One of the approaches used by expats to determine what country to live and work in is comparing the cost of living between destinations. This is less of an issue for those who find employers that pay for lodging and cost of living differences in high-end destinations. For retirees, finding the balance between a low cost of living and quality infrastructure can play a significant role in how well an expat enjoys a given area. Those who choose to retire overseas can find that even the most modest of pensions can be stretched further when taking up residence in a country that has a low cost of living.
What Cost of Living Factors Are Important?
One of the most popular methods for comparing the cost of living in different overseas locations is to take a look at the per capita income after adjustment for purchasing power in the countries under consideration. This will give you a decent idea to determine the amount of individual wealth required for the average citizen of the country to make a living. Using the adjustment for purchasing power helps eliminate the foreign exchange differences and give you a good idea on how far your income will go. These numbers are still not fool-proof, however, as most countries will have greater requirements monetarily to live in the city as compared to the countryside.
Countries with a High Cost of Living
Highly developed countries that have the highest cost of living include Luxembourg, Kuwait, Norway, Brunei, Singapore, United States, Hong Kong, and Switzerland. Luxembourg normally comes in the highest amongst these countries, with the cost of living in the United States varying significantly depending on the location in the country being chosen to reside. For those seeking a developed country with decent infrastructure, but a moderately high cost of living rating include: Austria, the Netherlands, Ireland, Sweden, Denmark, Canada, Belgium, Japan, Finland, Bahrain, the United Kingdom, Australia, France, Italy, and Spain. Similar to looking at residing in the U.S., the specific location in these countries can cost significantly more than the country average.
Countries with a Moderately-Low Cost of Living
Countries in this category have decent infrastructures in place, but a much lower per-capita income at the national level. As a result, for the expat who is on a fixed income (such as a retiree) or filling an entry level job, looking at one of the countries in this category may be worth considering: Cyprus, Slovenia, New Zealand, Israel, South Korea, Saudi Arabia, Czech Republic, Portugal, Malta, Oman, and Estonia. Some of the less developed countries with moderately-low cost of living include Slovakia, Hungary, Lithuania, Latvia, Russia, Poland, Croatia, and the Seychelles. For those who don’t mind the economic structure of the destination being underdeveloped in many places or considered developing, Malaysia, Gabon, Argentina, Chile, Mexico, Turkey, Venezuela, Uruguay, Costa Rica, Panama, Montenegro, and South Africa may fit the need of the expat.
Countries with a Low Cost of Living
For the low cost of living countries available to expats, there is a distinct difference between those with large cities that have access to amenities for expats to live there and those which it is more challenging to find suitable living conditions. Of the more favorable, Brazil, Thailand, Ecuador, Ukraine, and China continue to be popular. For the expat looking for a very low cost of living, but a bit more austere living conditions, then Sri Lanka, Morocco, Paraguay, Bolivia, Vietnam, and Nicaragua are some of the more popular.
Budget for FOREX Uncertainty
Finally, when determining the cost of living in a given country, ensure you come up with a buffer to guard against extreme exchange rate changes that are not in your favor. This is more important if retiring to another country and living on a fixed income than for someone who is still working. Many expats will address this issue by ensuring they have a “Rainy Day” fund tucked away in a savings account equal to one to three months of living expenses. In the worst case, this provides the individual or family a little bit of a cushion to make the decision on if the new exchange rate is temporary or long-term. If long-term, it could result in making the decision to move to another destination.