Blog — Sisters for Financial Independence (2024)

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It has always been my parents intention to retire in the Philippines. I have never known them to say otherwise. This year, they will return to our home country and setup a new life there. It’s been an eye-opening experience to watch my parents plan and finally make this goal a reality. I am happy and sad at the same time. Happy that all of their hard work will allow them to do this. Sad that we will be many time zones apart.

Doing so will allow them to take advantage of a concept called geoarbitrage.

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In 1992, my dad, my sister and I joined my mom in the United States. I was nine years old at the time. I grew up in an area in the south of the Philippines known for growing pineapples. It is in the mountains and aptly call “Bukidnon” meaning mountains. My dad had a very good job working for Del Monte Pineapples on track to become a high paying manager. We had what I thought was a good life. My sister and I went to a private, Catholic school, we lived in a 3 bedroom house with maids (somewhat common in Asia countries), we lived close to our cousins. My parents, however, had decided that we would have more opportunities in the United States. So we packed up our lives to move to New Jersey.

For the first few years, we lived in a one bedroom with my sister and I sharing a bed and my parents alternating sleeping on the floor or on the pull out couch. We eventually moved into a house and our third sister joined the family. As of today, after 26 years, my parents will be selling our childhood home and liquidating everything inside it with the goal to spend majority of their retirement in the Philippines.

Geo-arbitrage is heavily discussed in the FI/RE community as a great way to reach financial independence faster and a great way to make your money go further. Geo-arbitrage is simply taking advantage of the low cost of living in other parts of the world for a better or similar quality of life. This is especially helpful if you earn or have money in a currency that converts well to a local currency and you have the opportunity to spend less in the new location. The new location would have to have lower costs in housing, food, transportation, healthcare and education but at a similar quality.

For many immigrants, geoarbitrage can be achieved by simply going back to the home country. This of course takes planning and a different mindset because this does ultimately mean acclimating to a new life, a new set of rules, a new climate, a new culture and it's going back to the country that you know but are still slightly distant from.

I believe there are some challenges that returning immigrant might face when they return back to their home country and I have detailed them below.

Check out this book too, The International Living Guide to Retiring Overseas on a Budget: How to Live Well on 25,000 a Year, because part of living abroad and taking advantage of geoarbitrage is to learn to live on less.

Live Like a Local Instead of Tourist

For the past 26 years, we've gone back a few times to the Philippines, but always as tourists. This means our trips were always temporary. We had a return date and traveled and spent money with a very short-term mindset. During our trips, we also always bounced from one island to another to visit family given the short amount of time we had.

I'm foreseeing that my parents will need to acclimate to life as locals. This may mean they travel like locals. This means getting to know local culture systems and processes, which will vary wherever they are. This means getting used to prices in relation to their new level of income instead of the dollar conversion. This means being comfortable with the language. This means spending like a local.

There's a great advantage of being a tourist in a country that has a positive exchange rate, but it can be dangerous if you keep buying because it's so cheap.

Spend on You, Not On Everyone Else

When it's your home country, there is somewhat of an expectation that if you come from the US, you have money to spare. There may be an expectation treat everyone else because they expect you as an American to do so. The reality is that for folks moving to another country, the goal remains and continues to be about ensuring the money you've saved up for retirement lasts throughout your lifetime. Other people moving to another country as part of their geoarbitrage strategy may not have this challenge.

No matter what, even just the fact that your retirement money is in a "better" currency means a higher peace of mind. Your worries won't seem as great if the currency is stable and fluctuations are low. It's also tempting to be good to everyone in a nation that has a low poverty rate, but doing so can jeopardize your savings. It sounds a bit harsh, but we have to face this reality. I do believe though that hopefully retirement will provide the time to allow for volunteering which can go a long way to helping the local community than say perhaps doling out money.

It's easy to say that you remember things to be this way and that way, but as with anything, as time passes, everything else shifts with it. I think one of the challenges with also going back to the home country is shifting the mindset from one of familiarity to one of new appreciation. Twenty six years is a long time to be apart from a country. There's going to be this dichotomy of thought processes that will continue to flow. It's natural especially if you've been living and been experiencing two different worlds.

The move to the home country will mean seeing the familiar in a whole context. Just like anywhere in the world, things can sometimes remain the same which can be good and bad and things can be so different that it shocks you. You just have to prepare yourself.

To this day, living in the US, I still straddle two divides. There's nothing wrong with, it is just something that we all have to live with as migrants in this world. So with that, geoarbitrage can be a positive change for those that have plans to follow through with it. While geoabitrage was made famous by Tim Ferriss in his book The 4 Hour Work Week (which I highly recommend), many immigrants have already been doing this when they return to the home country.