I recently came across a cool website called Nomad List Financial Independence Calculator. By entering your age, net worth, location, current income, current expenses, and other investment related numbers, the calculator then determines how early you can be financially independent if you were to move to a different city. There are 306 cities on the list and the information is tabulated by expats that are currently living or have lived in these cities. I am not sure what the sample size is like for each city, so some of the numbers might not be the most accurate. Since we do plan to live abroad for an extended period of time (Denmark & Taiwan) in the future, I was very curious about which other cities might also work for us. I used our 2017 numbers for the calculation and below are some interesting findings.
Some Interesting Financial Independence Numbers
Cheapest city to live for a family: Khartoum, Sudan. $486 USD per month.
Most expensive city to live for a family: San Francisco, United States. $6,725 USD per month.
Vancouver spending per month for a family: $3,300 USD per month. (This is our baseline, I based this number on our 2017 spending).
It is worthwhile noting that weather for Vancouver is rated bad (presumably because of the rain). But the weather is such a personal thing, if you don’t mind the occasional rain, you would love living in Vancouver.
Copenhagen is ranked 5th most expensive city on the list with a monthly spending $5,504 USD for a family of 4. I knew Copenhagen was expensive but I had no idea it’s THAT expensive!
Some Interesting Findings
With $500,000 USD ($646kCAD) net worth, at 4% withdrawal rate ($20,000 USD per year) one could be already FIRE’d in 132 cities plus 19 within the next 12 months. Out of the 132 cities, I could see us living in Taichung, Quebec City (gotta learn French first?), Santiago, Budapest, Buenos Aires, Porto, and Hoi An. I was very surprised to see a major Canadian city on the list.
With $750,000 USD net worth ($967k CAD) net worth, the list of cities increased to 219 cities plus 16 cities within the next 12 months. The additional 87 cities on the list that could be worthwhile for us included Prague, Montreal, Ottawa, Madrid, Hiroshima, and Taipei. I have been to all 6 of these cities while Mrs. T and I have been to 2 of these (Hiroshima & Taipei) together. I would really love to live in Prague and Madrid to soak in some European histories. It would also be very neat to live in Hiroshima and Taipei for an extended period of time.
If we increased the net worth to $1M USD ($1.29M CAD), one could be financially independent in 278 cities out of 323 on the list (86%). If this was the case, based on the numbers, we would become financially independent in 309 cities before the age 40.
At $1.5M USD net worth ($1.94M CAD), one could be financially independent in all but 8 cities (Washington, Boston, Menlo Park, Copenhagen, San Mateo, Palo Alto, New York City, San Francisco). If this was the case for us, we could reach financial independence in 7 of these cities before age 40, and be FI in San Francisco by age 41.
We received almost $15,000 in dividend income in 2017. That amount was a mix of USD and CAD. I did not convert USD to CAD with our dividend income reports, rather, I treated USD and CAD at a 1:1 exchange rate to simplify the math. If we took a closer look at our 2017 dividend, the USD and CAD breakdown was about 20-80. This would put us around the $12,000 USD in dividend received for 2017. By calculating backward, at 4% withdrawal rate, that would give us a net worth of $300k USD (note: not our actual net worth. I’m basing net worth purely from our 2017 dividend income). I then plugged in $300k USD as our net worth into the Nomad List Financial Independence Calculator and kept all the other numbers the same. The calculator then showed that we could already be financially independent in 65 cities on the list with 17 additional cities within the next 12 months. It was very reassuring to know that we could already be FI in many cities based on our 2017 dividend income and expenses.
Interestingly, I didn’t see cities like Melbourne and Chiang Mai on the list. Since the list was crowdsourced by people already living or lived in these different cities, we should view the list with a grain of salt.
Here a more detailed calculation on whether we can be financially independent today by geo-arbitrage and living off dividends
Financial Independence vs. Retire
You may have noticed that I have not used the term “retire early” so far in this article. This was done on purpose. I believe retire early is a term that gets thrown around on the internet and is very loosely defined. What exactly is retire early? Does that mean you are no longer working at your full-time job before age 61 (or whatever the standard retirement age is now)? If you are still making income through some active work, does that mean you aren’t retired? For me, I would rather focus on being financially independent. Because once you are financially independent, whether to work or not is now entirely a personal choice. You are working because you choose to, not because you have to.
Macro View of Financial Independence
As already mentioned, we are considering living abroad in Denmark and Taiwan sometime in the future. We see this as an opportunity for the kids to learn more about Danish and Taiwanese cultures. We would also love for them to learn more Danish and Mandarin/Taiwanese. At the same time, living in Denmark would allow me to learn more Danish. Vice versa, living in Taiwan would allow Mrs. T to learn more Mandarin. Our plan of living abroad in Denmark and Taiwan has nothing to do with expediting our financial independence journey. Taiwan has a lower cost of living while Denmark has a higher cost of living, so perhaps they would cancel each other out, leaving a neutral effect on our financial independence journey.
There are many factors that determine whether you are financially independent or not. One of the biggest factors is cost of living. If you live in a city with a low-cost of living, it becomes easier to be financially independent. On the flip side, it is harder when you live in a high cost of living city. Thanks to advancing technologies, the world is becoming a smaller place each day. Therefore, geoarbitrage is something to consider as a method to expedite financial independent. And this calculator has shown financial independent is possible at different net worth amount by moving to another city.
Dear reader, did you get a chance to play around with this calculator?