If you really want to sound fancy, just throw in the term “Geo-Arbitrage” into any conversation and let people try to figure out what it means.
Let me break it down for you though:
Geo: As in “geography,” referring to location.
Arbitrage: A fancy word for taking advantage of price differences to make money or benefit in some way.
Example of basic arbitrage:
Imagine you know of two online sites that allow you to buy and sell clothes.
If a certain style of shirt is selling everywhere on Site A for 10$, but you find the exact same style on Site B selling everywhere for $4.50…...
do you think you could take advantage of that in some way to make money?
(Yeah – you could buy it from site B for $4.50 and immediately sell it to someone on site A for $10.)
***Notice that in the arbitrage example, you didn’t really do anything particularly valuable, you simply noticed a difference in prices for the same thing, and benefited off of it. That’s arbitrage.***
That’s the general concept. Price differences can be exploited.
Geo-Arbitrage is really simple.
Essentially, it’s just the idea that some places are much cheaper than others.
(To use fancier terminology, we could say “some currencies are much ‘stronger’ than others.”)
And you can benefit from this.
Want to really understand this concept?
Do what I did. After living in the United States your entire life, go to Mexico on a vacation.
What you’ll notice is that 1 USD buys you, at the time of this writing, about 20 Mexican pesos.
So even a few dollars can go a long way in Mexico.
(For example, if you want to buy three fairly authentic Mexican-Style street tacos in the States, it may cost you about $8.50 USD. I know because I just did it yesterday.)
But, you can buy 3 incredibly delicious street tacos in Mexico for like $3 or $4 USD. (I know because I just did it two days ago.)
The same thing applies to most everything in Mexico. The U.S. Dollar is strong relative to the Mexican Peso, and most things are inexpensive there, at least in terms of U.S. Dollars.
The exact same concept applies to other Central and South American Countries (e.g., Argentina), and Southeast Asia (e.g. Thailand).
Now think – how can you maximally benefit from this?
Well for one, you could go on vacation to these places, for surprisingly inexpensive travel. Oftentimes, in the right countries, you can afford super luxurious experiences for very low prices, just because of currency differences.
Or two, you could retire in one of these places – save up enough money in USD and then bring it over to the cheaper country, to enjoy an easy, early retirement where your USD goes a long way. (Leave all unspent money growing in an investment portfolio in USD, which you pull money from as needed.)
Or three, you could work remotely in these places (especially now that more jobs are available for remote work), and earn money in U.S. Dollars, which you then convert and spend in the local country, where your money will go a long way.
In general, by keeping in mind the principle of Geo-Arbitrage, traveling can often be less expensive than staying in one place and paying rent.
Instead of paying expensive rent in your home country, you could decide to move out, stop paying that high rent, travel long-term and enjoy incredible experiences in countries where your currency goes a long way – and still have a lower cost of living than staying home.
And that, my friends, is geo-arbitrage.