One of the interesting things that I’ve learned being the Nomad Capitalist – helping people go overseas and also studying money habits in general – is how much of this stuff is behavioural.
If you can go from 40% to 5% in taxes just by moving to a tax haven, you’ll be saving money, for sure. But how much money you can save or make by going offshore is not just tied to the actual tax rate that you’re paying.
I found that there are actually a number of factors that motivate people to make and save more money once they’ve gone overseas.
To illustrate this, I want to walk you through the case study of Tom and Mary.
Tom and Mary (not their real names of course) were a couple that I was able to really get into the human element with.
This article is going to cover the six different ways we found that a Nomad Capitalist lifestyle could help Tom and Mary live the life they wanted with more money in their pocket. They are:
- Reducing taxes
- Reducing the cost of living
- Reducing stress
- Taking “off-limits” opportunities
- Increasing partner revenue
- And increasing feel good income.
1 – Reducing Taxes
Going overseas to reduce your tax burden is one of the fastest and most straightforward ways to save more money offshore.
Step number one is reducing your taxes. We talk about this quite a bit here on the blog and YouTube channel. This is obviously a very easy way to save money and a big win for many people in the West.
In Tom’s case, he’s pulling in around $500,000 a year, $220,000 of which goes to taxes.
We put together a strategy for Tom and Mary where they could move from their home to a new country and only pay a little bit in taxes each year.
We got it down from $220,000 to $10,000 a year.
The money Tom saves can go into helping his business grow, be saved for emergencies, or put towards an early retirement. And all without having to sacrifice their quality of life.
Gained: $210,000 a year.
2 – Reducing the Cost of Living
You can reduce your cost of living to a fraction of what you’re paying now just by moving to another country.
Tom and Mary are living in Western Europe where they’re paying about $100,000 a year to live. This includes the particularly high cost of rent where they’re living. So far, we have around $210,000 in their pockets every year, making this cost of living much easier to afford.
Moving from Western to Southern Europe will cut that $100,000 down to around $50,000 a year.
Not only do they get the help from the massive tax break, but their living expenses are going to fall so drastically that they will have the opportunity to increase their quality of life.
Tom and Mary enjoy the sun and warm weather and were very happy to live somewhere in the south where they could also have more money in their pocket.
Moving seems like such a simple thing to do to reduce your cost of living, but it truly is an effective way to save more money. When you look at folks in the United States, for example, it’s very hard for people to save even 10% of their income.
Almost nobody does that.
The average person can’t even pay themselves first because almost all of their money is going to pay for their car to get around, their rent or mortgage, and their food from Whole Foods.
Paying for necessities, however, isn’t the only thing that changes.
There’s a behavioral change that happens when many nomads go out into the world from their home country. You can see it in the intentional way they start spending their money.
They don’t start making payments on the fancy new car or go spend their time doing what all their friends want to do with their 9-to-5 paychecks.
The reality for many modern nomads is that they can finally spend their money the way they want.
I know people who enjoy picking up Gucci loafers or flying business class to whatever place sounds nice. They’ve gotten out of the trap of needing to live in a certain neighborhood or needing to drive a certain car. They don’t need to spend their money doing the most popular thing.
They don’t have to keep up with the Joneses because they just aren’t around the Joneses any more.They get to spend their money living an intentional lifestyle.
So, not only do Tom and Mary get to cut down on the cost of what they need, but they get to redirect their money to pay for more of what they actually want to spend their time doing.
Gained: $50,000 + ??? a year.
3 – Reducing Stress
Reducing stress by fully addressing tax and other issues will not only save you money buy also improve your quality of life.
When you’re stressed, you aren’t productive. And, particularly if you’re living a western lifestyle, you know that there can be a great deal of stress in the way you live.
This was the case for Tom and Mary.
Part of their stress came from the fact that Tom was still a US citizen. They have European citizenship together, but Tom was still filing all sorts of paperwork in the US, which he had to find and pay someone to help him with.
When he eventually did find someone he liked to help him, Tom had to pay him $4,000 a year to do his US taxes. And he had to do the same for someone else to file his European taxes.
This is why I recommend that you have the right team of professionals behind you instead of going out without a plan like Tom and Mary did before they came to me.
With eleven years of studying these things, I know firsthand how difficult it can be to figure it out for yourself.
With our team behind Tom and Mary, we helped them cut what they were spending to file their taxes down to $1,000 a year in a straightforward way that reduced their stress.
You can quantify what Tom saved by no longer associating himself with the US and lowering their tax rate by moving south, but you can’t put an exact figure on what they saved by reducing their stress.
Tom was no longer chasing down his accountant to file his forms or worrying about how to get everything handled legally. This might mean Tom and Mary live longer, spend less on heart medication, or reap other health benefits, but it also means that they’re just generally more productive.
