Financial Independence: Tackling the Location Conundrum

by FI Fighter on May 13, 2014

in Thoughts

photo (5)

Anyone who is on the journey to early financial independence (and doesn’t earn an exorbitant salary) knows that frugality plays a most monumental role. Point blank, if you are not mindful with your spending, your chances of getting to early FI diminish substantially. After all, every dollar you save is an additional dollar you have available to invest with. And as we all know, getting to early FI requires passive/semi-passive income to make it all possible.

Frugality: Necessary for Early FI

Over time, I’ve learned that frugality can be optimized… or rather maximized to the point where there really isn’t anything more you can do to cut back on expenses. For the past 3 years, I’ve worked very hard at trying to cut down on my spending… I’ve learned to cherish life experiences over mindless spending, and in many ways, I’m just as frugal now as I was when I attended college. For a given month, it’s normal for me to save upwards of 70% to 80%+ of my total income (comprised of earned income and investment income). I’ve honestly now reached a point where I no longer really know what to do to save more money…

Location: Always Important

Lately, I’ve been pondering the thought of location more and more. I live in an extremely expensive area (Bay Area); one that probably isn’t the most conducive to helping me reach early FI… It’s funny, when it comes to real estate investing, almost every investor out there will reiterate the importance of location… “Location, location, location“, the experts will tell you time and time again. And there’s a good reason for that! If you want to maximize your chances of success with REI, picking out the best location is a sure-bet strategy to succeeding long-term. When it comes to early FI, perhaps there’s also something to read into those lines as well?

Why I’m Still Here?

Location is extremely important. As I’m learning first-hand, a lot of money can be made by living in the right area. Also, as a person living in an expensive location, I know all too well how much it costs to maintain a decent standard of living out in these parts of the woods. So, it’s a tricky dilemma I find myself facing everyday, and one that I’m currently trying to sort out on my path to early FI. The first question that might come to mind is, “Why live in an expensive location at all?” Here’s why I live and still live in the Bay Area:

  • Lots of job opportunities. I live in Silicon Valley and there is literally a tech company to be found on every corner. As a young person just starting out in their career (and life), there’s really no better place to be than to live in a location that offers tons of job prospects.
  • Higher salary and wages. With so many opportunities and companies in town, naturally, this creates a lot of competition. If you have the talent and there are others in need of your skills, companies will have to up the ante to secure your services; there’s simply too much competition nearby. As a young person trying to get to early FI, this can be a real blessing. Sure, you may have to initially work hard and put in long hours, but if you can find that right company that pays well (salary + bonuses), you can turbocharge your progress towards early FI. And because there are so many companies close-by, you can even utilize my own personal favorite strategy of hopping around every 2-3 years to secure 20%+ pay raises each time.
  • Local investing opportunities. I’m very familiar with the Bay Area. I know how crazy expensive it is to live here and how absurd housing prices are. Because I have the inside scoop of this region, when things hit the fan (2008-2012), I should also be THAT person who capitalizes on the extreme volatility. I should also know better than most that when the local economy eventually does recover again from a disaster (and it will if you live in a desirable location with tons of jobs), then the prices will rebound sharply as well.

When first getting started on the path to early FI, it can make a lot of sense to live in an expensive area. In hindsight, it was the right choice for me to start my professional engineering career off in the Bay Area, as there was an abundance of choices and opportunities available. I’m not so certain my progress would have come so easily, or even have been possible elsewhere…

The Next Step

So, to get a career launched and to start earning the big bucks, it can be necessary to live in an expensive location. Once you’ve sorted out your living situation, you can start stashing away any excess cash for investments to fund early FI. If you are really serious about getting to early FI at a young age, you can then focus on optimizing your frugality. Going back to the previous point, this means becoming extremely efficient with your spending habits. Once you’ve fine-tuned your spending, you will inevitably reach a crossroads of sorts — The location conundrum. I am facing that very problem as we speak. I’ve worked hard at my job, made a good amount of money, invested it wisely, maximized my frugality, and am now wondering, “What’s the next step?”

