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At its most elementary level, geoarbitrage makes sense when it lowers your expenses far more than your take-home pay and the gap between your expenses and your take-home pay grows decidedly larger. To show what I mean, let’s take a quick look at the Groovy gap before and after we left New York.
Groovy Gap in Long Beach, Long Island (May 2006)
Monthly Take-Home Pay: $6,500
Monthly Housing Expenses: $2,000
Monthly Expenses Excluding Housing: $2,500
Total Monthly Expenses: $4,500
Gap: $2,000
Savings Rate: 31%
Years Until FIRE: 27.4
Groovy Gap in Charlotte (June 2006)
Monthly Take-Home Pay: $6,500
Monthly Housing Expenses: $200
Monthly Expenses Excluding Housing: $1,300
Monthly Expenses: $1,500
Gap: $5,000
Savings Rate: $77%
Years Until FIRE: 6.4
I wasn’t blogging back in 2006, so admittedly, these numbers aren’t 100% accurate. But they’re pretty damn close. For example, we were budgeting back then and I distinctly remember our monthly take-home being in the $6,500-6,800 range. I also remember socking away $2,000 a month for at least the last year we were in New York. And since Mrs. Groovy kept her New York job and I remained on my municipality’s payroll for another year after our move, our monthly take-home pay was $6,500 for the first year we were in Charlotte. And, finally, here’s another clue that points to the general veracity of these numbers. Mrs. Groovy and I officially retired in October of 2016. But we achieved FI in late 2014, roughly nine years after we left New York. Nine years, in turn, indicates a savings rate of 68%, which is not wildly far from 77%.
Given the above numbers, it’s safe to say that geoarbitrage made a lot sense for me and Mrs. Groovy. But what about others who may be curious about geoarbitrage? How would they know if moving from, say, Los Angeles to Austin made sense—from a gap perspective? Wouldn’t it be great if they had reasonably accurate numbers to inform their decision?
The obvious answer is, “yes.” We need the geoarbitrage equivalent of a retirement calculator.
But here’s the rub.
I did an exhaustive 5 minute search of the interwebs, and I couldn’t find one. But rather than curse my “outrageous fortune,” I decided to fill the void. Because that’s what personal responsibility warriors do. We don’t protest. We don’t hashtag (#whereismygeoarbitragecalculator?). We don’t bemoan retirement calculator “privilege.” And we certainly don’t beg corporate America or the political class to make things right.
Nope, we get off our arses and fix it ourselves. Here, then, is my first stab at a Geoarbitrage Calculator.
The Groovy Geoarbitrage Calculator In Action
I took the Long Beach and Charlotte numbers above and plugged them into my geo calculator. For the cost of living index numbers, I used an index provided by Infoplease. Nassau County’s index was 145.7, and Charlotte’s index was 93.2. And here is what the geo calculator spit out.
Not bad. My geo calculator pretty much nailed the prospective gap.
But what if Mrs. Groovy and I wanted to relocate to Austin, Texas, rather than Charlotte? And what if we decided to rent rather than buy? And what if I didn’t stay on my municipality’s payroll and had to get an equivalent job in Austin? To see what the results would be, I tweaked the entries as follows:
- Prospective Salary One: $41,500 (According to CNN’s Salary Calculator, this is the Austin salary comparable to a New York salary of $76,000.)
- Prospective Monthly Housing Expense: $1,000 (According to Zillow, you can get a decent two-bedroom apartment for $1,000 a month.)
- Prospective City Cost of Living Index: 95.5 (According to Infoplease, Austin is a bit more costly than Charlotte.)
And here are the results.
Hmmm. Admittedly, this wasn’t a fair comparison. I’m sure the rents were cheaper in Austin 11 years ago. And the salary calculator might have erred on the low side. The salary calculator came up with a similar number for Charlotte, roughly 55% of my New York salary. But when I secured a job in my second year in Charlotte, its pay was closer to 65% of my New York salary. Anyway, regardless of my test’s shortcomings, it did show that geoarbitrage isn’t always a slam dunk. Account for rent/mortgage and local salaries, and the prospective gap improvement may not be large enough to warrant a move.
Final Thoughts
Okay, groovy freedomist, there’s my first stab at a geoarbitrage calculator. What say you? Is it satisfactory? Or does it suck the big one? I’m all ears. Let me know how I can improve it. And if you’re willing to collaborate with me on designing a better one, I’m down with that too.
Enjoy the weekend. And enjoy part two of Talking Trash with Claudia and Garrett. Peace.
