Moving from a high-cost area to a low-cost area is known as geoabritage. The promise is simple: if you live in a location with high costs of living, you could move to a location where cost of living is cheaper and save more money while maintaining the same quality of life. This is a method that many people who are committed to the FIRE movement (Financially Indecent / Retire Early) are using to reach their goals sooner.
Some people move internationally to beautiful locations in Bali, Indonesia, or Lisbon, Portugal but you could still leverage this option without leaving your home country (and probably avoid a whole lot of immigration paperwork).
Cost of living, taxes, provincial infrastructures… Canadian Provinces are not created equal. It is even more true when looking at our neighbours down South in the US. So if you are currently living in a high-cost area, you could reach your financial goals sooner by moving to a lower-cost area. And cherry on the cake: this can be done without impacting your quality of life.
However, for most people, this is not an easy thing to do. You could potentially be leaving all your supporting network, friends, families, etc. and face significant upfront expenses. So is it really worth it?
An example: relocation from Ontario to Québec
Let’s take an example to discuss this further. My family and I just recently relocated from the Greater Toronto Area, Ontario to Montréal, Québec. It was a sudden decision and we accomplished the whole move in less than 2 months (mad stressed out is an understatement). In our case, let’s just say the stars aligned:
- My husband got offered a new job in Montréal with a nice salary increase, in a field he loves.
- I am working from home and my company also has offices in Quebec that made it easy for me to simply transfer there since they already had the appropriate employee tax structures in place.
- Our children are very young (3 and 1 years old) and were not affected by the change the same way older children or teenagers would.
- Being immigrants in Canada, we do have friends in Toronto where we lived for about 8 years…. but our family is not there.
- We used to be students in Montreal so we also have some friends and contacts and know we like it there.
- My husband’s company paid for most of our relocation expenses. This is important because it adds up quickly.
- We speak French, a nice plus although it is definitely not required to enjoy Montréal.
Comparing cost of living
Obviously, moving to a lower cost of living area is not a decision you can or should take only based on financial considerations. But since it is important to know what to expect, here is a table vainly trying to compare apples to oranges.
| Cost of living | Ontario (Greater Toronto Area) |
Quebec (Montreal) |
| Average house price as of Oct 2022 2 | $1,098,200 | $504,800 |
| Daycare | $1,800 / month | $191 / month |
| Sales taxes | 13 % HST | 14.975 % GST + QST |
| Average tax rate based on a 100k annual salary 3 | 30.0 % | 34.2 % |
Housing price
The housing price is really what made the difference in our case. We were able to purchase a beautiful detached home when we could only afford a medium sized semi-detached in the GTA. On a side note, I am very much aware of how privileged we were to even have our own home in the GTA, the housing market there is absolutely brutal, even now we are in a so-called “buyer market” and I would like to seize this opportunity to send my best wishes to anyone looking out to buy for the first time over there (so sorry).
Rent in Montreal is supposed to be 38% less expensive than it is in Toronto 1 so both renters and owners would see a benefit in moving to Montreal.
Childcare expenses
On the childcare front, our Toronto daycare had not yet enrolled into the latest government initiative promising to progressively decrease costs to $10/day. That means we were still on our way to pay over $1800 monthly per kid when we decided to change to our new home. I truly couldn’t believe how cheap the new daycare was until I actually started paying for it. I guess I am glad I pay taxes (sometimes).
Income differences
On the other hand, even if my husband had a pay increase, my take-home pay actually decreased: hello, Quebec provincial taxes. All in all, we are barely making more money than we were back in Ontario: what’s really making our cash-flow more positive is that we get to spend way less for an equivalent and sometimes better quality of life.
There are many other things that could affect your fix and variable expenses but these are going to be very specific to your own situation and providers: home and car insurances, utilities, gas, groceries (likely to go up a bit by going from 13% HST to 15% GST + QST), etc.
It is expensive to move
It is worth noting that the move itself is an expensive step and is something to consider as well. A quick calculation to understand what is your return on investment (ROI) can help: what if you need an extra 7-8 years to save the money you spend on moving?
