Dave Starr

Moving to The Philippines from the USA

(Updated 25 April 2019)

Why would anyone ever search Google for the phrase”Moving to The Philippines from the USA “?

Well, there’s a lot of possible reasons, but one that comes to mind right away is geographic arbitrage.

Geographic Arbitrage

Geographic Arbitrage (which I’ll call Geotrage from now on in the article)  is a rather complicated term for a simple life tactic … earn high and spend low.

“Easier said than done, Dave, ” I hear you saying.  “I can only earn so much (and don’t forget to whine “I’m on a fixed income” *sigh*.

“And it just costs so much to live … just the basic necessities.”

If You Just Can’t Make Ends Meet, Perhaps Geotrage is for you”

Arbitrage most simply defined; … is the practice of taking advantage of a price difference … “.  Now often when you hear someone rattling on about “arbitrage” they go off onto complex deals involving foreign exchange, buy or selling stocks and all sorts of complex monetary deals that give many of us a headache.

And which can be disastrously costly if you make a big mistake.

For our purposes here, we are going to define our coined word … Geotrage” as “earning a high cost of living income” (HCOL) while living in a low cost of living country. (LCOL).

Here’s an Example That Worked For Me

I’m a US-born man now in my 73rd year.  13 years ago, when I retired from my US government job, at age 60, I was about $40,000 USD in debt, had already sold my US home at a very low price to pay off even more debt, and I was living in a decrepit double-wide trailer with holes in the walls.

I receive a very nice pension from my former job … spent 38 years of my life all over the world earning it, but my income could hot really have been any more “fixed”.

Actually, I wish my income had been even more “fixed” because after 13 years of the “tender mercies” of three US presidents (cutting Civil Service entitlements is “good politics for either Red or Blue politicians) I make even less than I did in 2003 when I retired.

To Put It Mildly, I Had Month Left Over At The End Of My Money.

However, was I going to get a decent roof over my head and pay off that whopping pile of debt without going to Wal*Mart and getting a job as a door greeter … or flipping burgers at McDonald’s on the night shift?

I don’t even have a college degree, and even if I did, have you ever seen anything more pitiful than a60yo man sitting in the line of bright, young 20 yo’s at the employment office …waiting to be interviewed by a 30 yo who thinks that age 40 is “old”?

Don’t Call Us, We’ll Call You Takes On New Meaning After Age 50

What could I do?  What would YOU do in my shoes?

Fortunately, I had an “ace in the hole”.  I was married to a lovely lady from the Philippines who was with me there in the USA, working hard and earning everything she could to help pay thongs off.

Since my wife was already a US citizen, we were pretty much free to go and please as we wished, and when I had visited her family in the Philippines I noticed that life seemed a lot more laid back and easy there … and A HECK OF A LOT CHEAPER!

Remember the Geotrage definition a few paragraphs back?  Earn in HCOL money (US dollars) and spend in LCOL money .. like Philippine Pesos?

My wife and I sold off the two cars we didn’t need, garage-saled everything else in our house and bought one-way tickets to Manila, Republic of the Philippines.

Did we survive?

You bet we did.  We didn’t just “survive”, we thrived.

All that credit card debt is now paid off.   We own a car, bought new and now free and clear and a two story 3 bed 3 bath home that’s now fully paid for.

All in slightly under 13 years.  And trust me, we didn’t live like millionaires but we lived quite decently and well.  Ate too much, had too much fun, traveled to other locations in Asia very cheaply and have generally enjoyed life to the hilt.

How Can You Save By Leaving The USA?

First and foremost, things in most Asian countries are cheaper.

On average at least 40% cheaper.  Here are two independent sites which document people’s spending all over the world and allow you to compare costs one country or city with another.:

Numbeo

Expatistan

Go ahead, take a look for yourself and see what your costs might be.  The savings can be significant indeed.

Secondly, You can save a LOT on Income Taxes.

If you are a US citizen, you must report and pay to the IRS Federal Income tax on all income … by law.

You can’t escape US federal income tax by moving outside the USA.

But there’s a huge legal potential for tax savings for all citizens who are outside the USA for 330 or more days per year.  It’s called the Foreign Earned Income Exclusion (or FEIE).  And it is not a trivial amount by any means.

In the tax year 2018 for example, the FEIE is $104,100 USD for all taxpayers outside the SA for more than 330 days.

This means that the first $104,100 you receive in earned income from your work while outside the USA is excluded, that is subtracted out of the total adjusted gross income that you owe taxes on.  This can easily mean a direct reduction of 20% or more in your total cost of living for that tax year.

It Ads Up Fast

Let’s see now, as much as 69% direct cost of living savings, plus as much as 20% savings in US income taxes?  We seem to be getting into some real savings here.

Also, don’t forget state taxes.   There is no requirement that any US citizen also be a citizen of any US state.  In fact, there are several hundred thousand US citizens in this world who have never even BEEN to the USA.

So if you’re currently a citizen of a US state that levies outrageous state taxes on you, just change your legal residence overseas and you pay no state taxes to anyone.

How much would that save you every year?

So FarWeAre Up To A Pretty Whopping Potential Savings, Aren’t We?

What should you do next?

First, research, explore and most of all, open your mind to the fact that living inside the USA, especially in a high cost, high tax state is NOT the only way a US citizen has to live.

Second, realize that Geotrage need not be a “forever” thing.  A lot of people I talk to have the idea of moving overseas when they retire kind of floating around in the back of their minds.  This may be the wrong way to look at things.

When you are 60 plus, with health issues, needing to use the services of Medicare (important to note that Medicare pays for nothing outside the USA), grandkids growing up and such, being back in the USA may be the best place for you.

Making a 10 or 15-year move overseas when your earning power is at its peak, when your kids are not sucking up $100k a year in college tuition, etc., may be best … it’s all up to each individual family.

But Don’t Close Your Mind To The Power Of Earning High and Spending Low

I kept my mind open and wow, did it improve my personal finances a LOT.

If you have questions or comments, or you are curious why I chose the Philippines, rather than Thailand, where 90% of the Geotrage folks seem to head, be sure to leave a comment .. and let me know what you want to learn more about.

Let me know what else I can tell you about:

Moving to The Philippines from the USA.