I’ve also considered developing a retirement draw-down calculator that takes Obamacare into account. There are many variables involved, and it would be helpful to see how IRA distributions and capital gains impact the amount of your Obamacare subsidies. It’s a fascinating concept, and there might be some optimization opportunities. Thanks, Susan. You really got me thinking.
Love this post. Bookmarked in case I get an offer to work in Austin.
I always wanted to add calculators on my blog posts. But I have little motivation to write code since that’s already what I’m doing at work.
Thanks, Menard. Appreciate it. And if you can think of anyway to improve my humble geo-calculator, don’t hesitate to let me know. Improving it is going to be one of my avocations going forward. Cheers.
P.S. Check out the Calculated Fields Form plugin. No coding involved. Just a quick and dirty way to get a calculator up and going on your blog.
Hey, thanks for the tip. I’ll check that plugin. Please extend my regards to Garrett and Claudia. I met the lovely couple last spring over lunch together with other bloggers.
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Awesome tool Mr G!
After two awesome weeks in Hawaii, we’ve been fantasizing about moving there but financially it would be rough – cost of living is higher and job prospects are worse – both in terms of availability and salary.
Could reverse geoarbitrage ever make sense? I won’t lie that we found a lot of joy in our time there – and not just because we were on vacation.
The awesome part is that we can use your calculator the other way to see how much more it could cost us. Definitely food for thought 🙂
Haha! I just wrote a post about the benefits of geoarbitrage not always being financial. So, yeah, if geoarbitrage is awash in a financial sense, it still might be worthwhile if it makes you a better person or a happier person. And I definitely understand the appeal of Hawaii. My sister went to Hawaii several years ago and she still raves about it. Don’t leave us, Chris. We need you state-side, my friend.
I know you are already retired and so am I. We are going to need a Geoarbitrage Calculator for selecting Obamacare subsidies and avoiding State Taxes, especially when we get to the age of RMDs.
I’m impressed with the coding too. That is cool that there is a plugin for that. Good to know.
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Hmmmm. I’ve also thought of coming up with a retirement draw-down calculator that factored in Obamacare. There are a lot of moving parts and it would be nice to see how IRA distributions and capital gains affect the size of your Obamacare subsidies. Very interesting. There may be some optimization opportunities. Thanks, Susan. You really made think.
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Shiny! According to the calculator if we relocated back to SF with no cost of living adjustment then we have a gap of…17? That’s not good is it? Haha. Plus those Cali taxes. Oh dear, it’s straight to the poor house for us.
Haha! San Fran has a way of humbling many a gap. Definitely too rich for my blood. Stay in Seattle. You and Jared are kicking butt. Or come to North Carolina. We need all the FIRE enthusiasts we can get here.
Love the calculator! Excellent work, Mr. G. This great tool may be just what someone needs to take the geoarbitrage leap!
In the parallel universe where we kept our current jobs and moved to Boise 5 or 6 years ago, we would already be retired and out on our bike tour.
Now, as we pedal around the country trying to figure out where to live next, we’ll keep that cost of living index bookmarked as we create the short list.
I love the way your mind works, Mrs. G. The cosmopolitan cities in America are awesome. But not everyone can afford to live in New York, Boston, LA, San Fran, Chicago, and DC. The good news is that a lot of non-cosmopolitan cities in America are pretty awesome as well–Austin, Atlanta, Boise, Charlotte, Denver, Louisville, Nashville, Pittsburgh, and Raleigh are just some of the cities that immediately come to mind. I learned long ago that there is indeed life outside of New York City. Hail America’s low-cost awesome cities! And hail anyone who is bold enough to take advantage of them.
Not sure what I like more – the calculator or the fact that you built one because you couldn’t find one? Nice work, Warrior!
I’m not sure what I like more either–the fact that you praised my calculator or referred to me as a Warrior? Made my day, my friend.
Great post Groovy and I’m certainly going to bookmark this for the future when I’m ready to move. Right now my girlfriend has a great job that she loves in our state(HCOL) so we’ll be sticking around for a while. My job here is pretty good too so I’m not in a hurry to move but once I’m ready to call it quits, I’d rather move somewhere cheaper and warmer.
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Thank you, TITM. For a lot of people (such as you and your girlfriend), a HCOL state or city works. But when such people have made all the money they need to and are no longer taking advantage of amenities peculiar to their HCOL state or city, geoarbitrage is a great option. Nothing wrong with cheaper and warmer. Thanks for stopping by, my friend. And I love your moniker. Time-in-the-market is a great name.
As a numbers nerd I am LOVING this!!! 🙂
Number nerds are always welcome here. Just let me know if there are any features you’d like to see added.