- Selling your house is expensive, there is plenty of calculators out there helping out with closing costs estimates (such as this one that I like: Closing Cost Calculator )
- Moving households goods. (Note that if you have many plants, you will need to figure out how to transport them on your own because most moving companies won’t be able to do it. I got in a bit of a frenzy buying all the tropical plants during the pandemic and I’m told I’m not the only one…)
- Transition period: potential period of time where you may have to pay 2 mortgages simultaneously if the closing date of your “old” home is after the closing date of your new home; or you may have to spend money on temporary lodging if this is the other way around (to what you would need to add storing costs for your things)
- Traveling to prospect for your future home: we spent 5 days in Montreal where we visited about 20 houses before making an offer on our new home. Our family of 4 stayed in a hotel and ate take out food; an Air BnB would have been much cheaper but we were in a rush and this was covered by my husband’s job.
- Buying new appliances: this one was a bit of a surprise because in Ontario, appliances are typically part of the deal and we had not properly budgeted for this. Quebec is a little bit different and we had to purchase a washing machine, dryer, dish washer, stove and fridge.
- You may also face late notice fees from your childcare provider or from other institutions. We were able to avoid this as the director of our daycare was understanding of our situation but the contract fine prints were not in our favour.
- Driving licenses and vehicle registration: another ~$500 to exchange both our licenses, get our car safety certified and get a Quebec license plate. This has to be timed up with your car insurance change as well.
What about quality of life?
Quality of life might well be the most important aspect of your analysis when deciding on making a move like this one. Based on this interesting article, Québec would be the 3rd cheapest province of Canada, behind New Brunswick and Newfoundland and Labrador. However, these two others provinces were not really fitting our needs from a quality of life standpoint and accessibility to certain things that come with “big city lifestyle”.
No extra money will pay for a specific atmosphere so the cost of living is only a part of the decision if you are willing to relocate. Is being close to the outdoors important to you? Do you prefer a big cosmopolitan city? Can you endure long and hard winters or is a more clement weather important to your well-being? Do you want access to a diverse food scene?
How much more money can you save?
Let’s say we are now saving $4000 monthly instead of $1200 if we had remained in the GTA. And let’s assume we are investing it all in index funds. Based on our near-future needs, we can expect to continue with this saving rate for a couple of years.
I don’t think it would be fair to compare a monthly investment of $4000 vs $1200 over the next 20 years because this monthly amount is going to change as our lives evolve. Childcare cost or mortgage renewal will have a huge impact on our future cash-flow situation, no matter if we live in Quebec or Ontario. So let’s have a look at the impact of the next 2 years of saving:
- 2 years of $4000 monthly investment with a 7% interest rate is equal to $102,724, including $6,724 of interest. This ~$100k will then grow to $354,098 after 20 years of compounding
- on the other hand, 2 years of $1200 monthly investment with a 7% interest rate is equal to $30,223 including $2,017 in interest. This ~$30k will then grow to $101,161 after 20 years of compounding
- That’s an EXTRA quarter million dollars saved right there between scenario Ontario and scenario Quebec. Pretty cool, huh?
(I recommend this calculator that I often use to help out with compounding estimates.)
Three questions to ask yourself
Geographic arbitrage and moving to a lower cost of living area can be an amazing way to accelerate your progress towards your financial goals. According to your personal situation, it may or may not be the right option for you. You can use the questions below to help you in making this decision:
- How long do you see yourself living in this new location? The longer the better as you’ll want to make sure the savings you make are at the very least breaking even with the move costs.
- Are you able to easily secure a new job in this new location; or can you keep working from home? or continue with your business successfully over there if you are self-employed? How easily do you maintain your main income stream?
- How is a potential move going to impact your relationships with your friends and family? Those of your children? Is this new location fitting the lifestyle you are looking for?
Hopefully this post helps you learning more about this concept and opens some new options for you to save money more quickly and without impacting your current lifestyle.
References
1 Numbeo, a cost of living database: https://www.numbeo.com/cost-of-living/in/Montreal
2 The Canadian Real Estate Association – housing market prices national map