If Costs are Low, Dreams Can Grow - Financial Geography

Welcome back to my blog for post number five, today we will be taking a trip back in time to grade 8 geography class, with a mix of some financial analysis of these locations, to hopefully answer the burning question (at least burning for me)... where is the most financially optimal place to live, on the earth? Yes, this is in fact a question that keeps me awake at night, tossing and turning, because of these Ontarian living costs as a result of taxes and inflation. The truth is in Ontario, no matter what tax bracket you're in, it feels a little excessive, especially with all the financial waste that goes on in this country... but that's a topic for another time. So, quickly back to the burning question because I'm starting to get very toasty now, where is the best place to live out of absolutely ANYWHERE, that would allow your money to stretch the furthest? That is what we're going to be discussing today, and we will be attacking this question from all angles, all around the world, including taxes, living expenses, housing prices, and even considering personal discrepancies like age, job type, preferred styles of living, and much more to find the perfectly financially tailored location of living for any personal profile. Some of these financially ideal locations will be absurd and unrealistic for some, while quintessential and faultless for others, and other locations will leave the same individuals in vice versa positions. The point of this post will be to narrow down the entire globe into a small handful of locations, that differ in living logistics depending on the individual, while all holding the same true condition of being a financially feasible destination.

Have you ever played the game "Guess Who"? Where you are trying to ask the broadest elimination questions and narrow down the choices until you guess the correct person that your opponent chose at the start of the match? That is the type of approach I am going to take at the start of this grueling task, since we are taking into consideration the entire world. The goal by the end of this is to have a small handful of locations that each fit different profiles in terms of the personal discrepancies mentioned earlier. The first major elimination condition I am going to consider is the equivalent to a blood sucking financial demon, income tax. To begin, let's knock out some places around the globe that offer ZERO tax on personal income: United Arab Emirates (UAE), Qatar, Saudi Arabia, Bermuda, Cayman Islands, and the Bahamas. No income tax does not come without a price however, since almost all of these locations have either sky-high housing prices, like the Cayman Islands, or expensive imports and cost of living, like the Bahamas. While taking into consideration the extreme lifestyle differences and restrictions of places like Saudi Arabia and Dubai, Qatar might have been the best pick out of these international locations, however there are limited residency options for non-citizens. Overall, out of all these locations I would have to say the Bahamas would be the best pick so far, as their cost of living is approximately 20-30% higher than in the U.S., however that is still probably less than what you are skipping out on in income taxes. This location caters more to the successful, young and ambitious, or potentially middle-aged person who does not have many responsibilities tying them down (job restrictions, family tie-downs) and can work remotely or online, but we will get more into personal specifics in a bit. If you are looking to stay local in the U.S. or Canada, the province of Alberta would be your best bet for Canada, as they have the lowest provincial tax (flat 10%) in all of Canada, and no sales tax. As for America, the states Florida or Texas would be ideal as they have no state income tax and strong economies, however Puerto Rico is a potentially lucrative option for Americans to escape state and federal income tax, which we will circle back to later.

Okay, now that we got the meat and potatoes on the plate, and the first big step is out of the way, let's hone in on the specifics and make some calculated decisions. In order to properly define these decisions, we are going to specifically outline four consumer profiles which we will consider. Number one, which we will denote as 'profile A': young and ambitious professional who found success early, 18-30 years old, $150,000 or higher annual income, success driven, with no tie-downs from work or family. 'Profile B': Middle-aged professional with a family or soon to be, 30-60 years old, $100-$200k or more individual income with help from spouses salary, family oriented with work and family tie-downs (in office job, wife's job, kids in school, etc.). 'Profile C': Middle-aged professional with no family, 30-60 years old, $100-$200k or more individual income, with no tie-downs from family or work (remote/online job, no kids, no wife). Last but not least, 'Profile D': matured age retirees, 60+ years of age, decent to high retirement savings in the bank, no tie downs from work and minimal to none from family. If you fall somewhere in between a couple of these categories, that's no problem, these are just broad guidelines and ideas to use in your residency decision making, and more than likely you lean majorly towards one of these profiles over the rest, if you are even considering making a residency location change.

