Last week I wrote about the importance of aspiring to become a millionaire — even if your “real” goals are different.
But I was thinking small. Today I’m upping the ante. Inspired by my British friend The Money Grower, I’m pledging my new goal: I want to be a Billionaire — in Somalia. Or Vietnam.
You see, one Somali shilling is worth 0.0006 U.S. dollars at the official Interbank conversion rate. Which means 1,000,000,000.00 Somali shillings are worth $613,475 U.S. dollars.
That’s right, baby! I’m on my way to being a billionaire in Somalia!
I’m almost a billionaire in Vietnam, where 1,000,000,000 Vietnamese dong is worth $48,065 U.S. dollars. By that metric, millions of people in the U.S. earn more than a billion each year.
Well, maybe my billionaire goal is pointless. “Thousand” or “million” loses its meaning in a foreign currency: I remember paying 220,000 Laotian kip for a bus ride.
MONEY AROUND THE WORLD
I’m being ridiculous here, of course, but while I have your attention, I’d like to make a more thoughtful point about purchasing power.
Loads of us who are lucky enough to earn in high-value currencies — US Dollars, British pounds, Euros, Yen — take advantage of favorable exchange rates by spending our high-value global currency in Thai bhat, Egyptian pounds or the Colombian peso.
The term for this is “geographic arbitrage” — earning in a place where pay rates are high and spending in a place where prices are low. This can be as dramatic as earning in the U.S. and retiring in Bali, or as simple as working in Manhattan and retiring in Vermont.
Our purchasing power is best when we’ve got the currency upper hand. The more you save from your Manhattan paycheck, the bigger of a house you can buy in Colorado. The more you save in US dollars, the longer you can travel in India.
Even while you’re working, living in a place with high salaries has advantages — the stuff you order on eBay costs the same whether you live in New York or Kansas City.
This is why I disagree with conventional personal finance advice, which tells you to live in an area with a low cost-of-living. I believe you should spend your working years in a place with a high cost-of-living and high salaries. You should travel and retire in a place with a low cost-of-living.
HOW TO LIVE LIKE A ROCK STAR
I lived in Australia for a year, where I met about a dozen people who used “geographic arbitrage” to their full advantage. They’d grit their teeth through a few years of working in the Northern Territory, a hot, desolate swath of land boasting enormous pay rates (and the highest cost-of-living) in Australia. My friend the daycare teacher earned $32 an hour, while her boyfriend the unlicensed electrician earned $60 an hour.
Living costs there are high, too, so the teacher and the electrician made it a priority to live as frugally as possible. They rented a tiny home, shared a car, and almost never drank beer.
Motivated by the knowledge that this is “only for a year,” they saved close to 60 percent of each paycheck. After they quit, they vacationed in Bali for months before finally moving to the Caribbean.
Another couple I know, both nurses, lived frugally in Australia’s Northern Territory for a full 3 years, motivated by a huge goal: they paid cash for a beautiful beach house about two hours south of Sydney. (Incidentally, one of their next-door neighbors is Flea from the Red Hot Chili Peppers. That’s right — they literally live like rock stars.)
The one circumstance in which I don’t recommend living somewhere with high salaries is when you’re the boss. If you’re trying to bootstrap your own business, especially if you’re in the start-up phase, you’re better off living somewhere where you can skate by.
Please Note: I’m in the middle of the desert without electricity, running water or wireless internet. Forgive me if I’m slow in responding to comments — I’ll be back ‘on my game’ after Sept. 7.
Photo of the Zimbabwe $5 billion courtesy manwithface.