Retire Cheap in Places like Bali
Lifestyle design is all about changing the way we live so that we can fulfill our passions and experience life now. We should all be striving for early retirement from lousy jobs. My wife and I have a one year plan to quit our jobs and move to a new country. We are not retiring from work, we still want to continue working on interesting projects and possible doing some longer term volunteering, but we do want to retire from our current career of owning an English school in Japan.
Too many people still believe that retirement is for the 65 and older crowd who have worked and saved their whole lives and still have trouble making ends meet. How much money do you really need to retire? What if you could retire now, for as little as $500 per month? Of course, that means cutting back on most luxuries and living a relatively simple life but it does seem possible in lower income countries like The Philippines, Cambodia, Thailand, and Indonesia.
If you could live on $500 per month ($6,000 per year) and you made 6% annually from safe investments, you would only need to have $100,000 saved to retire. ($100,000 X 6 % = $6,000 per year) Alternatively, if you could make $500 per month from passive income like rental income from your house, or some internet business, then you could effectively retire now.
Ken Baylis on EscapeArtist.com, wrote two comprehensive posts (Retiring on $500 per month Part 1, Part 2) on living costs in several Asian countries. Here is the Breakdown.
Approximate expenses for apartment living on the cheap in Cambodia.
Rent: $90
Electric: $15
Water: $10
Cable: $35
Groceries: $130
Transport: $30
Miscellaneous – Visa Insurance etc. $75
Total monthly expenses – $310
Approximate expenses for apartment living on the cheap in the Philippines.
Rent: P7,500
Electric: P1,300
Water: P120
Cable: P850
Groceries: P5,000
Taxis: P3,000
Miscellaneous Visa, Insurance etc. P2,500
Total monthly expenses P20,270 – $431
(Here is another post with a $500 budget for The Philippines.)
From my experiences in Bali and Thailand, I know that living within these means is quite possible. Guest houses and inexpensive, but nice accommodations can definitely be found for less than $10 per night, particularly in off seasons. Long term stays generally get a bit of a discount but expect prices to substantially increase in the peak season starting at about Christmas.
The sample living costs that Ken Baylis offers are missing some other considerable expenses. Airfare is the biggest cost. If you plan on traveling extensively like my wife and I plan to do, then travel costs will greatly inflate your budget. This can be offset by traveling to local countries by bus or other cheap transportation, but for most jet set citizens, expect to add another $3000 to $5000 per person per year for air travel. That will increase your monthly budget by $300 or $400 per month.
Medical Care
Another key concern, for the older of us anyway, is health care. We all need to have decent access to medical care should we need it. Many credit cards offer coverage for vacations but there may be some difficulties getting reimbursed if you are a perpetual traveler. It is probably advisable to have some sort of international health care which can cost anywhere from $20 to $100 or more per month depending on the type of coverage. Global Insurance offers rates of $169 per year while World Nomads comes in at the higher end of the scale at $961 per year. Do your research and find an insurance provider with the coverage you need and also make sure it is a company that will pay out if the time comes.
The good news is that many countries like Thailand, Costa Rica, Hungary, and India have great, inexpensive medical care with English speaking doctors and dentists. Even if you need major procedures, you are probably better off then trying to go through the cash strapped medical system in your own country. Just make sure you have a substantial chunk of money readily available in case something serious happens.
Traveling Costs for Real People
Another key factor is luxury. It is hard to always save and scrimp. Cheap locations off the beaten path are great for a month or two, but most of us need to go to a big city and indulge in a nice dinner, a bottle of wine, purchase a new camera or clothes, etc. Of course, most of us need decent computers with reliable internet access. It is likely that you will want to take lessons, go sight-seeing, learn a craft or study a language, etc. Everything costs money.
$500 is definitely possible, but unless you are a real hermit, your expenses will be more. Talking to people in Asia, Central America and South America some numbers I commonly hear are $1000 to get by, $2000 to live comfortably and $4000 to live like a king.
Accommodations
$100 per month accommodation is certainly possible in many countries around the world, but it might be at the lower end for the preferences of some travelers. A more comfortable range would be from $300 to $700. For $700 you can often find a beautiful house, sometimes with a swimming pool, in lower income countries. Here are a couple of examples;
Serviced apartments in Changmai, Thailand for about $300 per month
Condos in Cebu, Philippines many in gated communities, sometimes with swimming pools for $300+
Food
Food can be found very cheaply in many countries, even if eating out. However, $5 per day as Ken Baylis suggests might be a little too low for my tastes. Even in an inexpensive tourist oriented restaurant, eating out with some drinks can cost you more than $15 for one meal. Of course, it is not necessary to do this every day but many of the more expensive and trendier restaurants and bars are great places to connect with other foreigners.
