Are you dreaming of a far-flung getaway but worried about the cost? If so, you’re not alone. Surveys indicate that with the price of gasoline down and post-Covid flights and accommodations getting more expensive, many Americans are considering shorter vacations within driving distance from home.
That option is certainly better than not traveling at all. Instead, what if you were boarding a plane for a fabulous international vacation at half the price you would expect to pay? It’s totally possible through the magical power of a fascinating and misunderstood concept called geoarbitrage.
What The Heck Is Geoarbitrage?
Geoarbitrage is a term first coined by the FIRE (Financial Independence, Retire Early) movement. People devoted to this concept follow an extreme discipline of saving and investing.
One strategy to accelerate financial freedom is “geoarbitrage” — moving somewhere with a lower cost of living while retaining the same income level. By residing in Ecuador on our Social Security budget, we’ve been following this aspect of the program for over a decade without knowing it had a name!
With that same income during the past 2 years, we’ve been exploring low-cost destinations around the globe for our website. By doing so, we have learned firsthand that the principle of geoarbitrage applies to vacationing as easily as it does to relocating.
To maximize your travel dollars, consider countries south of the United States (with one exception that we’ll mention shortly).
For sure, there are exceptionally affordable destinations in eastern Europe and Southeast Asia. The picturesque landscapes and historical cities of Bulgaria, Hungary, and Romania are fantastic, as are the stunning beaches, rich cultural heritage, and delicious cuisine of Thailand, Vietnam, and Malaysia.
But these places require a long flight traveling east or west through numerous time zones. Fighting fatigue and major jet lag when you step off the plane is not an ideal way to begin your trip. Plus, round-trip tickets to such far-flung locations are often budget busters.
You will generally pay less for airfare by vacationing in countries south of the United States. And with a shorter flight, you arrive fresh and ready to go.
From our experience, there are three categories of countries to focus on: those that are inherently cheap; those where the value of the U.S. dollar (USD) is favorable; and those that offer the best of both worlds.
1. Countries That Are Inherently Cheap
The most basic form of travel geoarbitrage is visiting a country where prices are always cheaper than what you normally pay. Our home country of Ecuador is a great example.
A low cost of living was one of the primary reasons we moved there in 2010. Since Ecuador uses the USD, there is never a concern regarding fluctuating currency valuations.
For budget-conscious vacationers, the combination of affordable accommodations, inexpensive dining options, and a plethora of attractions is unbeatable. Galapagos Islands, anyone?
Even though Mexico’s peso has strengthened this year versus the USD, America’s southern neighbor continues to offer a lot of bang for your buck. We spent several months there exploring Riviera Maya and the Mexican highlands and were constantly surprised at how little we spent for delicious food and, of course, margaritas!
Near parity between the euro and USD has made Europe more affordable for Americans in recent years. In particular, Portugal has emerged as the low-cost “destination du jour” for both expats and travelers.
Yes, Portugal is an exception to our east/west suggestion that is totally worth the flight time of 7 hours from New York. The weeks we spent in Lisbon were unforgettable and we can’t wait to go back.
As if its fabulous coastline, enchanting castles, and delectable cuisine weren’t enough, Portugal is a gateway to the entire European continent through a network of budget airlines and reasonably priced trains.
2. Countries With Favorable USD Exchange Rates
Some countries aren’t usually inexpensive, but faltering economies sometimes allow you to leverage the value of your money. Argentina is the current poster child for this situation.
Despite its abundant resources, poor government policies have caused Argentina’s economy to be in freefall for the past decade. This has resulted in an exceptionally weak peso versus the USD.
To add insult to injury, a “blue market” there creates an unprecedented opportunity for travelers arriving from the United States with crisp $100 bills. Trading dollars on the blue market gives you almost twice the number of pesos as the official exchange rate!
Is this legal? Well — let’s say it is Argentina’s worst-kept secret. Walking down Florida Street, a pedestrian shopping avenue in Buenos Aires, locals are shouting “Cambio, cambio, cambio” (Change) every 10 feet.
This year, we brought a stack of 100s with us when we spent the winter months in BA (as Buenos Aires is called by locals). After an unforgettable bucket-list excursion to Iguazu Falls and consuming copious amounts of fantastic Argentine beef and Malbec, we were shocked to return home with almost half our money unspent.
3. Countries With Double Advantage
Imagine a destination that combines both basic affordability and a favorable exchange rate. These countries provide the ultimate geoarbitrage opportunity, allowing you to enjoy a truly budget-friendly vacation.
Colombia, Ecuador’s northern neighbor, is just the country. In addition to sharing a border, both of these countries offer cheap prices for everything except imported goods. But as opposed to Ecuador’s previously described currency stability, Colombia’s peso has been quite weak against the USD.
The months we spent there last fall were incredibly economical. Rent for our lovely apartment, which included a terrace, was less than $700 per month. The most expensive entrée in a high-end restaurant cost no more than $7.50. Uber rides averaged $1.50.
Bonus Tips For Maximizing Your Savings
To further enhance your savings and make the most of geoarbitrage, consider the following tips:
- Instead of accommodations in a hotel or an entire condo, consider booking a private room through Airbnb. This economical option is basically the same as a hotel room with the bonus of a kitchen. Your host can often be an invaluable resource of insider tips as well.
- Embrace local cuisine and dining options to experience authentic flavors while saving money. In Colombia, our biggest meal of the day was often what is called an almuerzo. This is a freshly made fixed-menu lunch with fresh juice, a big bowl of soup, an entrée, and a dessert for just $2.50.
- Use local transportation instead of renting a car. If you normally drive everywhere, taking a subway or bus in a foreign country may seem intimidating. We have found the signage in most places to be quite clear even if you don’t speak the language. Since this is the way most locals get from place to place, the prices are super low and the systems are timely and reliable.
- Explore free or low-cost attractions, parks, and cultural sites to immerse yourself in the destination without breaking the bank. Prestigious museums often have certain days or afternoons when the entrance fee is waived. Admission may be discounted for seniors. Picnicking in a beautiful park is always free!
Wrapping It Up
Geoarbitrage opens up a world of possibilities for travelers seeking unforgettable experiences at a fraction of the cost. Whether you choose countries that are inherently cheap, those with favorable exchange rates, or destinations that offer both advantages, it is possible to create lasting memories without compromising your budget.
There is no need to settle for a trip close to home because you thought that’s all you can afford. By leveraging the power of geoarbitrage, you can turn your dream vacation into a reality.
So pack your bags, explore new horizons, and get ready to embark on a journey that combines adventure, culture, and affordability.