Home > Blog

3 Simple, Secret Ways to Live Well on Little Money

Does it seem that costs are increasing and wages are remaining stagnant each year? You’re not alone if you feel this way, as wages have been stagnant for over 20 years. This means that while the actual wage numbers have increased; the purchasing power has decreased. For example, the minimum wage in 1968 was $1.60, which would be worth $12 in 2019 dollars. This figure is much greater than the current federal minimum wage of $7.25.

Luckily, there are some ways to live well on little money like developing a location independent source of income, living in a country with a lower cost of living like Thailand, and being aware of fundamental US expat tax laws.

1. Develop your source of income

Due to the internet, more workers are choosing to work remotely. This means that they will be able to work from anywhere like the beaches of Bali, to a cafe in Colombia and everything in between. There are many online job opportunities, but the best ones revolve around specific skills sets like writing, graphic design, web development, web design, business development and teaching english. Some of these jobs can be done on a full time basis, while most are considered contract or freelance opportunities.

You could use the following resources to find remote work

  1. Problogger (mainly for freelance writers)
  2. We Work Remotely (various job types)
  3. FlexJobs (various job types)

Besides working a full time remote or freelance job, many people have pensions and/or Social Security, which gives them a fixed, dependable  monthly income. This is more common among retirees and some countries cater to expats with pensions. For example, Panama has a Pensionado Visa which grants retirees permanent residency if they have a guaranteed stream of income of a least $1,000 USD per month. Thailand offers similar benefits, but applicants must have a monthly income of at least 65,000 baht or approximately $2,000 USD. 

2. Choose the right country

Many first world countries like the USA, Canada and Europe have high housing, food and transportation costs. Therefore, it makes sense to find a country that is safe, has a good visa policy and a low cost of living. It’s interesting to see how far your income can stretch in a developing country. For example, you can rent a furnished one bedroom apartment in Medellin, Colombia for $300/mo. or even a have a filling local meal for just $2 in many Southeast Asian countries. 

These lower costs will allow you to live a good life on just $1,000-2,000 per month, which would only cover rent in major cities like Los Angeles. While costs are important, you should look into visa requirements and safety issues. For instance, some countries like Mexico allow tourists to stay in the country up to 6 months with just a tourist visa. Others like Thailand are much stricter and only give tourists a 30 day period to stay in the country. Many expats based in Southeast Asia have to do “visa runs”, meaning that they go to neighboring countries briefly to avoid being fined for overstaying their tourist visas.

Safety is another large concern and you can use sites like the US State Department’s Travel Website to see if your destination is safe. Be sure to take these reviews with a grain of salt as the danger levels of some places like many Mexican cities, are over exaggerated. Practicing common sense safety tactics like not dressing fancy in public, avoiding dark alleys at night, staying in tourist areas, and not flashing high ticket items like phones will keep you out of trouble.

Don’t travel to a country with a level 4 travel advisory, and some of these countries include Venezuela, North Korea and Syria. Lastly, you can use Nomadlist to learn about the cost of living, safety and other vital information about most worldwide cities.

3. Be aware of basic expat tax laws

Taxes can become very complex if you’re from the USA and decide to become an expat. For example, the USA is one of the few countries that taxes its citizens on income that is earned outside of the country. It also has very strict requirements like having expats report foreign assets or bank accounts on form 8938 and the FBAR. If you have foreign bank accounts that are worth at least $10,000, you must report these on the FBAR annually to avoid steep penalties. US expats that have foreign assets like real estate must report values, gains and losses every year on form 8938.

Luckily, the US government does offer expat taxpayers relief through the Foreign Earned Income Exclusion Act (FEIE). The FEIE allows expats to not pay federal or state taxes on up to $105,500 for 2019. This amount is indexed for inflation, but expats must always pay Social Security and Medicare Taxes regardless of their income.

Your personal situation can vary, but it’s still prudent to know the fundamentals of US expat tax law. If you have more complex situations like a foreign spouse and/or substantial foreign assets, consult a tax adviser who specializes in these issues.

Bottom Line

It might seem tough to live well on little money. Most workers haven’t seen their salaries keep up with inflation, which has led to higher debt and lower quality of life. However, geo arbitrage or earning a strong currency like US dollars and spending in a weaker currency like Colombian Pesos or Thai Baht could be a great way to live on less. 

Before making this lifestyle choice, be sure to develop a mobile source of income, choose the right country based on cost, safety, visa situations along with other factors, and know basic US expat tax rules.

Have you ever considered geo arbitrage or made the leap? Please tell us below!

About the Author

Dalton is the lead financial copywriter of Sensible Financial Marketing. He enjoys breaking down complex financial concepts, so anyone can understand them. He also helps businesses gain more leads and increase revenue via converting sales copy, blog posts, white papers, email funnels and more!

When he's not writing about finance, you can find him surfing, playing pool or traveling the world!