I have a little trick, designed to find places with a low cost of living and where your dollar can go far. It’s pretty simple, and you should be able to use it to scout for new countries as long as you’re alive. but if first requires that you understand a couple of background concepts, so bear with me here.
When you’re choosing a cheap country, you don’t want to just be looking at things like the cost of rent or food. This doesn’t allow you to know the full picture. To get an accurate picture, use the GDP per capita.
What is GDP per capita?
GDP stands for gross domestic product. Per capita means per person. A country’s gross domestic product is the measure of the country’s level of production in dollar terms. The GDP per capita is the average level of production per person in a country. GDP per capita can be deceptive, because some countries have a lot of children and old people. Japan for example, isn’t as wealthy as it seems at first glance. Nigeria is the opposite. The purchasing power GDP (PPP), is the second figure you want to know. This shows how much the country is producing in *today’s US dollars*. This means that the PPP GDP per capita in 2023, must use 2023’s prices no matter what currency it’s in.
How does knowing about this help me find a cheap place to live?
By knowing the GDP per capita, along with the purchasing power adjusted number, you figure out the difference between how much money is being made in the country, and what is tangibly being built. Purchasing power GDP Is standardized to the US dollar. This means that the PPP GDP per capita tells you how much the people in a country would be making *if they lived in the United States*. If you take a glance at the numbers, you’ll be able to see that many countries punch above their weight, meaning their purchasing power GDP Is higher than the nominal number.
So…what do I do?
Whichever country you’re looking at, you’re going to divide the purchasing power gdp by the nominal GDP. Assuming the numbers given are in USD, this number will tell you how much farther the dollar goes in that country than within the US. You obviously want this number to be over 1. My country is sitting around 1.7 or 1.8. Places like India and Pakistan are forced to be around 3, because their people are poor on average and need to survive. The higher the number you get, the cheaper the country. So, to summarize:
Cheapness of country = PPP GDP/Nominal GDP
Factor in warmth
It costs less to live in warmer countries. You don’t have to have special shoes, hats, coats, or other clothes in order to function. This means that in order for the cold country to be better, there needs to be some other factor making the warm country more expensive and it needs to be huge. Generally speaking, warmer countries are cheaper. So don’t go to a country that’s cold and poor unless you’re miserable.
People in poor countries are often living “off grid”
Want to know how some countries are full of people living well on $500 per month? Just remember that certain places are filled with people living on the fringes of the law and regulatory bodies. Poor countries make allowances for their residents because life simply wouldn’t be possible if they didn’t. You can’t take money from people who don’t have any. So be aware of this. In my experience, you need at least $600/month to survive pretty much everywhere on planet Earth. Don’t just look at numbers and decide you can live on $2,000/year.
So there you go. If you want to find a cheap place to live, I’ve given you the solution. Just run the equation I gave you, and you should know which place is more worthwhile.