The Location Conundrum

My semi-passive income stream through rental properties is currently generating about $3,000/month, on a good month with no issues/vacancies. Basically, when my investments are operating at 100% peak efficiency. I’ve also worked long enough where I am now very sick and tired of my job. I desperately want out… I don’t want to work another 10-20 years… I can’t even imagine working in a cubicle for another 5 years… Stretching it out for another 2 years would be pretty torturous at this point…

So, what can I possibly do to expedite early FI as much as possible? Location. It’s as simple as that.

When starting out a career, it makes absolute sense to live in an expensive city… As you get closer and closer to early FI, though, I would argue that it becomes even more important to select the RIGHT location. Honestly, I wouldn’t feel confident attempting early FI with only $3,000/month living in the Bay Area. Even $5,000/month wouldn’t put my mind at complete ease. The cost-of-living out here is just too much… I’ve made do for the time being because I’m still dependent on my earned income… However, once I’ve decoupled myself from that, I would do the most logical (easiest) thing you can do… leave.

Is Location Everything?

I don’t believe that there is just one perfect location out there. I love the Bay Area… but I’ve also lived in Newport Beach and absolutely loved it out there as well. I vacationed in Hawaii earlier this year and can’t really imagine a more beautiful tropical paradise… The list goes on and on and on, and I haven’t even been to that many places yet in my life! 🙂

With that logic, it becomes really easy for me to say, “Why work your whole life trying to support yourself in an expensive area? What’s the point? No matter how amazing that particular location is, you’re still going to miss all that it has to offer if you don’t have any free time to enjoy it. Why not MAKE your money in an expensive area (for a few years) and then LIVE in a cheaper location… that is still amazing and beautiful?

I have many co-workers who are sitting on massive capital gains off their $1MM+ houses. But they will never try and sell to capture any of that equity. To them, it’s all relative… They’ll simply reply, saying, “So what if my home is worth $1 million? My neighbor’s home is worth $2 million… Our senior co-worker lives in a $2.5 million home out in Los Altos hills…

Newsflash: Not everyone in the world owns (or needs to own) a $1MM home!

See what living in a bubble can do to a person… 😉

It’s too easy getting complacent and comfortable in life. Even when we are blessed with good fortune, we might not even know how to acknowledge it… Many of my co-workers COULD retire tomorrow if they really wanted to… But as long as they believe that the Bay Area is “the best place in the world to live”, they will continue on, nose-to-the-grindstone, each and everyday trying to make ends meet. They will complain about how expensive everything is, how they are working harder than ever, or how they are suffering (both mentally and physically), and still, they will do nothing about it.

Alternative Path

I am very serious about getting to early FI. Sometimes, this means thinking outside the box and doing things that others might not be so willing to do. These days, I’m thinking a lot about living overseas in a cheaper location.

I love Hawaii but I can’t afford it… $3,000/month might not get me very far in the states, but I’m almost certain I could get by quite comfortably on just $1,000/month elsewhere. And that’s what I intend to do… I want to stretch my dollar as much as possible. Once I declare early FI, I’m thinking about starting the next chapter in Thailand. Or the Philippines. Perhaps Bali for a few months of the year as well. The possibilities are endless, really. All I know is that I want a warm climate, and some affordable living. The Bay Area is simply too expensive, and I don’t particularly love it so much that I want to continue working another 5 years just to make early FI possible here…

In many respects, I am just like one of my co-workers. Only, I’m starting to realize that I don’t have to subject myself to this type of pain indefinitely. If I’m willing to “sacrifice” on location, I can opt out of the rat race much sooner. As a person who’s on the path to early FI, I truly believe that life should be all about the experiences and memories. Location is nice, but an abundance of time and freedom? That’s PRICELESS


What are your thoughts on location? Are you willing to “sacrifice” location for time and freedom? Do you HAVE to live in a particular location?