Great article on Geo-Arbitrage, this is THE KEY for people with “options” or ready/ eager to change who want to reach their goals faster. Your “years to FI” are a great way to show the tremendous difference of choosing where to live. We live in the city of Basel, Switzerland (bordering Germany and France) and we can do Mini-triple-geo-arbitrage by shopping in three different countries. Optimization is key and can save many years of your precious life-time!
“We live in the city of Basel, Switzerland (bordering Germany and France) and we can do Mini-triple-geo-arbitrage by shopping in three different countries.”
Oh, man, I got a tremendous Chris Matthews Leg Tingle reading that. Thank you, sir. And I’m jealous, by the way. Europe is a pretty freakin’ cool corner of the world.
Pretty good… nicely done!!
I just wish there was an “anywhere but Francisco or New York” button. Haha
Oh, crap, Mr. WoW. Now you got me really thinking. What about a feature that suggests 10 good candidates for geoarbitrage after you put in your current city, income, and spending? Now that would be pretty freakin’ cool.
It’s pretty amazing that you couldn’t find such a calculator out there on the web, but I’m so impressed that you made one yourself. I’m not planning on moving from my high COL area (for a variety of reasons) but I will have fun playing with the numbers!
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Agreed, Gary. You would think geo calculators would be fairly plentiful on the web. Oh, well, now I have a little side project to keep my creative juices flowing.
Last year I geoarbitraged within my own city, moving 16kms away to a bigger house on a smaller block by the beach. Sometimes making a profit of 700K that you can sock away into investments means that even if things like commuting costs rise, (though I’ve found a way to reduce that to only a minuscule increase), and other basic expenses stay the same, it’s still worth moving to a different suburb within the same city. I’ve even kept the same job.
Isn’t it interesting how knowing about these things means that we can look at our own situations and tweak things to our advantage?
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“Isn’t it interesting how knowing about these things means that we can look at our own situations and tweak things to our advantage?”
That is sublimely brilliant, my friend. It’s amazing what one can do when one engages one’s functioning brain!
Very cool calculator! Angular or some other language?
I’m a fraud, Olivia. A fraud, I tell you. I actually started coding a my own geo calculator plugin with PHP and javascript. But there was no way I was going to get a functional mock-up in time for the post. So I cut some corners and just used a WordPress plugin called Calculated Fields Form. Not exactly my finest moment. If it’s any consolation, I feel a lot of shame. Do you forgive me?
Mr. G you keep amazing me! Nice calculator sir.
I would never have thought of condensation being an issue in a small house. The things you learn in these talking trash episodes. Good stuff!
Thank you, Amy. Yeah, I thought the same thing. Who knew a small house has potential condensation issues?
Fun tool Mr. Groovy. For me, the lure of Geo Arbitrage is not to move somewhere and get a lower paying job in line with that market. It’s to save a percentage of my inflated NYC area salary. Then take the savings with me somewhere else that’s less expensive and not have to work at all.
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That’s really the way to do it, Jason. If you can use your accumulated savings from New York and buy a house or condo outright, you’ll be in a great position to turbo-charge your advance toward FIRE. You’ll also have a heck of lot less stress. Life is good when you don’t have a mortgage payment.
Great article! Love the calculator. How did you make it (what tools/language)?
Hey, Whymances. I’m working on a geo calculator plugin that uses PHP and javascript. That should be ready in a month or two. To do my test-of-concept mock-up, I used a WordPress plugin called Calculated Fields Form. As Mrs. Groovy loves to point out, I cheated!
CRAZY – I don’t know how I didn’t pick up earlier that you moved from NYC to Charlotte to aid in achieving FI faster!
Mrs. Frugal Money Man and I are actually planning to do the exact same thing! We aren’t making the trip from NYC, but our plan is to relocate from DC to Charlotte in about 3 years!
Hey, whenever you’re heading down here, let us know. We love to share our knowledge of the Queen City.
I wish I had time to code up an awesome calculator like this one…. nice work…
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Hey, perhaps in the future we can do a little collaboration on this. Those html, css, and javascript skills you’re building would be a big help.
Nice calculator! Our COL is 85.1 in Houston, and 84.9 in San Antonio, the closest city with numbers, so we don’t gain too much with relocating. BUT, when we were looking at Bend, OR, omg, it was going the wrong way with expenses.
Similarly, I turned down a job in Camarillo, CA because the COL was too high for moving to just one, very reduced income. Since Mrs. SSC didn’t have a job lined up, we used COL calculators and home rental sites to estimate our new costs. It was disappointing because that job would’ve been nice and in a beautiful area to boot. Oh well…
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Haha! Think for my geo calculator to work for you, I have to add an international component. The cost-of-living in the Houston area is too affordable. Would you and Mrs. SSC consider Chiang Mai?
