Today I’m going to share with you How to Use Geo-Arbitrage to Save Money. Geo-arbitrage simply means moving to a less costly place to take advantage of the price difference.
I have been taking advantage of this knowledge when I first learned about it from Tim Ferris’s book – The Four Hour Work Week. I don’t know if he’s the one who coined the word but his book definitely helped popularize geo-arbitrage.
By the way, I’ll just be discussing domestic geo-arbitrage since I didn’t move out of my country.
Table of Contents
My Experience in Taking Advantage of Geo-Arbitrage
Prior to Learning About Geo-Arbitrage
Prior to learning geo-arbitrage and when I was still employed, I used to live as close as possible to my workplace. I prefer to rent an apartment within a short (or at least tolerable) walking distance from where I work.
And since most offices are located in the Business Districts, that means, that most available apartments close to them are very expensive (and very small).
In my mind, I was offsetting the cost of transportation with the cost of my rent. However, now that I think about it, in my country, the cost of public transportation (jeepney fare) is really inexpensive.
Upon Learning Geo-arbitrage
Upon learning geo-arbitrage, I started looking for places that were still just a jeepney ride (or two) away from where I used to work, and then, later on, I moved to an apartment that was around 20 – 30% cheaper.
My transportation cost did increase though but only minimally (again because public transport here is really cheap).
When I decided to go full-time with my online selling gig, I moved outside the city since I didn’t need to live near the Business District anymore. My rent cost dropped significantly and my living space grew so much as well.
Now, I moved even further away because I wanted to have more space for my inventory. My rent is still practically the same as the last one but the space available to me now is waaay much larger.
And because I moved a bit farther away from the city, it’s not just the significantly lower cost of rent that I’m enjoying. I feel that my quality of life also greatly improved because pollution is way less here and there’s so much greenery compared to the city.
What to Do Before You Consider Geo-arbitrage
Before you consider moving to another location to save money, I suggest that you do the following to ensure that you’ll be making a well-informed decision prior to the move:
Do Some Research First
Don’t move to the first cheap apartment that you’ll see online. I highly suggest that you do some basic research prior to deciding.
Here are some things that I suggest you do:
- List down potential apartments located within an acceptable commuting distance of your workplace
- Before you visit, call the landlord and ask how to get to the apartment
- If the commute will make you transfer from one public utility vehicle (PUV) to another, numerous times, then think about it twice (or multiple times). Personally, I usually just go after two jeepney transfers or one jeepney and one tricycle ride (max). If getting to the apartment will require me to take multiple PUV transfers, then I will not even check it out. First, it’s gonna be a very tiring and very difficult commute (especially during the monsoon season) and second, it’ll definitely cost more.
- If the commute is tolerable (again for me, max of two PUV transfers) then I’ll go and check it out.
- I’ll check the apartment twice, daytime and nighttime to see what it’s like during those hours.
- Safety and security (I personally avoid dodgy-looking places and streets without street lamps)
Create a Basic List of Your Requirements
Since you’ll be moving primarily to take advantage of the price difference to save some money, I suggest that you create a basic list of your requirements before you decide to move. Some of the things that you might include on your list are:
- Target Rental Cost Savings
- Total Commute Time (New Apartment to Workplace)
- Total Transport Cost (New Apartment to Workplace)
- Proximity to Basic Necessities (Groceries and supermarkets, Schools -if you have some kids, Hospitals, etc)
- Parking (If you need one)
Discuss this with Your Family
If you’re living on your own then it’s just up to you to decide. However, if you have a family, especially if you have kids, then you also have to consider their needs.
Talk to your family and discuss if the rental cost savings are worth the move.
List down the pros and cons and discuss each item carefully.
Sometimes, the cost savings with your rent might not be that worth it if you’ll be commuting for a few hours just to get to your workplace and back to your house, most especially if you have additional activities (like side hustles) that make you earn money aside from your full-time employment.
It might be better in the long run to stay where you are to save time and use that time to generate more money.
However, if you don’t have any other source of income aside from your full-time employment, then it might be worth considering moving to a different with a lower cost of rent but with a longer commute time.
If you have a family then this gets a bit more tricky. Luckily, as of the time of writing, taking online classes, and working from home is the ‘temporary norm’.
However, once everything gets back to normal (I don’t know when that is LOL!), then think about the commute of your kids to and from school as well as the commute of your partner to and from his/her workplace.
What to Do After You Move
Save Your Money
If you were able to survive in your old budget prior to the move then you should be able to save a portion or the entire savings that was generated by doing a domestic-geo-arbitrage.
You can use this to build your emergency fund if you don’t have one yet.
Grow Your Money
There are numerous ways to grow the money that you were able to save by doing a domestic geo-arbitrage and these are some of the ways:
Put Your Savings in Digital Banks
There are numerous digital banks in the Philippines nowadays (and I guess in most countries as well) and they offer way higher interest than traditional banks.
I have written some articles about them, please see the links below.
Please take note that some details might not be updated (such as interest rates, etc) by the time you read the articles so always check the updated info on the banks’ websites.
- How to Earn Money from DiskarTech App
- Komo by EastWest – How to Sign Up and Start Saving Money
- What is GSave and Why Open an Account?
- CIMB Bank Philippines Review
Put Your Savings in Traditional Banks with Value-Added Services
If you’re not comfortable with using digital banks, then you may opt to put your savings in traditional banks instead.
To maximize your savings, look for traditional banks that have some additional benefits.
I have also written some articles about it and I will link them down below.
Again, some information such as the interest rates, may not be updated by the time you read the post so be sure to always double-check the data with the banks’ websites.
- High Yield Peso Time Deposit Accounts in the Philippines – 5-Year Term
- Savings Accounts with Free Life Insurance in the Philippines
- How to Choose the Right Bank for Your Savings Account
Invest Your Money
Investing your money entails higher risks than the traditional savings account.
There are various investment vehicles available in the country and each of them varies in risk.
Before you invest your hard-earned money or the money that you can generate by doing a domestic geo-arbitrage, always Do Your Own Research (DYOR) to minimize the risk of potentially losing your savings.
Also, consult a professional financial advisor to guide you with investing.
Moving outside the city is one of the best decisions that I have made for myself in recent years.
It enabled me to grow my inventory without compromising my living space.
Moving to another location might not always be the best solution or option for anyone.
So, before you decide to move to save money, do some research first to see if the money that will be saved is worth the move. DYOR! 🙂How to Use Geo-Arbitrage to Save Money Click To Tweet