The American Salary is an Illusion

So I’m on day three of my mini-retirement.  I’m posted up in Chiang Mai, Thailand for a week or two and I’m thinking about the low cost of living and debating the merits of living in lower cost areas in Asia vs. the USA. In my opinion, the best reason to live in the US  is to make a good salary.  But I think if you really put US salaries under the microscope, they aren’t as big as you think. 

Let’s consider a respectable middle-class salary of around $65,000. For the purpose of keeping things simple, I’ll consider a single person.  A couple earns more of course but they often come with children and more expenses.  After the tax man takes his cut, you’re likely left with around $4,000 a month based on a take-home pay calculator for someone living in Chicago.  Before you’ve purchased anything, your $65,000 salary has shrunk to about $48,000.

You Don’t Dare stay in USA Without Health Insurance

If you’re going to reside in the US, you simply can’t go without health insurance because if health problems come your way you can be devastated. Medical expenses are the number one cause of bankruptcy in the US.  Health insurance doesn’t come cheap with especially as you get middle age.  Prices vary wildly depending on coverage but middle-of-the-road coverage for a middle-aged person might run about $300 a month.  You’re $4,000 a month salary is now about $3,700.  Your $65,000 annual salary is now closer to $44,000.  

Never mind that American healthcare cost are absurdly high.   Never mind that most health insurance doesn’t provide much value until you’ve spent over at least $1,000 a month out of your own pocket.  We’ve come to accept these things as acceptable.

The Cost of Working

In order to get to your job, you’ll typically need to live within a reasonable proximity of your place of employment. It’s true that you can definitely reduce cost by taking on roommates but for some of us past a certain age, it’s less feasible. Living in a decent pace in our near major cities can often run around $1,100 a month or so and that’s not extravagant living at all. Your monthly funds are now coming in around $2,600 and annually you’re at $31,200.

Of course you’re going to need electricity.  You’re also going to need internet access and you’re going to need a cell phone.  If you’re frugal all can be had for just a bit over $100 a month. If you’re looking to get phone service for only $20 a month plus data, I recommend Google Fi. Get a $20 sign up credit here. It’s great for global travel too.  Now were’ at $2,500 a month and an even $30,000 a year.

Getting Around

Here’s where you have a lot of flexibility in how you handle things financially.  I did my best to be frugal buying a Japanese economy car at a decent price and keeping it for two years before heading overseas.  I would have had a much better average total cost of ownership if I kept it for 10 years instead of two. But I ended up spending over $600 a month surprisingly to have this car.  I’m sure most can do better with effort but I think you’d be hard pressed to keep a car and pay less than $400 a month for TOTAL cost of ownership.  So that bring us to $2,100 a month and $25,000 a year.

I saved a ton of money on car insurance by taking a tuk-tuk. You can go far for 40 Baht or about $1.20

The Rest

I won’t go over every detail of expenses but consider what we have left.  You need to eat.  You’re going to be cooking and eating out sometimes.  Even if you’re frugal and intentional with your money you’ll be spending at least some on entertainment.  Haircuts happen. Trips to the doctor happen.  Medical expenses happen. Birthdays and Christmas happen. You need to shop. I think it’s fair to say that you might budget around $500 at least for the rest.  Now you’ve got around $1,600 a month left or $19,200 a year.

The Value of Your American Job

So you might put the value of your “$65,000” job to actually be a bit closer to $20,000.  Things ALWAYS happen that could reduce this but this is a rough figure for what a typical person might have available to them to save from their time toiling at the office for some 2060 hours of work a year.

How to Do Better!

Avoid The Taxman

One of the best easiest ways to hold on to more of your money is to shelter it from taxes to the best of your ability.  If your company offers a 401k plan, by all means participate in it to the fullest extent that you can afford.  For a traditional 401k, you’ll be able to avoid significant taxes on the income you diver into your retirement account.

When you leave your job, you can rollover your 401k to a good broker that has low fees or even no fees like my favorite broker M1 Finance.  Get $10 FREE for signing up with M1 Finance here.

Go to Where Living is More Affordable

The outside of the Chindra Boutique hotel. A great place in Chiang Mai

This is a big part of what’s bringing me to Asia is the lower cost of living. At the time of this writing, I’m in a very popular spot for low cost living in Chiang Mai, Thailand. The prices here play a big part in driving tourists. I stayed at my hotel for around $23 a night. Check it out on Agoda below.

Chindra Boutique comes in at around $23. This pic wasn’t my room and is courtesy of Agoda.

Consider lowering your total cost of living by ditching your car and finding some other way.  Consider lowering your cost of living even more by getting out of the US.  Look at the cost of some of these delicious meals in Chiang Mai.

The conversion rate for Thai baht is 100 baht is roughly about $3 US. Many of these meals are hovering around 50 to 80 baht.

Getting rid of my car felt great.  There’s plenty of ways to get around in Asia without a car.

It’s not just food cost and housing cost that drop when you’re overseas. Medical and dental costs drop as well. I was able to get a dental cleaning for $700 Baht which is about $21 US dollars without any dental insurance. I got two free tubes of toothpaste as well!

The V-Smile dental clinic in Chiang Mai. It was about $20 USD for a cleaning and service with a smile. And some free toothpaste!
I got two free tubes of Colgate with my dental cleaning. Nice.

Don’t Fall for the Illusion

A fat salary is only fat if you’re able to hold on to and save most of it. If most of your salary goes out the window to cost of living then the dollar amount of your salary is worthless. Focus on how much you can save when valuing your current situation. I know English teachers in Asia that were able to save up to $1,000 a month USD working part-timee. If your job doesn’t allow you to save this much then consider other lifestyles that might allow you to hit your savings goals sooner.