Why Most Expats End Up Broke
And How to Avoid It
For a lot of people, there’s a hidden financial trap that happens when moving abroad and trying to live the expat dream. Moving abroad is sold as the ultimate financial hack: lower cost of living, better quality of life, freedom from the soul-sucking office life. Your money is supposed to go firther further, your time is your own etc..
At least, that’s what they tell you.
But after spending enough time in expat-heavy cities, I start to see the same pattern over and over: the guy who showed up with $xxx in savings and now teaches English to pay rent. The crypto dude who had a "passive income stream" until the market tanked. The retiree who moved for cheaper healthcare but underestimated the cost of inflation and currency swings. The kid with a business idea that didn’t pop off.
Most expats don’t go brokequicklyk; they slowly bleed out. Not from one big mistake, but from a thousand small ones: lifestyle creep, bad investments, poor planning, and the belief that living abroad somehow exempts them from adult financial decisions.
I just want to write a quick article about some of the financial pitfalls that lead to expats goinginto poverty and taking the flight back home. More importantly, I want to give some idea on how to avoid it. Some topics I’ve included are lifestyle inflation, passive income, hidden costs, and strategies for building a more bulletproof expat life. Some of these are based on things I’ve seen. Some of these are issues I have had happen to me.
1 Lifestyle Inflation
First, you move to a place where beers are $2, taxis cost $3, and rent is a third of what it was back home. You expect to save money, live comfortably, and maybe invest or launch that business idea you’ve been putting off. But here’s what happens. You start eating out every day because it’s “so cheap.” You upgrade to the fancy apartment with a rooftop pool because, again, it’s “so cheap.” You start flying to the beach every other weekend… because it’s cheap.
But all those little “treats” add up. You’re now spending more per month than you were back home and justifying it because “it’s still cheaper than New York.” That’s lifestyle inflation on steroids. It creeps up slowly, reinforced by the behavior of the other expats around you who also overspend to live like they’re on permanent vacation. It also happens in cities wherethere ares a lot of short-term expats and tourists who don’t care to burn money because they have no long-term intent to stay.
I experienced this for a short while... I move solo into a 3 bedroom apartment that was cheap at the time, but as the peso strengthened, I started asking myself… Do I need all this space? Fortunately, I ate the cost, made more money, and weathered the storm, but I saw a big dip in the expat population for that period of the “Super Peso.
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The problem for a lot of people is that you’re no longer saving. And you’re not investing. You’re just spending differently and sometimes more often. You might even find yourself dipping into savings faster than you anticipated, all because you told yourself that you deserved to “enjoy” your new lifestyle.
I have been fortunate enough to never have to dip into savings, but mostly because this isn’t the first time I’ve been abroad and I didn’t show up already inexperienced with money. But I have countless contacts and clients that talk about dipping into savings assuming they put it back eventually, whether they are abroad or back home.
It’s a constant set-back path where people never get ahead because they never figure out how to deal with what they have.
To avoid this, you need a budget that’s tied to your income and long-term goals, not just your local cost of living. Live beneath your means no matter how low that local cost seems. Don’t let your expenses scale with your surroundings. That beachfront cocktail is still a bad idea if you can’t afford it twice.
2 Passive Income
Everyone wants to live the dream: wake up, check your crypto wallet, reply to a few emails from your hammock, and then spend the rest of your day “building a brand” or “working on your next product.” But for most people, the reality is much different.
What I see is…the majority of expats who claim to live off passive income are either 1) lying, 2) living off savings, or 3) struggling behind the scenes. The drop-shipping empire barely pays for groceries. The affiliate marketing blog hasn’t made a sale in months. The crypto wallet was exciting until the crash, and now it’s a source of anxiety…