In March of 2020, right as the world started to shut down due to Covid 19, I moved from Falls Church, Virginia to New Wilmington, Pennsylvania. While I didn’t know it at the time, this was an act of geoarbitrage – and one of the best money moves I made during the pandemic.
What is Geoarbitrage
Geo refers to location, and arbitrage refers to taking advantage of a price difference. When you put the two together, you get a fancy word for a simple concept: Moving somewhere less expensive while maintaining (or even increasing) your income.
My Situation
I was living in Falls Church, Virginia, which is within the Washington DC metro area. It has a high cost of living compared to a lot of places in the United States. Using this cost of living calculator, you can see that Falls Church ranks over 50% more expensive than the average area in the US, and for housing costs in particular, it is about 2.5x more expensive than the US average.
My portion of the rent was $950 a month plus utilities, which was a very affordable compared to some other rentals available in the area.
New Wilmington ranks much lower on the cost of living scale with housing costs at about half as much as the US average. I now pay $400 plus utilities for my portion of the rent and I also have much more living space than I did before. With this move I automatically started saving an extra $550 a month.
But wait, there’s more
When I lived in Falls Church, I took a toll road to work that cost me $6 a day, or $30 a week. I also bought lunch out about 2 or 3 times a week, which averaged another $35 a week. On top of that I went to happy hour events and other after work activities which totaled around $50 a week. All in, I was spending roughly $115/week or $460 a month on these work related expenses.
After moving to New Wilmington, I no longer had to commute to work because of my full time remote job (more on that in a minute), and the pandemic ensured that I didn’t buy lunch out or attend happy hours anymore. Between my reduced living expenses and my non-existent work expenses, I now have an extra $1,100 a month of income.
So all you need to do is move?
Not exactly. Changing your location and having a lower cost of living is only part of the equation in order for it to be considered geoarbitrage. The other important factor is making sure that your income either stays the same or grows once you move.
In some cases, moving to a less expensive area also means that jobs will pay less in that area since employers factor in cost of living when determining wages. If you want to take advantage of geoarbitrage, you need to make sure you can maintain or even increase your income after you move.
But how?
A lot of the appeal to working in a metropolitan area is higher earning potential and more career opportunities. The Covid-19 pandemic has changed this dynamic drastically due to the huge shift in companies hiring remote workers. When I moved, I was fortunate enough to land a full time remote job with the same level of income I had when I lived in Falls Church.
Due to my new cost of living, I got a $1,000 a month raise. That’s 12k per year.
Geoarbitrage = more money + more time
With this move, I experienced first hand how big of an impact geoarbitrage can make for your financial situation. I’ve been able to reduce my money stress and actually max out my Roth IRA in 2020 and 2021. (If you’re not sure what a Roth IRA is, check out this article).
Due to my remote worker status I’ve also gained a lot of time back in my day that I now get to spend with friends and family doing things I love like hiking, rock climbing, and playing music.
But wait, there’s still more!
You can super-charge your geoarbitrage efforts because some places will actually pay you to work there if you qualify. A lot of low-cost places are enticing new residents with relocation assistance packages like the West Virginia WV Ascend program that pays $12,000 cash for remote workers to relocate. The package also includes awesome outdoor recreation and education perks that are hard to pass up. There are similar programs available around the country and the world that are worth checking out if you’re interested in taking advantage of geoarbitrage and actually getting paid to do so – just google places that will pay you to move there.
Word of Caution
While the move from Virginia to Pennsylvania was a huge bonus for my piggy bank, it took time for me to adapt to my new environment. Northern Virginia has a lot to offer in terms of dining, culture, and activities, and when I left Falls Church I had to adjust to a slower pace of life without as many social outlets (and of course the pandemic didn’t help in this aspect).
While I definitely recommend considering geoarbitrage as a smart financial move, just make sure that your new home will still be able to provide the environment that you need to be happy.
Pro Tip: Take some of that money you know you’ll be saving and hire a moving company so your U-Hual doesn’t look like this!