Reducing your stress will increase both how much time you have to grow your business as well as the quality of work you can put into that growth, not to mention the quality of life you enjoy while doing so.
Gained: $7,000 + ??? a year.
4 – Taking “Off-Limits” Opportunities
When you are saving more money by going offshore, you have more freedom to invest in opportunities that used to seem risky and were, therefore, off-limits.
There are many people who may want to make an investment into something like cryptocurrencies, but are worried about the restrictions countries like the US put on doing so.
Changing regulations and tax laws create a moving target they’re afraid to miss, so they decide not to invest. Which means they miss out on the potential income of that investment.
Others have made investments that have caused them some trouble and don’t feel the desire to try again.
The reality is that there are investment opportunities that you could be missing out on by staying in your home country instead of going someplace where the regulations are more friendly. Investments that you won’t be able to make until you get your offshore banking set up or become a citizen somewhere else.
Just as we calculated the savings you’ll get by reducing your stress, there’s a question mark on the potential here.
But, you do have to consider whether or not you are losing money by not taking certain opportunities due to the fear of not knowing how to go about it or where to go to take advantage of those opportunities.
Gains: ???
5 – Increasing Partner Revenue
Chances are, your partner will also be able to earn more money once you take the jump and go offshore.
I’ve worked with a number of couples where one person is really crushing it making half a million or more a year, while the other person has a job that they don’t really want to stay with. The partner just doesn’t know where to go when they leave.
Sometimes, you just have to jump in the pool.
In the case of Tom and Mary, she had a job making $50,000 a year. That income is going to vanish when they leave Western Europe because she can’t keep working that job remotely.
But, Mary has some skills that she can take into freelancing. She can find clients and do her work from anywhere in the world.
We estimated that she could be making closer to $80,000 a year doing freelance work.
There’s a minor tax that I’m not really taking into consideration, but she’s essentially going to be adding an extra $30,000 a year to their income.
Some people get comfortable in these situations and become fine with the $50,000 they’re making.
I totally understand that kind of comfort and how uncomfortable it can be to get pushed into the pool, but there are opportunities that come from the forced entrepreneurship of moving overseas.
(On a note unrelated to revenue, coming from someone who doesn’t currently have kids, I actually believe that putting your kids into a system where they’re going to be going different places is a good environment for their growth, too.)
Gained: ~$30,000 a year.
6 – Feeling Good Income
When you feel better about your life, you are more productive and can make and save more money.
This is, perhaps, the most important way you can save money because it’s one that I’ve felt an emotional connection to myself.
You might be reading this feeling as if you’re holding back your true potential. That you’re not getting up to your maximum revenue because you’re seeing 44% of your effort going out the door.
I remember growing up in a family where we’d ask if it was worth working if half of what we’d make would go to taxes.
When I talked with Tom, he mentioned a similar idea:
Investing $50,000 into a growing a business or advertising your product will build your income, but part of every dollar you make will end up being taken away.
Why do it?
Now, with more of his money going into his own pocket, Tom is wondering what more he can do.
He’s now talking about getting his business up from $500,000 to $800,000.
This is speculative, of course, we don’t know for sure how far he’ll get, but Tom is self-aware of the fact that he is probably not doing as much as he could.
We’ll give this income another question mark in the end, but Tom is already experiencing the value of feeling good about where his money is going.
Gained: ???
Results
The point of this case study is to see how much money we can save Tom and Mary by going offshore.
By reducing their taxes, we saved them $210,000.
Cost of living is a little less obvious, but we still managed to knock out around $50,000.
We knocked off at least another $7,000 by simplifying their lives and reducing their stress.
And we increased their income by $30,000 by encouraging Mary to become an entrepreneur.
From what we’ve estimated in this case study, Tom and Mary will have around an extra $295,000 to do what they want before we have even started calculating the value of all the question marks.
Forgetting what the couple could make by taking on investments they couldn’t or wouldn’t access before and doing work that didn’t seem worth it, this is a huge jump.
Taking those question marks into account and considering all six of these strategies, Tom and Mary could potentially be doubling that $295,000 a year.
The average person out there working a regular job is hoping for a 2% or 3% raise. The average small business owner is happy if they see their business grow 10% a year.
By moving their lives offshore, Tom and Mary can expect much more.
There are a lot of people out there who could benefit from these strategies. A lot of people sitting on the sidelines at home not doing everything they can and missing out on all the potential.
If you want to see just how much you can save and grow by moving offshore, feel free to reach out and apply to work with the Nomad team. After seeing just how life-changing this can be for people, you can probably understand why we look forward to doing this stuff every day.
Andrew Henderson
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Source: https://nomadcapitalist.com/2019/09/20/surprising-ways-save-more-money-offshore/