{ 26 comments… read them below or add one }

1 Retire Before DadNo Gravatar May 13, 2014 at 3:32 am

I’m in a similar situation living in an expensive area (DC). My wife and I talk about moving somewhere less expensive, but the jobs are good here and we are becoming settled in as a family. I don’t want to move when the kids get older. So if we leave it needs to be soon. Our family isn’t here, but moving to where our family is doesn’t make sense either. That said, we like DC and we’ll probably end up staying and deal with the prices. I like your plan to go to Thailand and Bali (went a few years ago). Life is much slower and cheaper over there!


2 FI FighterNo Gravatar May 13, 2014 at 8:13 pm


That makes sense, and I’m sure things are a lot more complicated when they involved family and other people… My situation is very simple since I’m flying solo… which makes it infinitely easier for me to move about.

I read your post about your international travels and it’s inspired me even further to do this. I’m looking forward to a much slower, less hectic life. 🙂



3 No Nonsense LandlordNo Gravatar May 13, 2014 at 4:48 am

MN is not as expensive as CA, but it is not cheap. All of the fads you folks start out there, make their way here, and then we pay too many taxes for the same thing. On top of that, we have the costs of winter and snow removal.

I am looking at FL or TX or AZ as a final destination. I may even RV it for a while. 23 months and counting to my FIRE date. Keep the faith, save and make sure you can live like a ‘normal’ person, as frugality might not be as comfortable if the other destinations become politically unstable. But Hawaii has a great social safety net, so that is still an option…

I have another RE deal in the works, and I will probably be writing about that in a another couple of weeks, once I get it locked up. Another non-MLS deal, both the owner and I will save money.

I currently generate, according to my plan (and in actuality) about $114K per yer in passive RE income, and managing the propertied myself, add in another $21K. The new property will gain another $1800 a month, so it will put me well on the way to leaving the cube farm.

Keep dreaming the dream, and it will be come reality.


4 FI FighterNo Gravatar May 13, 2014 at 8:15 pm


Those are some nice (warm) destinations, and I like your choices! 🙂

You seem to have everything nearly wrapped up, and that’s wonderful that you may very well soon add another cash flowing property… $1800/month in additional income never hurt anyone, did it?

You will be living the dream real soon! Excellent work in securing your future forever after…

Take care!


5 FI PursuitNo Gravatar May 13, 2014 at 6:45 am

I spent about 2 weeks in Bali on a surfing trip a couple if years ago and loved it! Most of the places we stayed at were very cheap but here’s the catch – most of those places were owned by Australians, and operated by Indonesians. A small rental property located on/near the beach would cost about $25,000 to buy, but would generate quite a bit of income during the busy tourist seasons. Something to look into I suppose.


6 FI FighterNo Gravatar May 13, 2014 at 8:16 pm

FI Pursuit,

Yeah, I definitely hear good things about Bali and I’m very much looking forward to getting out there and into the beautiful waters…

That’s interesting, and something I’ve thought about as well. If I find a spot I really, really love, I may very well consider buying a property, or investment rental, or whatever the local governments out there let me do. 🙂



7 Stefanie @ The Broke and Beautiful LifeNo Gravatar May 13, 2014 at 9:24 am

Every place I would like to live is crazy expensive. After visiting San Diego for the first time this year, my heart is set on La Jolla.


8 FI FighterNo Gravatar May 13, 2014 at 8:17 pm


La Jolla is lovely! I’m also a huge fan of Coronado… probably b/c I love the beach out there. In general, it’s very hard to go wrong with SoCal.

Hope you get a chance one day to make it happen!


9 Andrew@LivingRichCheaplyNo Gravatar May 13, 2014 at 10:42 am

My wife and I were talking about this recently. We live in NYC so of course it is a very expensive place. Sure there are more job opportunities but I’m not sure our specific jobs and salaries are more because we’re in NYC. We both work in government and if we live in a cheaper city in NY, we would make a few thousand less a year (cost of living adjustment). But living in a different city, our housing costs would be a fraction of what it is now. We stay here because our family is here though…that’s the main reason.


10 FI FighterNo Gravatar May 13, 2014 at 8:18 pm


I hear you about living in an expensive city. It can be tough, but it looks like you have roots there and very good reasons to stay put.

