Leveraging on Geo Arbitrage with Slow Travel – NomadNumbers

Is travel really an expensive activity? or can it actually be budget friendly?

In this episode, Mr NomadNumber from the NomadNumbers couple talks about their nomadic travel style and expenses. He shares the activities that they engage in when traveling and how slow travel can actually be cheaper than lifestyle cost back home by taking advantage of geo arbitrage. We discuss travel budgeting tips, financial considerations and lifestyle design to create a life of freedom.

Here is also a free budgeting tool created by NomadNumbers.

FOLLOW MORE PODCAST EPISODES HERE:

FIND NOMADNUMBERS HERE:

• Link
• Instagram
• Facebook
• Pinterest
• Twitter

The following is an extremely summarized version extracted from the transcript of the full conversation. I strongly recommend listening to the podcast for all the valuable insights. You will also hear more detailed and contextualized stories from the guest(s), as well as pointers from me in a two-way conversation.

Please give an introduction of yourself.

I grew up in France and moved to Silicon Valley in 2008. I worked there for about ten years, and that’s where I met Mrs. Nomad Numbers five years ago. After a long conversation, we decided to quit our jobs, leave our place in San Francisco to travel the world full time.

We have been on that journey since 2018, so it has been three years; as of July of 2021, we just crossed our three-year mark. Since then, we have been having a blast. We’ve not looked back; we’re not missing anything we’ve done before. It’s been an exciting journey; we have a lot to be grateful for.

What made you guys decide to quit your jobs and travel the world?

It started when we were dating. We both like to travel, and we both had early travel experiences. She went to Australia for three years and grew up in France. I was used to traveling each summer for four to six weeks a year. When I moved to the US, I was also trying to prioritize other travel. So travel was always part of our DNA. So as we were dating, we thought, let’s take a year off to travel the world and start saving money. But as we were looking into this, we stumbled upon two types of people traveling full time. So there are the digital nomads who are flexible in their work and can work from everywhere. And also, take advantage of the arbitrage by being in places where the cost of living is pretty low.

Then we start going into that new category of people calling themselves early retirees or following the Fire Movement, which stands for Financial Independence Retire Early. It was something we were curious about, so we started digging into the stories of those people. We looked at people like Mr. Money Mustache, the mighty scientist, and Millennial Revolutions, a young couple from Canada who quit their job in their 30s to travel. So we looked into those people and how they did it because they stopped working at an early age. I think Mister Money Mustache was in his early 30s. As we started digging into it, we realized that it’s not related to your income when you understand how much money you need to save for your retirement. It’s related to how much you’re saving.

Mr. Money Mustache has a pretty good post called The Shocking Math to Early Retirement, which says that the more money you save, the faster you can get to retirement, no matter how much income you’re making. If you can save more than 50% of your income, you should be able to reach that regular retirement age within 15 years or so. If you’re saving nothing, you still have to work until 70, 80, 90. If you’re saving rate is 1%, you will most likely never be able to retire. We looked at our saving rates, and we realized that we’d already been saving a lot. I think both of us had already saved 50%, which is not typical. I think the average saving rate is somewhere between five to 10%, especially in the US. Because of our backgrounds, we are both very good at not overspending and frugal in our spending. By the time we realized this and looked at the numbers, we had already accumulated enough to quit our jobs and use that money. Of course, you have to invest the money in specific vehicles to make things work. Now we don’t worry about our finances, we get to decide where we want to go and we have more time on our hands to do what we love.

How do you organize your spendings?

The more money people make, usually, the more that we spend, and it’s okay. I have nothing against career growth; I increased my salary by nearly tenfold from when I started in France to when I ended in the US. But it’s about what you do with your money and your priority when you spend that money. As long as you spend that money on something meaningful, I think you are good to go. Many people spend money on things they don’t really use, like upgrading their phone every year for 1000 bucks, just because everybody upgrades their iPhone every year—those types of spending. So looking at your spending is essential. When we started looking at FIRE, many people talked about managing to live an entire year on $1,000; they were frugal to the extreme. They lived on rice and beans, which is not the case for us. We get to go out to restaurants, and we get to do various activities.

