Reducing your costs allows you to benefit in many different ways. The first is when you have a reduced cost of living costs. It’s much easier to retire. This is because if your average expenses are $2,500 per month as opposed to $5,000 a month, then it’s far easier to retire. You only need half the amount of assets to retire to derive $2,500 per month as opposed to the assets needed to derive $5,000 per month.
Allows You to Save More
The other thing is it allows you to save more. For example, if you’re earning $6,000 after tax, and your expenses are $5,000 a month this means you can only save about $1,000 a month while if your expenses are only $2,500 per month that will allow you to save $3,500 per month. If you invest this you will earn a lot more in the long run. If you think about it, you will be almost saving four times the amount by reducing your costs by $2,500. It sounds like it’s hard to do but it’s not that hard to do.
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Save For A Rainy Day
The concept of saving is the idea of saving for a rainy day. It’s the concept of planting a tree today that will provide you shade for the next 20 years and so on. This is a very important concept and it will pay dividends. The value of something today is going to be far less than the value of something 20 years down the road. For example, a simple idea is if you buy a $5 Cappuccino every day, for 20 days a month, that’s $100 a day, that’s $1,200 per year if you took that $1,200 per year instead and invested it over 20 years you would have quite a significant sum. It’s not just the sum of 20 times $1,200 which would be $24,000, it is far greater than that. It’s also all the income accrued during that period, which probably wouldn’t amount to another $50,000 this is almost $100,000, just by having a coffee every day.
Compounding Interest and Investing
Compounding interest is an important thing and investing for the future is critical. That’s why reducing
your costs today will save you big time and cost tomorrow. Yes, we all think well one coffee is not going to change everything. But imagine you keep doing that coffee and you buy that gum and you buy that chocolate bar and you get that fast food. All of these things add up. And all of these things make you become broke and hurt your financial future. These are the things you need to work on.
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Reduce your Living Costs
Hence, by reducing your costs, you will gain a great advantage now one of the best ways to reduce costs is actually to go and live in a different country. Let’s very quickly compare two countries so we’ll use if you look at the average living costs in the US for family size, believe it or not, it’s about 2.5 individuals. Of course, some families are eight people and some families are simple single unit families, when we average it all out and you get about 2.5 people, with the average living being about $5,000. Now imagine that the average family was to live in Indonesia. Instead, their costs would drop to $1,400. This is from $5,000 to $1,400. That’s a dramatic drop. You can see that’s a saving of about $3,600. It’s basically about spending 25%, hence you’re saving about 75% of your living costs, which is a significant saving.
Developing Countries
If we were to take another country let’s say you went to the Philippines, which is very well known for its love of basketball. This cost is very similar to Indonesia, you’re looking at it once again, reducing your cost, in this case, $5,000 dropping $1,500, hence saving $3,500, that’s a 70% discount. Now also what’s very interesting is when you live in these countries, if you take $500 a month, and you spend that you can do that quite often for a fraction of the cost that you would do in the United States. Or for example, generally in the United States, you might spend $150 to $200 for a cleaner for one day. The same quality Cleaner in developing countries can be $10 to $20. You’re saving about 90% of that costs. Think about it. Let’s say you’re able to save $1,000 per month in the United States.
Improved Quality of Life
Well, if you hire one cleaner for one day, let’s say you want to clean your house once a month. That’s going to take about 20% of your savings after taxes and after expenses. Well if you have the same income, you now have a lot more money because you’re saving the $3,500 plus the initial $1,000. Now you have $4,500 after taxes and expenses. If you’re going to spend $15 It’s a small fraction of your cost it is not even 1% – it’s 0.33% of your overall savings. You can see the difference between 20% of your after-tax after expenses, savings or 0.33%.
Great Improvement
That’s why living in another country goes far better and it does so for two reasons. The first is of course you’re saving a lot of money. The second thing is, believe it or not, your quality of life is far better. You can have a cook three times a week. If you were to hire a cook to come in and clean or let’s say a cook or clean or come in every single day for every month, you would spend about 500 to $600, you would still be way better off than you are in the United States. Adding that expense in you are still at $2,000 costs. You’re still saving $3,000 net. It’s not really necessary to have a clean or cook 30 days a month, but you can do so whether you want it twice a week, once a week, four times a week, whatever you want, it becomes affordable. If you were to hire a cleaner in the United States for a month, you simply wouldn’t be able to afford it you have $1,000 savings that would be eaten up in about one week.
Lifestyle and Retirement
Your lifestyle is going to be far better. You’re going to live twice as good alive lifestyle-wise, if not three, four times better. And you’re going to be able to save far more. And if you want to travel it’s going to be that much easier. It’s going to be that much less costly. It’s a win-win situation. Now the only key is how can you transfer your current job and the salary of your current job to another country. Now on top of that, if you’re able to get tax savings, then that even greatly improves the overall situation. Imagine on top of this, you’re saving now $3,000 A month but now imagine the net differential and tax so there are certain places you can go to where your tax rate could drop by 50% or it could drop by 75%. Or you might even be in a country with a tax-free holiday. Your tax rate could drop 100% the tax is very complex and it’s but it’s important to factor this in your tax rate might drop significantly. Now you have to check if you have a tax treaty with the country you’re living in and what the tax rules are. Make sure that you know what you’re doing and that you’re getting in touch with a lawyer and a tax advisor. Because if you are earning money in another country, you have to make sure you’re not setting yourself up for tax liability. Most countries will allow you to have a tax holiday for several years or they will say well if you’re paying taxes in another country, you don’t you’re not liable for taxes here. Look at what is available for you and talk to a tax lawyer in your country. If you’re from the States speak to a good lawyer and find out what the tax rules are. You can also get in touch with us and we’ll help you advise you on this process and how it can be in benefit to you.
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