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Live Better By Arbitraging Your Cost Of Living Around The World

Paul Terhorst by Paul Terhorst
Nov 17, 2014
in Retirement/Living
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Arbitrage Your Life To Enjoy All The World’s Bests

Earlier this year Vicki and I ended a long stay in Thailand. Then we spent two months on the west coast of the United States (Los Angeles, Portland, and Seattle), and just over a month in Paris.

We concluded that at street level Paris costs roughly double the west coast of the United States. The United States in turn costs roughly double Bangkok or Chiang Mai in Thailand.

For example, a small, plain cheese pizza for one person costs 12 euro in Paris, 6 euro in Seattle (US$8.50), and 3 euro in Thailand. A small espresso in a Paris bar costs US$4, about double that of Starbucks in Portland. A monthly bus pass costs US$100 in Paris, US$50 in Los Angeles. A hamburger in a bar costs US$20 in Paris, US$10 in Portland, and US$5 in Bangkok. A light bulb cost 4 euro in Paris, 2 in Los Angeles, 1 in Bangkok.

So given that Paris costs double Los Angeles and Los Angeles costs double Bangkok, other things being equal, you’d choose Bangkok, right?

Not exactly. First of all, other things are never equal. Bangkok has a tropical climate, Los Angeles a desert climate, and Paris the inevitable Northern European rain and cold. Bangkok has a king, Los Angeles a middle-of-the-road democracy, and Paris a leftist world view. The three countries differ in language, culture, and other specifics. You may have many friends in Bangkok and none in Paris, or the other way around.

Also, you care less about the overall cost of living than you do about your cost of living. Take transport, for example. In Paris and Bangkok most people live without the required-in-Los-Angeles car. What do you care what a car costs in Paris if you intend to live without a car?

Similarly, good wine costs a fortune in Bangkok, because of 400% Thai taxes. California wines are way overpriced. In France, on the other hand, very good wine costs as little as US$5 or US$10 a bottle, especially if you visit the winery.

Your personal cost of living depends overwhelmingly on what you like to do and how you like to do it. If you enjoy French wine and duck, culture and history, and the European change of seasons, you might be able to set up life in France outside Paris at reasonable cost. Even in Paris if you can find a place to stay, you can buy unlimited transportation on buses, subways, and intra-city trains for less than US$100 a month. And you’re living in Paris, where walks around town cost nothing, where the local Monoprix sells duck confit for only 10 euro a can (serves four), where you can meditate in a Gothic church down the block.

Remember, too, that you can move around from place to place, from high cost to low and back again. Your average cost of living comes down if you include cheaper places more often. Moving around also means you avoid daunting visa requirements.

Many people hate to move once they’ve settled in. Still, consider making yourself at home in several places, including renting the same place for the same three months, again and again. Return to your two or three favorite cities every year, like snowbirds. You’ll find many other expats doing the same in Chiang Mai, Fort Cochi, Paris, San Miquel de Allende, Valencia, and Buenos Aires.

Make it a point to skip the expensive wine in Bangkok, the car in Paris, and the elective surgery in Los Angeles. Never, ever buy glasses in Paris, go to the hospital in Seattle, or buy a new English-language book in Bangkok.

Instead practice a little arbitrage. Buy dental care in Chiang Mai, walking shoes in Portland, and cheese in Paris. Buy glasses in Pondicherry, wine in Mendoza, and a new hip in Bangkok.

Finally, take advantage of your wealth, of what you’ve managed to save from the work years. We read about billionaires who pay US$300 million for sailboats or US$50 million for paintings. A Silicon Valley investor just bought a huge penthouse apartment in San Francisco with only one bedroom, for himself. He’ll put up his guests in the Four Seasons next-door. What do these very rich people care about thousand-dollar hotel rooms?

On the joke list of the world’s thinnest books comes “Things I Can’t Afford” by Bill Gates.

So you have something less than a billion dollars. But you may have enough to live in Paris or other expensive cities for at least a few months each year. If you’re so inclined, go for it. You want to die having lived the good life rather than having avoided expensive places.

Paul Terhorst

Continue reading: Colombia Investment

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Paul Terhorst

Paul Terhorst

Paul Terhorst and his wife, Vicki, retired young and can now be found traveling the globe. These perpetual travelers have been everywhere from Chiang Mai, Thailand to Paris, France, and beyond. Paul regularly writes for the retirement and investing publications of Live and Invest Overseas.

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