Insane, I know. Let me explain…
My husband and I are a little nomadic. As typical Gen X’s we love to keep our options open.
Our idea of a nightmare way of life is what most of the population strive for: a comfortable existence in a village they call home, where friends and family are close by and people in the pub know them well.
Whilst I totally understand this sentiment, and on occasions I’m a little envious of such clear goals (not to mention the emotional benefits of a consistent support network) when I think of staying put in the same house, village or even country for more than a few years I feel… well, trapped.
I read somewhere that 95% of people fear change. My husband and I are certainly in the 5%.
We thrive on change.
Such flexibility has a massive upside when attempting to FIRE: Geo-arbitrage.
Geo-arbitrage is where you take advantage of the differences in cost of two areas. This may be within the same country, such as selling up your £1million house in London and moving to Leeds. Or it could be taking your £400k net wealth and comfortably living in Thailand.
We have been fortunate to build our (not that massive) net wealth in affluent countries: Australia and the UK. Affluent countries are brilliant for building wealth; however, they are expensive to live in – especially for non-earners.
Before I came across the FIRE movement, I was clueless as to how and when we would retire. We’ve always been mindful of spending money, but retirement wasn’t anything we had clarity on.
The FIRE movement gave us the tools to assess our assets and expenses, and using the 4% rule, to work out how much we need to retire.
Equipped with this new data and method, I set about exploring some different scenarios.
We identified the three countries we would like to retire to;
I worked out these costs across the three countries and applied the 4% rule to our net worth.
Initially I was astonished to see that with our existing assets we could retire to Portugal NOW, living a Lean FI life.
That moment was momentous. The clouds cleared and light shone through; angels sang and unicorns jumped over rainbows.
We had escape plan that could work immediately.
Before this epiphany I didn’t realise how not understanding when or how we could retire was a burden for me. I now acknowledge that it was there all along niggling away at my subconscious. Whilst neither of us mind working that much, it’s so empowering to know we don’t HAVE to if we CHOOSE not to.
My initial calculations were made two years ago (when I started this blog). Since then we purchased an historic nine-bedroom – (yes nine-bedroom!) – home in Somerset that had been neglected for almost three decades. We’ve spent two years doing it up, and the additional equity we’ve created allows us to now be Medium FI in Portugal (trumpets please!).
According to one real estate agent’s estimate we may even be Fat FI in Portugal, but I don’t like to count my chickens…
We are still mulling over where to live. We love all three countries.
Top of mind is our daughter – her well-being and education. Given she’s on the cusp of teenager-hood, a move to Portugal would be quite challenging. We’re planning a scouting trip in February to see if we feel the right vibes to move there.
The drawbacks for Portugal are navigating a new language and the cost of English teaching private school. We think it would be unfair for our daughter to be sent to a public school that only teaches in Portuguese whilst she currently knows no language. Another drawback is that our passion is fostering children. Given we don’t yet know Portuguese we wouldn’t be suitable to do this for a very long time in Portugal.
Heading back to Australia is a tempting option – especially as the dark damp days of winter are embracing our big cold house. But we’re trying to work out how we can do it and be FI – or for FI to be within reach. We’re calculating the cost of housing in the various locations, and the years we have before we can access: SIPPS (55/57), Aussie Super (60) and finally Aussie and UK state pensions (67).
I’m researching how we can draw on our SIPPs whilst living in Australia and the tax implications. Or whether it’s better to move them into our Aussie Super (although I don’t like the idea of locking it up for longer than I need to). If any of you know some good resources explaining these complexities, please do let me know.
So, there you have it. We have nine FI numbers. We’ve reached the lowest two already which is amazing. Without a windfall I don’t think we’ll ever achieve the higher two, but that’s cool. If we achieve the middle of the road FI whilst living in a high cost of living country that will be a fabulous achievement.
Is anyone else considering geo-arbitrage as a fast track to FIRE? I’d love to hear your plans.