Most of us will have a difficult time eating local food all the time. We all get cravings for various cheeses, breads, meats, or sauces. One trip to an international food store can often blow your budget for months. Based on my tastes and preferences I would say a more comfortable food budget would be closer to $500 to per month for eating out and groceries.
Internet
It is becoming increasingly common to find wi-fi Internet access even in more remote tourist enclaves. You may be able to scavenge free access if you are lucky, but for those of us building internet businesses, reliable and fast Internet connections are necessary. Don’t expect much in poorer countries. You will likely pay full western rates for a quarter of the speed if you are lucky. Expect to pay $50 to $80 for Internet access if you can get it. For those of us who will live more nomadic lives, buying your own long-term Internet connection is not an option. However, expect to pay similar amounts visiting internet cafes if your guest house or accommodations don’t have Internet included.
Real Costs of Retiring for Jet Set Citizens
Rent: $300 to $700
Utilities: $80
Internet: $60
Groceries: $200
Eating / Drinking Out: $300
Airfare (on a monthly basis) $300
Health Insurance: $80
Visas, translators, legal: $50
Total monthly expenses – $1370 – $1770
If traveling with another person or family members some of these costs can be shared, like rent, utilities, and internet connections. Other expenses will be per person. My wife and I expect a budget of about $2000 per month. This might be as little as $1000 in countries like Thailand but will shoot up to $3000 when we go to Europe or return to Japan.
Costs of Retiring For Two
Rent: $300 to $700
Utilities: $80
Internet: $60
Groceries: $300
Eating / Drinking Out: $400
Airfare (on a monthly basis) $600
Health Insurance: $160
Visas, translators, legal: $50
Total monthly expenses – $1950 – $2350
For $2000 per month you could have a very comfortable life in a tropical country with great food and a fantastic lifestyle. $1000 per month is very doable for those willing to sacrifice material comforts and give up western ideas of consumption. $500 is the low end of the scale. Possible for shorter term travel, but unless you are capable of living a very ascetic lifestyle, it is not practical for indefinite travel. Don’t get me wrong, I strongly encourage everyone to greatly reduce their environmental footprint on the world by living simpler lives. Living on $500 is still possible but it requires a disconnection from the rest of the world. It certainly would be hard to blog about it on $500 per month.
Live for Free
Another option is volunteer programs. There are a wide variety of volunteer opportunities around the world that cover all your living expenses so it is possible to live on next to nothing and do meaningful work to enrich the lives of disadvantaged people. Volunteer for a year or two and let your savings earn you a safe return on investment. You will then have more savings to begin your early retirement. Who knows, you may even find that volunteering brings you the spiritual satisfaction that you were looking for in life.
Here are a couple of links to get you started;
Volunteer Abroad
Projects Abroad
Do You Really Want to Retire?
Of course, the point is not to retire at all. Lifestyle design is about liberating yourself from work you hate so that you can focus on your passion and really contribute something of value to the world. Your passion may be expressed through art, volunteering or starting a business. Go ahead and retire from your soul-sucking, dead-end job but you will go crazy living in a tropical paradise for the rest of your life. Retire now so that you can begin your life’s work.
Update
The Cheapest Places to Live in the World. $500 per month?- OpenTravel.com
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I was relieved when I got to your real costs section. Because I’ve been to Cambodia and spent a bit of time there and in locals homes I know what you’ll get for $90mth while you can definitely do it within those prices the idea of retiring like that is pretty much downright unrealistic for most westerners even if you are used to living in a hippy commune. Your $300 rent is far more realistic.
On $500mth in Phnom Penh you would be in the middle class, Cambodian middle class, which for many westerners would still be considered poverty.
Nice article but, good to see a level headed look at the topic.
The problem with depending on investment income for retiring – particularly a long retirement – is inflation and variation. This year it would be a real struggle to get 6% on you $100,000 – without risking your capital – so suddenly your already ascetic $500 per month is only $167 since 2% is about the best you can get. And since you can’t grow your investment income (again, unless you are willing to get involved with riskier investments), you are not able to deal with increased costs thanks to inflation. And if you’re retiring at 30, inflation is going to add up to a lot before you get around to kicking it in 60 or 70 years.
Passive income such as renting a home or running an internet business has its own set of risks, but is definitely the better bet for someone who’s considering such an early retirement.
Hi Neil,
Thanks for the comment.
You are correct in pointing out the effects of inflation on those numbers I provided. I was trying to keep the calculations simple just to show that people might not need as much as they think they do to retire. However, over longer periods of time, an average inflation adjusted return of 6% on low risk investments is not unreasonable.
One interesting note is that with the appreciation of the yen and the US dollar, your money can go much further in countries with devalued currencies. The Japanese yen in particular has appreciated more than 30% since last year on most currencies. I am lucky to be earning my money in Japan, now.
