Transcription
If you want to retire sooner, moving somewhere cheaper isn't some vague lifestyle fantasy. It's a math problem with a simple answer.
Last year, I spent under $18,000 and living in several different countries before I even considered making these videos. That number, it isn't a brag. It's the foundation for a life with a much higher savings rate, a smaller dependency on one paycheck, and the power to retire earlier if that is what you want.
First, let's start with the basics. There are two numbers that come to mind when you're talking about retiring early. It's how much you're saving and how long you're saving that. Everything else that people talk about, the country, the people, your apartment, what brand of coffee you buy, it all only matters if it shifts those two levers.
Let me give you a simple example. Imagine two people, they both earn the exact same salary. Person A, they spend a sensible amount back in their home country and they save $500 a month. Person B, who makes the same amount, lives abroad and can save $1,500 a month. Both of these people are putting their money into a safe investment that allows for a conservative 6% return. This is a number that's also adjusted for inflation.
Person A is saving their $500 a month for 30 years. At 6%, that comes out to a little over half a million. Person B is saving their $1,500 a month under the same conditions and they end up with three times as much at $1.5 million. That's not a typo. Saving $1,000 more per month is letting person B retire with three times as much money in 30 years. Just that monthly difference from moving abroad compounded over the long term that they're both investing is what allows them to save so much more money.
Now, the 4% rule, which is pretty much agreed upon to be the safest way to turn that lump sum into monthly income. To use this rule, you multiply your annual spending by 25. Let's say you want to spend $5,000 a month or $60,000 a year. You multiply that by 25 and you get what person B has, $1.5 million.
But here's the crucial part that people miss. Living abroad, you don't need that much money. Yes, you can spend $5,000 a month, but I have never come anywhere close to that amount. If you can live on $20,000 a year, that target number you need to go for under the 4% rule is $500,000. If you need $30,000, that number bumps up to $750,000 for your total portfolio. Suddenly, a half million or $3.4 million is not some wild fantasy that only certain people can get. Living abroad means it's reachable with reasonable discipline.
Let's run some practical numbers. How long does it take to get $1.5 million under different savings rates with that 6% return? If you're person A and you're shooting for that $1.5 million, it takes you 46 years to reach it. Let's say you're saving at $1,000 a month, it's going to take you 36 years to reach the $1.5 million. If you're person B, you're right at the 30-year mark. And if you're saving $2,000 a month, it can knock it down to 26 years. Save $3,000 a month, which sounds nearly impossible back home. And that knocks it down to 21 years.
Those numbers matter because those small changes that we talked about in the savings rate change the timeline drastically. Cut your annual living expenses in half by moving abroad and suddenly your path to financial independence is cut by a decade or even more in a lot of cases.
Now, let me put this into a real-life framework. When I say I spent under $18,000 last year, this is not living like a monk. It meant choosing places that are cheap but still comfortable rent, eating great local food, using low-cost transportation that isn't a car, and overall skipping the expensive lifestyle traps that many people fall into when they move abroad. This isn't theoretical for me. I made lifestyle decisions that purposely raised my savings rate much higher. Living cheaper, it didn't make me miserable. It actually made my options more flexible. You still eat well. You still do some exploring, but you just don't pay western prices for western comforts. In return, you buy time, freedom, and a much shorter timeline for whatever retirement looks like for you.
There are a few practical realities to keep in mind here. Taxes, they still exist. If you're a resident in one of these countries that you're visiting, they may tax you differently than if you're not. And currency swings can drastically change your purchasing power. Japan is a great current example. Healthcare can definitely be cheaper in a lot of these places, but you'll still want some sort of plan for any major expenses, whether that's private international insurance or a local regional hospital you can trust. You also cannot forget the cost of moving, visas, and the emotional cost of leaving friends and your network behind. All those things should be budgeted into the plan before you make any leap.
Income stability also matters a lot more than wherever the cheapest rent is. A low cost of living only increases your time to independence if your income is completely consistent. That means a steady remote job, retainer clients, rental income, or a small business that pays month after month. People always say that diversifying your income is smart, but what does that actually mean? This could be you're receiving salary from one job. You have a freelance gig locally, and you also have a rental property in your home state that brings some side income. Doing it this way reduces your overall risk and it keeps that compounding engine running even when one income stream slips.
A practical way to test the idea out is a 6 to 12 month experiment. Pick a city, it doesn't even have to be in Southeast Asia, that fits your budget. Move and live there for a short period of time while maintaining your job and treat this like a pilot for your actual full-time trip. Track your actual spending, your health needs, and your happiness levels. If you can live well and saved even more than you imagined, then just extend the experiments you're already doing. Real experience beats the numbers every single time.
Another thing to remember is to guard against lifestyle creep. Move somewhere cheaper and don't instantly upgrade every single comfort. Let your baseline cost define your options, not the impulse purchases. When you do upgrade, make it purposeful. Upgrade to faster internet for working, a more reliable health care plan, or a rental that is closer to the things that you want to do instead of just purchasing a slightly nicer coffee machine.
One more practical tip that not a lot of people follow is plugging in your numbers to a retirement calculator online. You can do the math yourself. Plug in what you currently spend and see how long it's going to take you to get to retirement. And then plug in your annual spend abroad and see how much shorter it probably is. Watch how the years to your target change completely. You'll also be pleasantly surprised how small changes can add up quickly in these calculators. If you want the exact one that I use in all these models, then just look in the description for the link.
Let's go through a quick checklist on exactly what to do. Start with your numbers. List every monthly expense you have right now. Then build a plausible abroad budget for the exact same expenses. Don't forget to add in a buffer for flights back home if you need it. Run the calculators for 6% return and the two different scenarios, stay versus move. Also, automate your savings so that on payday your money is automatically transferred and you pay yourself first.
Finally, don't make cheap living into this permanent punishment. When your income grows, you can scale up in this life. You can travel, you can splurge, and you can still retire earlier than you ever thought possible. The point isn't to be stingy forever. It's just to choose financial freedom sooner so you get more of the life that you actually want.
If you enjoyed this breakdown, make sure to check out my newsletter where I share even more breakdowns, extra tips, and behind-the-scenes stories that don't always make it into the videos. Thanks for watching and I'll see you in the next.