Oh man, this is so awesome! What a great resource, Groovies! I would have killed for this before we made our move to MI 🙂
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You’re too kind, Mrs. AR. You’re making me blush. But I do agree that this calculator could be useful. And what makes me really excited is that with a little dedication, I can make it a lot more robust. Holy purple cats, Batman! I may have found my calling.
Nicely built…I may have to use this in the near future…or far future. We did a similar calculation time move out to Cali and it worked pretty well for us. Though the fire really boosted our networth.
There are all sorts of calculators out there on the internet–retirement, mortgage, leasing, weight-loss, etc., etc. But not one geoarbitrage calculator? Outrageous! On a brighter note, though, I now have something to occupy my creative energies. Thanks for stopping by, my friend.
This is really some good stuff. Are you a coder or what?
I will have to play around with different scenarios to see how soon we can FIRE.
Hey question: Do you have any family around in Charlotte?
One of the reasons we are stuck in this VHCOL area is because we don’t want to move too far away from family 🙁
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Do not move too far from family if you have (or are planning to have) kids and if your family seems to have one ounce of willingness to babysit EVER, ha ha. Or else add a field to your geoarbitrage calculator for babysitting costs. They’re a killer🙃
Whoa! Great point, Kat. Yeah, the geo calculator definitely needs some refinements.
Thanks, Ms 99to1. I am a coder. I have a lot of experience with C#, PHP, and javascript. But, sadly, I didn’t code the above geo calculator. I’m working on my own right now. But that’s going to take a while, and I just wanted to put out a crude mock-up just to promote my idea. The above geo calculator was created with a WordPress plugin called Calculated Fields Form. So as Mrs. G so delightfully proclaims, I’m a fraud. Haha! I hope you don’t think too badly of me. And, no, we don’t have family in Charlotte. When our family decided to leave New York, they all decided to relocate to the Raleigh area of North Carolina. And that’s the main reason why we’re building Groovy Ranch up there. To get closer to family. Thanks for stopping by, Ms 99to1. Always a pleasure.
Dang Groovester, have you become a coder in your retirement? You’re dorking out on us
Maybe you need to turn this into a mobile app, that’s where the money is. Buy more Mountain Dew Code Red and get working!
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Haha!I love dorking out. But in all honesty, I’m a fraud. The crude geo calculator you see above was crafted with a WordPress plugin called Calculated Fields Form. I am working on a more robust geo calculator using PHP and javascript but that won’t be ready for a while. I’m just excited about the concept and wanted to get it out there. And I would love to turn this into a mobile app. I know Chris over at Keep Thrifty has some experience in this. Maybe it’s time for a joint venture? Thanks for stopping by, AF. Always a pleasure.
See a problem, go fix it. Or in this case, build it. Nicely done Mr.G.
Our issue with Geoarbitrage is we’d like to move from NY to CA. Not really a cost saver. I’ll have to run the numbers to see what they say.
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Hey, Brian. California’s tough. But if you own your house or condo outright, it may work. I think you’ll have to consult Tanja from Our Next Life on this matter. Best of luck, my friend.
Holy crap this is awesome!
Excuse me while I spend all day running numbers on this new calculator…
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You’re too kind, my friend. Give me plenty of feedback. I know it needs a lot of work.
Oh if you wanted to spend a lot of time on this you could automate some of the fields that look up data on the other sites. Screen scraping ftw!
I can’t believe the index site doesn’t let you sort! It is pretty hard to find a place that makes the cost/benefit ratio work out when we live in a 111 index.
Thanks, BOAS. That is definitely on my list. I want to make data input as painless as possible. I just put together a very crude calculator to prove the concept. Now comes the hard part–making it user friendly.
Mr. Groovy, Very innovative and tech savvy what you have done here. I have not tested it, but totally impressed that you take this concept to an even higher level. You too have a good weekend. Tom
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Hey, Tom. I agree with you that the geo calculator is innovative, but I have to push back a little bit on the tech savvy front. I started working on a geo calculator plugin using PHP and javascript. But that plugin won’t be ready for a while, and I wanted to get my geo calculator out there. So to show proof of concept, I used a WordPress plugin called Calculated Fields Form. This plugin is fairly intuitive and I got the above geo calculator ready in a couple of hours. Bottom line: when it comes to the tech savvy part of the geo calculator, I’m a fraud. At least that’s what Mrs. G says. Man, it’s tough having a spouse for a blogging partner. Thanks for stopping by, my friend.