How has your minimalist lifestyle been influenced by your travel?

I was renting my place in San Francisco, so that’s where we were working before. I’d been in the same place for ten years, since 2000. In 2018 is was limited to the size of my one-bedroom apartment, so we were limited to what we could accumulate. As we prepared for traveling, we realized we still had to downsize quite a bit; we needed to travel as lightweight as possible. So we had to sell quite a lot of stuff and stored a couple of boxes at a relative’s place, but that was pretty much it. We kept winter stuff we might want to use when we come back or going to colder countries, but since we prefer warm weather, we’ve never needed them. We also realized that it’s probably cheaper to buy it, use it for a month, and then donate it back if we need something. Things don’t last forever, so we embrace minimalism.

We read the book by Marie Kondo, The Life-Changing Magic of Tidying. Her concept is to make sure that everything you own you need to bring you joy. If you look at anything you own and it doesn’t bring you joy, you don’t need it in the first place. It is good to declutter; it brings you more joy and makes you happier because everything you have is sentimentally attached. Decluttering is good; I think everybody should do it. I think it’s a good exercise for people, so then they only focus on what matters.

Did you guys plan to achieve a certain state of financial stability before leaving?

There was a good question. We wanted to try to understand how those people can sustain it. So we went digging into the math behind how much people were saving and whether it would be safe over a more extended period. I think there was a study called the Trinity Study that is a couple of decades old. When we were looking into the portfolio of people who had invested their money into stocks and how many years ago the minimum withdrawal amount they could take each year from their portfolio to last over 30 years. They realized that 4% is a safe withdrawal rate. As long as you only take 4% of your portfolio, your portfolio can technically sustain you for 30 years; it has been proven it can be extended longer to 60 years. So we looked into that. You need to know how much you want to spend per year. So let’s say you want to spend 40,000 a year; that’s how much money you need to have an enjoyable life, then you do that 25 times. So 40 times 25 is going to be 1000; that’s 1 million. Suppose you invest that into the stock market; it has to be 50% into stocks and 50% in bonds. As long as you have that, technically, you will be able to extract 40,000 American dollars of that portfolio for the next 40 years or up to 60 years. So that’s the formula; we looked at what we felt was the amount of money we needed to travel. Surprisingly, you don’t need that much, and we’ve shown that it’s actually below that threshold, and basically, this is how we came up with the numbers. We did a lot of double-checking, talking to people to make sure it was solid. We’ve done that for the past three years; we went through the pandemic, the crash in the market, and everything was fine on our end. We feel comfortable about our decision.

What are the factors you take into consideration when you decide on your next destination?

To ensure that we are not going to be above the budget we have for the year; we closely track our spending. Without realizing we always seem to spend around 40,000 no matter what we do. So that seems to be our average budget. The thing is that for us there are so many places to go. There are costly places like California, New York, and London. If we wanted to stay in one of these places the entire year, we’d go over that 40,000 budget. That being said, because we take advantage of geo arbitrage and the fact that we can be anywhere, we can alternate being in a cost of living country and the US. By using geo arbitrage and traveling around the world, we can have excellent control of our budget. So there are times when we spend much more than we would generally spend, but we can always balance it out. So far, we have had no limitations; every time we wanted to go somewhere, we just went there and were able to enjoy it. We didn’t have to reduce our stay because that place was too expensive.

What are some of the top tips that you have for saving money while traveling or making your money stretch while you’re traveling?

I think the first is that you need to look at your spending, which we initially put most of our efforts into. Look at how you can reduce your big-spending, for us it is accommodation. Then it is food and then transports. When it comes to accommodation, we try to stay a minimum of four weeks in a place. We use Airbnb; you will be able to negotiate a better deal, a daily or weekly rate. We have usually got it down to at least 50%, and we share tips on negotiating with the host. We have a way to approach them and negotiate further, that’s helped us reduce our accommodation costs.