Starting with profile A, the young successful free spirit. In this situation, a young and high earner who is likely to be very ambitious and success-driven, I believe they could benefit greatly from a low taxation location, due to their sights most likely being set on scalability and making more and more money. This profile would be the most likely to go abroad and fully take advantage of the foreign financial benefits that some locations offer. For this profile, I believe that Puerto Rico is a very enticing location, and most likely the most financially beneficial location on the planet, for a young and ambitious high-earner. First step, you must obtain U.S. citizenship and become a bona fide resident in Puerto Rico, which under Act 60, allows you to pay ZERO tax on capital gains. Oh, also forgot to mention, dividends and interest are also tax-free now. The fun doesn't stop there, if you are a business owner you could be subject to a staggering 4% corporate tax rate, compared to the 21% or more federal rate in the United States. In order to bask in all this newfound financial retention, you do have to meet a couple standards, such as living at least 183 days of the year in Puerto Rico along with a few other conditions, but no requirements that are too hard to meet considering your making a permanent move to the island. Some of the best locations in Puerto Rico to look into for the cheapest cost of living include San Juan and Dorado, but once again, to make sure this location is worth it, I don't recommend it if you're making less than $100,000 per year and not okay with spending at least half of every year on the island.

Next, onto profile B and C. These two profiles are virtually identical, other than the tie downs as profile B has a family or possible work logistics restricting their geographical movement. For profile B, the reality is if you can't move, you can't move. However, if there is potential to switch to a different location or office within the country, there are a couple alternatives that stand out as superior locations in the U.S. and Canada for financial retention. Florida or Texas for the U.S. as stated before, since they both have thriving economies, with zero state income tax, along with some very affordable living destinations within the states, especially in terms of housing prices. As for Canada, Alberta would have to be the way to go, because of the low provincial tax and no sales tax, as well as the fact that you can definitely find some affordable living within the province. For profile C, you have a little more wiggle room in terms of uprooting yourself and moving abroad, so an interesting and potentially lucrative location could be the Bahamas. Now, although it would be a beautiful and lavish lifestyle, along with the beauty of no income tax at all, the higher living expenses do pose a potential challenge, although that does not mean finding financial serenity in the Bahamas is impossible by any means. If you were to go abroad, I would recommend weighing the pros and cons between the Bahamas and Puerto Rico.

Last but certainly not least, profile D. Now, this is the category that definitely has the most freedom and opportunity, as long as they followed my 20/40/40 budgeting strategy from a young age, of course. If you are able to reach profile D, you can practically go and live wherever you'd like in the world, but for the sake of the topic at hand, what is the most financially beneficial place for retirees to enjoy their well earned relaxation, but still have their money work for them? If you would like to stay living domestically, again, I would recommend somewhere like Florida for the U.S. and Alberta for Canada, however, when taking a look at international locations for a lavish retirement opportunity, a few interesting options caught my eye. When looking for locations, a key point of interest for profile D was affordable health care, which Portugal accommodates beautifully, along with a high quality of life and low cost of living. They also offer a Non-Habitual Resident (NHR) regime, which grants tax exemptions on foreign income for up to ten years. The second international location, and last location for this post overall, I found Panama to be a potential hidden gem in the retiree's financial geography portfolio. Panama offers very affordable health care and housing, along with a cost of living that is generally lower than in the United States. In terms of the tax benefits, Panama also offers the Pensionado Program granting substantial discounts on various services and no taxes on foreign-earned income.

Listen, all in all the reality is some people may directly fall in profiles A-D, while others may take a few things from a couple different profiles, but at the end of the day all of the locations mentioned in this post are financially viable and top tier locations to live among the globe, at some point in your life if the complexities of human existence don't interfere. Another reality, to be quite honest with you, writing this post felt a little crammed, and I could not do this topic justice in just one post. The ideology of financial geography has inspired a plethora of new blog ideas for me, and I can and will take a deeper dive into making only one post on a specific profile or location, and it's financial feasibility, rather than trying to fit the entire world into one post. However, this was a good starting point to open you all up to the general idea of putting some thought into the soil you stand on, and whether or not there's some better dirt out there for you to inhabit, which leaves a little bit more money in your pocket.

As always, thank you all very much for reading. I hope you learned something new and started turning the gears on thinking about a topic you haven't given much thought yet. Be sure to tune back in on March 26th for my next post, most likely another company analysis, or potential ETF analysis...

Nolan Kushnir.