or you could shop at the Riba Smith super-store every week and load your cart with imported cheeses, specialty hams, wine, and prepared foods, in which case a couple’s monthly grocery spend could be as much as, say, US$600.
Grocery costs also vary according to region. In Paris, we lived in the 7th arrondissement, in the historic heart of the city. We discovered that prices in the grocery stores in our neighborhood were sometimes 25% more than prices for the same items in grocery stores in the 15th arrondissement, for example, a more working-class district.
This is another big variable that you control. Sticking with Panama City as an example, you could budget US$100 a month for entertainment. That’d allow you two or three dinners out at modestly priced restaurants (Panama City boasts many good ones) and a couple of nights out at the cinema each month (a ticket for a first-run movie in English costs as little as US$3, depending on the day of the week).
On the other hand, you could spend US$100 on a single dinner for two at Market, Panama City’s best steakhouse. You get the idea.
Miscellaneous (dry cleaning, haircuts, household bits and pieces, etc.)
In the places I recommend to you in these dispatches, these little everyday expenses can cost a fraction what they’re costing you now. In Panama City, my husband has his hair cut at the barbershop down the street for US$3 (and, no, I’m not embarrassed to be seen with him). I have mine trimmed at the salon on the corner for US$7. Dry cleaning costs an average of US$1.25 per item (compared with US$12 per item in Paris, for example).
Travel (within your new country of residence and for visits home)
How often will you want to return home? Your biggest related expense will be airfare. Allow for it in your budget, as well as for in-country travel. You’re taking a big step and making a big effort to relocate somewhere new and exotic. Once you’re there, you’ll want to get out and see the place.
Now let’s get specific. What would your monthly budget look like in each of the world’s top overseas retirement havens for 2012?
Detailed budgets for many of the world’s best places to think about living in retirement as we move into New Year 2012 are available in the Country Budgets section of our website, which is being expanded continually.
In addition, we’ll bring you full and fully updated budgets for every one of the destinations on our 2012 Top Havens list in these dispatches as the year progresses.
P.S. Perhaps the most important thing to recognize is that you can control your cost of living most anywhere in the world within parameters. You choose where you want to live, how you want to live, how often you dine out, whether you have help around the house, where and how frequently you travel, where and how you shop, etc.
This is why there’s really no answer to the question, How much does it cost to live in XYZ? The more relevant question is, How much money do you have to fund your retirement? Figure that amount and then identify the destinations overseas where that budget will buy you the retirement lifestyle you’re looking for.
That, therefore, is our shared agenda as we move into 2012.