Following up on Neil’s point, I’ve often heard that 4% of the current balance is a safe withdrawal rate (at least historically prior to the latest drop). The 6% number is probably too high. Also, had you had $100K in 2007 giving you $4K in income it would have dropped to less than $60K today permitting a $2400 income this year – obviously inadequate.
Note that the 4% withdrawal assumes you’re invested in stocks which have averaged about 10% annually (again prior to the latest drop). You have to cover inflation plus your withdrawal and account for market drops. $100K probably isn’t enough without additional strategies for income generation and / or social security, etc.
A final note, remember you’re talking about the ‘developing’ world – as they develop they will start costing more to live in. Italy, Greece and Spain were super cheap 40 years ago. So you need to think strategically in that regard as well. Those 8% annual growth rates in China, etc. mean you’ll need investments that keep pace or your $100K will do you about as much good as they would back in the US today.
Otherwise, I suppose you could consider moving to North Korea in your elder years
Thanks for the comment Ken.
I think people tend to over-estimate the amount needed to effectively retire and generally give up before they get started. With some other online income strategies and some frugal living, earlier retirement is certainly feasible for many people.
Investing your life savings and quitting work are serious issues so I don’t expect people to take those decisions lightly. However, I also think that the last year was an aberration. Sure stocks are down 40% and if you we unfortunate enough to start your retirement in the middle of 2007 your assets would have taken a huge beating. That of course assumes you bought at the highest point and sold at the lowest point.
I think in a couple of more years, most of the losses will be recouped. The S&P returned an average annual rate of 10.40% over the last 20 years. If you invested your money in January of this year you would already be up more than 20% from the lowest point last year. Dividend payments would also probably add a couple of percent per year to those numbers.
With regards to currencies, the yen and US dollar have appreciated substantially over the last 6 months. If you have your savings in one of those currencies, this is a great time to buy property or invest in foreign countries. Your money still buys 20 or 30% more.
About the “safe withdrawal” rate you mentioned, if you withdraw less of your money that means you are leaving more principal behind to earn more interest. My understanding of what you are saying is that you are adding safety by taking out less then you could. The remaining balance would grow at a faster rate because you are earning interest on the interest.
I do agree that $100,000 is not enough to retire with only risk-free assets. But supplemented with some other online income, different short-term jobs or businesses and maybe the continued asset appreciation and mortgage reduction of a house you own, it might not be as far-fetched as some people think.
My wife and I are certainly going to try with not much more in savings. We still plan on working on other business ideas and we are only 40 so we can still work again in the case of some real financial set backs, but we are going to give it a try. 11 more months to go!
Actually it is easily possible to generate 4%-5% annually if you buy some dividend growth stocks such as some of the companies part of the Dividend Aristocrats index. These companies have increased their dividends for more than a quarter of a century. Dividend increases are typically higher than inflation, thus creating an inflation proof source of income for you.
A portfolio with a 75% dividend stock/ $25 fixed income allocation would outlast you provided that your retirement is about 30 years.
Btw I just found your blog, and I am loving it! (ironically Mc’Donalds is another dividend stock to consider)
$2000 is about £1200 GBP currently. My family of 4 live on less than that. Clearly we don’t have much luxury, but if that’s your per person total then I’d consider you’d be able to live in a modest flat with a degree of luxury in the UK.
Thanks for the comment.
Yes, $2000 is a decent amount of money. I use that figure just to be safe. In all likelihood we should be able to live for $1000 per month. We have before in Bali, Thailand and Hungary so i definitely know it is possible. I just want to have a budget that will also allow for regular airtravel and a more comfortable life.
Also, it is an average figure. Living in Paris, New York, London or Tokyo will probably cost closer to $3000 per month. I would like the average to be less than $2000.
You know in college I lived off 500$ a month in Minnesota just fine(2 years ago, no debt, 500$ a month fixed income) … 250$ a month apartment (actually very nice 3 bedroom apt btw, there was cheaper also) when shared with 2 other renters. If its with family or something you can easily split up the costs of living in plenty of places in the united states and still live the \western\ life style. I had a cell phone, internet and went to the bars fairly often. My diet may suffered a little but I am sure you can be creative with it.
I grew up in northern Wisconsin too where the cost of living was even lower then in college.
I lived in Houston TX in 1997-98 at $600-700 a month
1 bedroom apt $350 cable included(Nice apt community by a reputed mgmt company) with swimming pool
video library etc.
Gas – $50 (it was around $1/gallon at that time)
Groceries – $100
utilities – $30 (Hosuton is the energy hub and subsidized by state)
entertainment – (restaurants ,movies etc) $70- $170
Do you know there are many $3 haircuts shops around in Houston.