When I look outside the Bay, I do get tempted to venture out as well.

All the best!


11 Even StevenNo Gravatar May 13, 2014 at 11:09 am

You are much closer to FI than myself, but I had always thought I would live in Chicago for the summer and Miami for the winter with long travels in between, for example a month or two in Europe, etc. I like the idea of international travel/place to live, but I think it’s best to see what’s out there before setting up roots.


12 FI FighterNo Gravatar May 13, 2014 at 8:19 pm

Even Steven,

Chicago is lovely in the summer… but I would definitely avoid it in the winter if possible… Miami would be great for that 🙂

Yeah, I agree, it’s a good idea to sample first before deciding on a permanent location. I’m going to heed that advice.



13 Joe S.No Gravatar May 13, 2014 at 11:14 am

If one is financially independent, does it really matter where one lives? I believe that when I am financially free I would want to live where I “love” to live. FI, if you love living in the Bay area, then stay there and enjoy the gift of living in one of the greatest areas in the world, knowing that you are financially free. Visit the places you want to vist and having the advantage of coming home to a great place is priceless…at least to me.




14 FI FighterNo Gravatar May 13, 2014 at 8:20 pm


Good point. If I get to early FI, I’ll have many homes instead of just one permanent one. I’ll be jumping around here and there and everywhere. 🙂

The Bay Area is wonderful, and I hope to come back here someday in the future. For the immediate time being, I think it’s time I ventured out and tried something new… My wallet/bank account will thank me for that…

Take care!


15 JasonNo Gravatar May 13, 2014 at 11:47 am

It’s great that you’re so close to doing a move out to somewhere cheaper. I’ve watched a lot of travel videos on youtube and Chaing Mai in Thailand seems very nice and not that expensive.

But instead of deciding on a destination up-front, maybe just hop around the cheaper countries, staying for a few weeks in different cities with no particular destination in mind. SE Asian is a good bet, but I’ve also heard that Equador is safe and not that pricey.

My wife and I often talk about moving out of the Bay Area. Workaholism is a toxic cloud around here. Not sure where we’d move, though, maybe central CA or some places in the South.

Looking forward to hearing about your adventures!


16 FI FighterNo Gravatar May 13, 2014 at 8:22 pm


Yeah, I’ve seen pictures of Chiang Mai and Thailand in general looks beautiful. I’ll be out there in August, so I’ll come back with a detailed report.

I love the idea of hopping around places. Thanks for the tip on Ecuador, I’ll have to study it up some more.

I hear you about the toxicity of overwork in the Bay Area. Just the culture around here, but I’m desperate to get out! No more cubes!

All the best!


17 Dave @ The New York BudgetNo Gravatar May 13, 2014 at 7:37 pm

An interesting thought – let’s say you quit your job right now and moved to Thailand or Bali and lived off of $1,000/month. That would allow you to save $2,000/month. Let’s say you lived overseas for 2 years. You would be able to save $48,000!!! Use that as a down payment for your next 1 or 2 rental properties and you are closer to FI! So instead of working in a cubicle for 2 years, you are not working at all and just living in a tropical paradise – sounds like a pretty decent trade!


18 FI FighterNo Gravatar May 13, 2014 at 8:26 pm


I love how you think sir! That’s a great idea, but if I could just play devil’s advocate for a second…

The $3000/month I’m currently collecting assumes 100% efficiency. Unfortunately, rental income isn’t quite as stable as dividend income, so it’s only a matter of time before I run into issues… That’s why I’m aiming for $4000/month+… I need some margin of safety.

But I definitely hear you! If I can get to $5000/month (maybe possible through 1031 exchange of Rental #1), and if I can succeed in only spending $1000/month, and setting aside $2000/month for reserves, I’ll still be able to save $2000/month.

Going back to your point, yup, that would give me $48,000 in two years… Also doesn’t take into account any rent increases and principal paydown on all the mortgages…

Unfortunately, loans wouldn’t be possible since I would be without a W-2 job, haha. Unless I were to just buy an all cash $50k property, which do exist out in the Midwest.

