Living Abroad Means I Spend $3,000 a Month Less Than the Average American. Here's How

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  • Living abroad can significantly reduce your cost of living, but it isn't always easy.
  • The average American spends over $5,000 a month, but I spend around $2,000.
  • I'm able to make bigger contributions toward my savings for old age, which may help me to retire early.

Would you live in another country to save $36,000 a year?

Research from The Ascent shows that the living costs for the average American come to around $5,111 a month. That money goes toward housing, food, insurance, healthcare, as well as fun activities. Costs vary a lot depending on where you live and what type of life you lead.

But my monthly spending is a fraction of that -- even though I eat out in restaurants and have a pretty active social life. I live in Bogota, Colombia and my monthly spending comes to just over $2,000 a month.

How living abroad saves me $3,000 a month

My biggest saving is on housing. I've rented an apartment here for many years and I rarely paid more than $400 a month on rent. In contrast, the average American spends $1,784 on housing per month. In fairness, many foreigners living in Bogota pay monthly rents of closer to $1,000, but it's possible to live in a decent apartment for much less.

More recently, my partner and I bought a house. It cost around $120,000, which is a bit more than a quarter of the median house price in the United States. The lower cost meant we could buy it outright, so now I only need to pay for maintenance, insurance, tax, and utilities. Our utility bills are also about a quarter of those in the U.S.

The two areas where I spend about the same as the average American are healthcare and my investments. My healthcare contributions are calculated as a percentage of my income. And I put a lot of my spare cash into my brokerage accounts. As an expat, I can't count on any kind of a state pension here or in my home country, so I need to be able to care for myself. Plus, I want to have the option to retire early, so these contributions are a priority for me.

If I wanted to aggressively save money, I could cut my costs a lot more. Here's how my monthly spending breaks down versus that of the average American.

Spending category Average American monthly cost My monthly cost
Housing $1,784 $440 (assuming I still rented)
Transportation $819 $120
Personal insurance and pensions $604 At least $600
Healthcare $431 $300
Groceries $412 $300
Entertainment $243 $50
Restaurants and other meals away from home $198 $100
Cash contributions $190 $50
Apparel and services $120 $20
Education $106 $20
Miscellaneous $76 $30
Personal care $54 $20
Alcoholic beverages $40 $40
Tobacco/smoking products $26 $0
Reading $10 $20
TOTAL SPENDING $5,111 $2,110
Sources: U.S. Bureau of Labor Statistics (2021) and author calculations.

Living abroad isn't for everybody

Moving to another country can help you drastically reduce your bottom line. And, for many people, the possibility of remote working may make it a more achievable option, particularly if you're trying to pay down debt or sock money away into your savings account for a house down payment or other big expense.

However, it's worth pointing out that I don't have children or other dependents, and living abroad can be challenging. It isn't the lower living costs that drove me to live in Colombia. I live here because I fell in love with the country, the people, and the culture. Socking away cash for my old age is an unexpected benefit.

Here are some factors to consider if you're tempted by the idea of upping sticks and moving to another country:

  • Things don't always work as they do at home. Whether it's a different attitude toward customer service, crazy amounts of red tape, traffic jams, or cultural norms you're not used to, there are a bunch of daily frustrations you might need to deal with. Some people find it super hard to adapt.
  • Visas can be a headache. Every country has different rules and requirements when it comes to visas, and you may need to jump through a lot of hoops to qualify.
  • You may face unexpected bank charges or restrictions. Even if you have a credit card that doesn't charge foreign fees, you may find you spend a lot on moving your money around. You may also pay more for international insurance, and other unexpected charges.
  • You may need to learn a new language. If English isn't the native language in the country you plan to live in, be prepared to learn. Your life will be a lot richer if you can talk to local people in their own language.
  • Safety could be an issue. Every city has its danger spots, but if you move to a country with higher crime rates, you may need to change how you operate.
  • You may miss your friends and family. Not only will you need to ensure your employer is OK with you living in another country, being away from friends and family can take its toll.

Bottom line

Cost-wise, there's a lot to be said for living abroad. But that shouldn't be the only reason you do it -- you need to want to experience a different way of life. Otherwise it will be much harder to navigate the challenges and you could wind up being miserable.

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