We like to go out, but we mostly eat at home because it’s part of our new lifestyle. It’s not like recovering for a year and then going back to what we used to do. We like going to restaurants and street food vendors. But we’re very focused on enjoying cooking at home plus it helps us know the seasonal ingredients and whatever is in the country. We get to discover new food and new produce. Mrs. Nomad Numbers and I are both into cooking, so we don’t mind. We appreciate having a kitchen in the place we booked, so we reduced our food budget by cooking at home. When people travel for a shorter period, they will tend to go out all the time.

The highest transportation costs for us are usually flight industrial transportation. So we use travel rewards, which many people in the US can tap into by opening credit cards. You get a lot of signup bonuses you can use to pay for a free flight. I think each year we only spend 1500 2000 on transportation. Even though the first two years we were traveling multiple, long flights across continents. That was probably $10,000 of flights, and because of the miles, we only pay for the fee and tax. We only have to pay when we do short flights within Southeast Asia with low-cost airlines. That’s why we have to pay a bit more, but there are huge savings there.

So those are some of the tips that we like to employ.

How is flexibility beneficial when traveling?

We can decide based on the seasonality of things. When we went to Aruba, we didn’t want high season. We went in shoulder season when the weather was still lovely, but things were relatively cheap, and instead of booking all-inclusive, we booked an Airbnb. We were able to negotiate as well as having more space and being in the less crowded places. We don’t like being too close to a lot of crowds. Sometimes Airbnb, which is away from the big hotels, is a good option for us. We like to DIY our sightseeing because we have the time to do everything we want. We rent cars and stop when we feel like it. We don’t have to worry about predefined schedules.

Do you choose tourist destinations depending on the travel season?

We made that mistakes because, in our second year, we went to Europe. We went to Spain and Portugal. We spent July and August in Porto and Lisbon, respectively, and we paid full price because it was during a season. I think we spent a lot in those places. I think we spent 1500 in each town when we would probably spend at least half of that price out of season. So we learn from that.

Do you splurge on any particular things on your travels?

We enjoy food, we both like cooking and every time we go to a country we want to sample the food. We’ve been to Penang, Malaysia, and the food there was impressive. We had loads of Nyonya food, Chinese and Malaysian food that mixed various flavors and rich cuisines. We ended up taking a cooking class with a private chef. It was a surprise for Mrs. Nomad Number I was I took her on that afternoon cooking experience, we met the chef at our hotel and went to a market to gather all of the local ingredients. Then we went to his condo overlooking the city with a nice open kitchen. We made three dishes together over the entire afternoon. It was such a cheap experience in the US it would probably cost maybe 1000 bucks for such an experience. Because most of the countries are way more affordable than the United States, we can splurge more. We didn’t spend a tonne; that experience was relative to our budget. That’s one experience. We like food, and we enjoy a monthly date night. So once a month we have an experience, sometimes we’ll surprise each other or going to a new restaurant or go to the park and prepare something nice. That’s where we’ll be splurging on the food. We also love the outdoors, so we will spend a lot of time hiking and being outside, but those things don’t cost too much.

Is cost of living a big factor when choosing destinations?

Yeah, that’s why we love Slow Travel. We were in Chiang Mai for almost six weeks; we rented it for 600 a month, on the higher end. It was our own condo with a kitchen, a pool, a gym, a lobby; everything was modern. But over a year, you can easily spend 10,000 in Thailand and live very comfortably. So I think that’s why we love geo arbitration and Slow Travel; we just get to expand so much. In Thailand, massages are inexpensive, it’s less than few dollars for an hour massage, and they are of excellent quality. So we don’t mind planning to spend more time in Southeast Asia, because there are just so many countries to explore. Then we get the advantage of tapping into the low cost of country living.

Tell us about your travels to Taiwan?