So, yeah, definitely that’s an option. Play for 2 years… pay down mortgages, save money and maybe even buy a house after all is said an done… 🙂

Take care!


19 dannyNo Gravatar May 14, 2014 at 12:29 am

I would recommend taking a trip to scope out a few places. Some of the regions that come to mind is Southeast Asia, Mexico, Panama and a few countries in South America where the cost of living is low. Make sure you like the weather, people, food, medical care and infrastructure before making the jump. I definitely support your plan though as we are venturing to get out of the US and do something similar.

If money was not an issue I would have a house in La Jolla and a house in Hawaii but that’s just a dream for now.


20 FI FighterNo Gravatar May 19, 2014 at 10:06 am


Thanks for the tips. There are tons of great locations out there, so I hope I do get a chance to see a lot more of them. SE Asia will be my main focus starting out, but I’m definitely not opposed to relocating and trying out other spots.

Yes, I think weather, safety, cost of living, and medical care would be at the top of my list. That, and just go with the “feel” you get, which is always hard to rationalize.

La Jolla is lovely… I like it almost as much as Hawaii… almost 😉



21 TomNo Gravatar May 14, 2014 at 10:24 am

My fiance and I are no strangers to moving, so to us it almost seems logical to move when we become financially independent. We’ve actually thought moving to cheaper locations in Central America, Mexico or East Asia would be a great way to take the leap into FI because it lets us test the waters out on relying solely on passive income in a place that would give us a much lower cost of living.

It would probably allow us to re-invest some of that passive income, or who knows, we may find we like a place so much we could buy a business for cheap in our new country.

I understand that some people love the area they are in or are tied to it (usually by family), but I’m a big proponent of getting out there and seeing more of the world. San Francisco will always be there for you later, just be sure to keep a few rental properties in the area so if you decide to move back your costs to live there wont skyrocket.


22 FI FighterNo Gravatar May 19, 2014 at 10:10 am


I’m with you! No matter how much I love the Bay Area, or California, I can’t imagine being tied to it indefinitely. There’s just so much out there to see and experience, which is one of my main motivators for reaching early FI.

I definitely agree… Since I own a few rental properties here, I can always just hold them and rent them out… In the future, should I decide to come back and live in the Bay, I’ll have a property waiting for me. It’s reassuring that I can move back and my rent won’t skyrocket since I’m locked on a 30 year fixed rate.

Those are some great destinations, and I’m sure you’ll have a blast in any of them.

Best of luck!


23 A Frugal Family's JourneyNo Gravatar May 14, 2014 at 9:03 pm

Our family lives in Orange County and have pondered the thought of moving to save money. For us, our kids safety and education ranks supreme. We have that here were we are. We also have great California weather!

The reality is that when we sit down and talk about places we can move to save money, it generally results in some place out of state. But to do so, we would not only lose the California weather but the distance to our parents who both currently live within 30 minutes from us. Unless the sacrifice would significantly shorten our path to FI, it simply is not worth the sacrifice to us.


24 FI FighterNo Gravatar May 19, 2014 at 10:12 am


That’s understandable, I think for many, it’s exactly kids and family that keep you rooted. Just gotta do what’s best for your own situation.

OC is lovely… I lived there for awhile and you’re right, you can’t beat the weather! Only thing I don’t like about OC is the cost of living… but that’s same in the Bay Area as well… You pay for quality 😉

Take care!


25 ThorinNo Gravatar May 15, 2014 at 5:15 am

I lived in SF after college working as an options floor trader at the now defunct Pacific Exchange. Now I live in a sleepy fishing village on the south coast of South Korea. I can’t tell you how much reducing my cost of living has increased the quality of my life.


26 FI FighterNo Gravatar May 19, 2014 at 10:14 am


Wow, that’s like a world’s apart from the hectic lifestyle of SF. I’ve never been to South Korea, but would like to in the future.

Sounds like you’ve got things figured out! In the end, it’s all about being happy. Life’s too short to be stressed out and miserable.

Take care!


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