Moving Out of The Country – Budgeting
I recently got back from my first long trip to New Zealand. I talk about my impressions of the country here, but suffice it to say that I really like it and I’ve officially designated it as one of the places I will spend a lot of my time once I move out of the USA. My most likely plan will be to spend several months in New Zealand, then Hong Kong, then the summer in the USA every year, then repeat the pattern, slowly lessening my time spent in the USA, as I described here, using the Five Flags model to minimize my taxes and maximize my freedom.
In this article I will lay out my initial planning stages regarding the budgeting of all this. I can’t and won’t give you financial details, but I can lay out the general basics of what I’m planning.
As I’ve said many times, the primary reason for me leaving the USA under a Five Flags model is to save money on taxes. I have many other reasons that I’ve talked about many times, but tax savings is the number one by far. I make a six-figure income, and though I pay much less taxes than the typical man who makes what I make (because I follow the Alpha Male 2.0 lifestyle), I still pay quite a bit in tax. This is because I live in the USA, one of the highest-taxed nations in the history of the world.
I don’t like paying a lot of money in taxes, particularly since most of that money is used to pay interest payments to billionaire elites, bail out rich bankers, bomb and murder innocent civilians in the Middle East and Africa, and to financially support Won’t Poor people and lazy Millennials who refuse to work. Yeah, no thanks. I choose not to participate.
I currently pay around 17-18% of my income in total taxes. Not bad for an American (who typically pay 51-73%), but my goal is to get this number down to 4% or less. 0% would be ideal, and I know digital nomads and perpetual travelers who have done this completely above-board and legally. However, at my age (46) I have no interest in being a perpetual traveler and would prefer a much lighter travel schedule. So 4% will make me happy, and anything less than that I will consider a bonus.
I will also save money in that once I adopt this lifestyle, I will not own a car. I will instead use a combination of public transit, ride sharing services, and rental cars to get around. This will save me some additional expense since owning a car is very expensive (gas, upkeep, repairs, insurance, deprecation, etc).
In following Five Flags, I will not own any property of any kind in any of the countries I reside in. Thus, one could also argue that I will save some additional money by the fact that I will be renting my homes instead of owning them like I do now, since you typically get more for your money in terms of house when you rent vs. when you buy. However, the numbers and variables behind this get complicated so I won’t assume this, even if it may be true.
That’s the money I will save, which is quite a bit. Going from 18% taxes to 4% is quite a bit of an income boost, particularly when you’re making six figures. Now I need to assess how much money all of this will cost. To make all this worthwhile, I have to ensure the costs are less than the savings; ideally, far less.
Here are the new costs I will incur once I assume this Five Flags lifestyle:
1. Airline tickets for three flights per year. Some of this will be offset by the massive amount of frequent flyer miles I’ll be racking up, but it will still be a new expense.
2. Approximately six months of extra rent. I will purchase some property, cash, in SE Asia, rent it out, and this rental income will pay the rent for my homes in Hong Kong and New Zealand, so that won’t cost anything. However, in where I decide to make my primary home, I will rent a place 12 months a year even though I will only actually be there a maximum of six months. Those extra six months per year will be a new expense. I probably won’t be able to rent it out AirBnB style since I won’t be the owner, just the renter.
3. Various small international banking fees. In order to keep my zero-tax status in places like New Zealand, I can’t own any bank accounts inside New Zealand. This means all my transactions will be with debit or credit cards that will be considered international transactions, often around 1%. This won’t always be the case, but will certainly be the case for some consumer transactions I would need to make.
4. Small amount of sales taxes I can’t avoid. Right now, I pay no sales tax, since I live in one of the few states in the USA that has no sales tax (by choice). Hong Kong, thank goodness, also has no sales tax because they believe in freedom and prosperity. New Zealand, however, being the typical, socialist Western nation, has a ridiculous 15% sales tax on just about anything. The good news is that it doesn’t charge this tax on food, which is nice, and I will only pay this a few months of the year, not all year and not on everything (since I won’t buy anything expensive there, in accordance with my Country E). Yet, in a given 12 month period in my life, there will be a small uptick in the amount of sales tax I will pay.
5. Attorney’s fees. Establishing this Five Flags setup will require various attorneys from three different countries. That’s going to cost some cashola. I already met with several tax attorneys in New Zealand and they were extremely helpful. The good news is that 90% of this will be a one-time expense to get all of my finances and business structures situated. Once I’m set, I’ll be done with this stuff. There will simply be an increase in the amount of money I pay accountants for my US tax return.
6. Shipping costs. I’m sure I’ll be shipping more stuff than I do now, and be doing so internationally. Not a big thing but definitely something new and extra.
It’s my job to ensure that all of these new expenses added up is still far less than the money I will save in taxes (and lack of a car). In penciling it out on several spreadsheets, this is indeed the case, to the tune of five figures per year. This will become even truer as my income continues to grow. (My income grows every year, because I make sure it does.) If I see some savings at my current income, I will see much more in the years ahead, since I will be making more money several years from now than I do today (unless something very unusual happens).
The above is just my thought process as I navigate this stuff. As usual, Five Flags is complicated, which is why I don’t expect very many of my readers to attempt it. But if you’re considering something less complicated, like just relocating to a new country, hopefully the above info will be of help to you