We didn’t know anything about Taiwan until we got there. We were in Bali, Indonesia, in March 2020 when the pandemic hit. Nobody was worried about it, but when we saw the news, we decided against staying in Bali because things didn’t seem very stable, and the nearest hospital was an hour and a half drive from our villa. We were worried that it was going to get overwhelmed. So we decided to look around at the neighboring countries that were doing well; in terms of cases. We looked at Taiwan, Malaysia, Singapore, and Australia, and we decided to take a chance with Taiwan. I don’t know anything about Taiwan, but the food is fantastic. It is one of the best street foods in Southeast Asia. For context, I’ve never been to Southeast Asia until 2019, even though I’ve been traveling a lot in America for the past ten years before we left. We did street food in a couple of countries we explored in 2019 and 2020, but Taiwan was by far some of Southeast Asia’s best street food and overall food. Taiwan is one of the safest places we’ve been, and we managed to get residency there. I think we will probably try to come back because it’s a perfect base for South Asia.

How does travel become different when you are a perpetual traveler versus a vacation traveler?

We don’t do the touristy things because it is too crowded and you don’t get the experience when you don’t have the time. If you are in a place for a few days or a week, you have limited time to see many things. But because we have the luxury of having as much time as we want in the location, we focus on the less touristy things. We find those places much more pristine and hidden. We sometimes do the touristy stuff, in Taiwan, we went to Taipei. We tend to focus on hiking, finding excellent viewpoints or beaches; we swim, meditate and read books. We have a nice morning routine. When we went to Penang, the food was so good that we tried as many restaurants as possible to explore the food.

The criteria vary on the location we want to visit. We go to places because we want to explore them; we don’t pick them as potentially long-term stays. When we find places we like, we consider coming back to them. So, for instance, in Portugal, we feel it could be a good base for Europe. We spent two months there in the summer of 2019 and would consider going there for a more extended period, maybe look more at the real estate.

What do you consider when choosing a travel destination?

Yeah, we look at real estate. Taiwan is the cheaper version of Japan. The people are friendly; it’s incredibly safe. We lost a GoPro, but someone found it and left it at the local police station. So really save the transportation they have you know, The trains are high speed and relatively affordable. They have local trains, which are super cheap. We can live in Taiwan for around 25,000 a year and live pretty well. So yes, we look at the pros and cons of each city, we pay attention to the environmental quality like air pollution, water pollution, and safety. We look at the country’s stability; some of our friends were in Malaysia during the pandemic and got kicked out after a few months because the government asked them to return to their own country, they couldn’t stay. We are looking at some of these criteria when evaluating it as a potential base in the future.

What are some of the challenges you have faced when traveling full time, and how do you overcome them?

Community is a big one and one that we’re still figuring out as we travel. Even though we travel slowly, we do move multiple times each year. We might meet people as we travel, but those people tend to stay in this location or move to different places. We try to go home at least once a year, so France for me and the US for Mrs. Normad Numbers so we get to see our friends there as well. But I think keeping in touch with those people or developing communities as we travel is one of the challenges.

The other challenge that we resolved was from a relationship standpoint, as we are together for 99% of the time. In the beginning, it was an adjustment because we got to do everything together most of the time. So being with the same person, in the same room for an extended period, is a little bit what people probably experienced with the pandemic. We’re pretty good at it now. We’re using monthly rituals to check in on things that are good or things we can improve. We tried to communicate as much as possible together, which has helped solve all of those issues and challenges. I think there is planning involved, so it’s time-consuming. We have to plan and look for accommodation with a pretty good kitchen and natural light whenever you move somewhere. So Taiwan was quite a challenge because many apartments don’t have natural light; many apartments have artificial light and blue light. We didn’t like that, so there was a lot of planning going on.

Do you find it challenging to meet the traveling community?