Also there are so many restaurants there that you always find good meal specials.
I used to eatout a lot.
I believe living costs are still around the same except for Gas.
I spent just under a month in Cambodia last year on about $500US. This was travelling around and staying in reasonable hotels, not going out of my way to stick to budget. The biggest expenses are almost always transport, not accommodation and food. If you’re staying in one spot for a long time, you can get your expenses down to $5-10 per day.
Another thing to take into account if you’re price shopping destinations is the ongoing political circumstances. The Airport shutdown at Bangkok last year was in many ways a good thing for the tourists and expats that were over there. I was getting hotels/guesthouse rooms for 1/3 the normal rate, and scored a great deal on an apartment in Sukhumvit. Whenever there’s something that scares off the package deal tourists, have a careful look, check out whether it’s dangerous or not (in this case it wasn’t) and considering going. You’ll get everything on offer, at a really low cost, without being surrounded by tourists.
Hi Nick,
Thanks for the comment. What was Cambodia like? I haven’t been there yet. Is that a good place to stay for extended periods of time?
And it is not just SE Asia where one can live large on little. We have been living large & doing extensive travel on 4 continents with Europe as our base so far…..all on a budget 25K total costs for a family of three. We find travel over land & deep immersion, MUCH more satisfying travel and very rarely take a plane. We saw 29 countries & 4 continents with just one long flight over 2 1/2 years. If we cross seas, we usually take a cargo ship…a fantastic & luxurious way to travel!
We like a lot of luxury…some 5 star hotel stays, top restaurants in Prague, France, Italy, Spain etc, expensive piano lessons across continents for our child, 3 lap tops–2 that are macs, nice clothes from France & Italy for our child, large new modern home with a pool & fast cable internet for the winter in southern Spain, dolphin swims, theme parks & lots of museums,groceries delivered, lots of dental work done etc etc.
It could be done for much less than we do it. Everyone thinks Asia, but we were paying less for lots more luxury in Spain than a fellow RTW family did in SE Asia. We are frugal types so we do not splurge constantly and put thought into our budget, but we would not want to live a life without luxury. On the other hand, I find it hard to believe that some people spend over 100K/year to see and experience much less than we have. I’ve seen families pay 5 or 10K just for a week or two of vacation and think what a waste of money.
In this economy, I think one needs to really watch currencies. We are really glad that we mostly got out of the dollar in 2005 as the fundamentals do not look good for it. I would also be very careful of stocks and bonds in this economy as the major economic shift going on will continue for years. Many of the major problems have not even begun yet.
I couldn’t agree more that people tend to over-estimate the amount needed to effectively retire. One can retire and still build one’s nest egg if one makes wise choices. The Terhorts retired at 35 over 25 years ago and wrote a classic book about it.
You actually can live & travel the world on nothing ( people have done this, including my brother), but if you want comfort in your life, a great education for your child/ren and more security for your future to add to your free life, you’ll probably want to spend more. Even in the US, most retirees live on 25/30K a year, so it makes sense that one can live well on that amount or less in cheaper places.
Thanks for the comment!
Yes, I agree that Europe can be inexpensive as well, particularly if you stay out of the larger cities. I have family in Hungary so I try to visit there regularly. A drink in a bar in Budapest will cost $3 to $6. In the country side, it is possible to find a drink for about a $1. That price differential is similar for rent and meals as well.
However, I still feel that countries like Bali, Thailand and the Philippines offer lower prices for comparable services.
How is the cost of living in Greece as compared with Spain?
John – A fantastic, thought provoking post! May I ask you how old you are, or a range, since I’m new here? I’m in my early 30’s, and my goal is to be free from my 7-7pm (!) job by 42. The target age was 40 but since the recession, I thought it best to work a couple more years.
I’ve planted my online income seed this year with Financial Samurai, and I have to imagine that in 8 years of consistent networking and writing, I should be able to generate a decent online income and travel the world forever.
I like your thoughts, and I wrote a post called “Knowing When To Walk Away – Financial Planning For An Unknown Future” on Wise Bread. Essentially, I ask readers to walk away from your job after a certain age, and not after a certain level of income accumulation.
I lived in Osaka, Kobe for a couple years and loved my time in Japan!
Best,
Sam
Financial Samurai´s last blog ..The Katana: Nobody Really Cares More About You Than You 11/22
Hello Sam,
Thanks for the comments.
I just turned 40 last week. I am certainly not rich but have managed to save enough to ‘almost’ semi-retire if my wife and I live cheaply. I am definitely going to continue to work on projects I enjoy and that still means work, but I am not going to be tied to set hours or a set location any longer.
10 years is plenty of time to phase out of any job, particularly if you plan to continue earning money online.