As we’re a couple, we don’t have to seek out that community at first. When we stay in places for just four weeks, we do everything together. But over time, you want to have a bit more space. Taiwan was good because we spent 18 months there. We went from four to six weeks in one location to a few months. That was very interesting because we were able to develop a community of friends. We have people now that we’re calling friends that we’ve been hanging out with. I signed up for a triathlon, and it was something I did for myself. I was training with ex-pats and locals that I met. Of course, I have the travel tools that we’ve been sharing on the blog, but I think it’s nice when you are in a location for a long time. You can invest yourself in the area and into new hobbies. That has been good, but because we love each other, we are not seeking community as much as you might if you’re traveling solo.

We usually don’t have a problem finding people because we go to meetups or use Facebook groups. We are creating a small community in every location, and when we return, maybe they will still be there. Taiwan will be a nice experiment because we plan to come back here more often due to the current residency permit.

How has the COVID situation affected your businesses and investments?

It was a good test for us. We got to our second year of full-time travel, and the market has gone up significantly since 2018. Most of our investments are in the stock market. We also started to diversify before we left into some real estate. COVID was really bad on so many financial levels. The stock market tanked. We had to consider what our budget for the rest of 2020 should be back in March. We had to do a two-week quarantine in Taiwan, which was mandatory, we had to stay inside our apartment, and we had a lot of time to think. Things were looking terrible, and we decided to reduce our spendings.

We set a budget we could stick to and focused on cooking more than going out because we wouldn’t be able to go out. I wrote about this on the blog; if your readers want more details about the mindset. We were surprised we didn’t have to sell anything; the investment stayed the same; we just kept monitoring it. We were amazed that the market recovered quickly because all losses were recovered by September or October. By the end of the year, I think our investment went above what they were before the crash. We weren’t in panic mode; we felt grateful that we had that money invested, and we could be anywhere in the world. We managed to be in a place with a tremendous cost of living to reduce our spending significantly. We spent a little less, and then we felt comfortable in spending. We had passive income coming from the market and from a dividend in renting for the real estate; those incomes kept coming in, so we were good on that front. Some of our friends went straight back home to the US, but we felt that, even in California, there were too many cases, and Taiwan had none. It turned out to be the best place we could have been.

Taiwan had no cases for the first 18 months; I think they had 1000 cases from March 2020 to March 2021 and all of those were imported cases of people coming back to Taiwan because the border was closed to foreigners. There were no locally transmitted cases for a year, and there were a couple of outbreaks. One significant outbreak in May affected the country; fortunately, that has been resolved, and things are reopening again. I think that brought the total number of cases since the beginning of the pandemic to 20,000 or 18,000, and maybe less than 1000 deaths. Those are really low numbers when you look at the worldwide numbers, and that’s why we’re planning on going back to Taiwan long term; it will be a safe place if there is a new variant and if the situation becomes complicated.

I forgot to mention that we also had a couple of years of spending in cash, which is why we felt pretty comfortable. We expected the crash to take two to four years to recover, which was the case in 2008. We chose cash instead of proceeding with our investments. That’s probably good advice if people are trying to get into the long travel journey and following investment practice; have an emergency fund, so you are not panicking.

We like to be conservative; if that situation happens again, we can reduce our budget. But technically, we’ll have time, and we can still spend the same amount of money for three years so that we feel good about it because two to three years give us plenty of time to adjust.

What are you working on, and how do you get motivated to work on all these things?

That’s a good question. I think many people are used to working, that’s what they do for their life. They go to work from Monday to Friday and then on weekends that’s their free time. There are a lot of things to do because we don’t have a house or kids. So what do we do with our time? We can explore, but after a while, it might be tedious. So we split our time. 50/50. 50% we explore new places we can learn more about. Then the other 50% will be our project or hobbies. So for myself, it has been blogging and spending time sharing what we’ve learned and showing people that it takes very little to travel. We are in Dubrovnik spending time building an app because my background is in software engineering; I’ve been running mobile developments. I’ve started launching an app to help people track their budget, as well. So working on the app and keeping our brains sharp, reading books, and taking Chinese classes.