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An Extreme Cost of Living Comparison: Southern California vs. Rural Bolivia

I realized last week that I did something few people ever get to do.  I just moved from one of the more expensive places in the world – California – to one of the cheapest places in the world – a small town in the Bolivian Andes.  From one end of the spectrum to the other.  It was a dramatic change in many ways, but it was especially dramatic for my wallet.  Now that we’ve been here for a few months, I can do an extreme cost of living comparison:  Southern California vs. rural Bolivia.

 

As a hopeless dreamer, I often like to think about what it would be like to live in other places.  But as an accountant and personal finance nerd, the cost of living is one of the first things I consider.   A place’s cost of living has a massive impact on your finances.  It impacts your salary, how much you spend, and how much money you need to accumulate to achieve financial freedom.

 

Early retirement dreamers often pursue a strategy of working and building their nest egg in a high cost of living area like California, and then retiring to a low cost of living state (aka “fly-over-country”) to make their funds last longer.   It’s a kind of geographic arbitrage – save your money where salaries are high, and spend it where things are cheap.

 

Keep Flying, Son

Seems reasonable, but maybe a bit… unambitious?  After all, why stop in fly-over-country?  It seems like a half-ass effort to me.  Maybe you’ll save 10% or 20% in a slightly lower cost of living state… That’s peanuts!  Why not go extreme?  After all, if you’re going to do something, do it RIGHT!  If you’re looking for cheap, then keep flying right over that country and head way, way down south where things are REALLY cheap.  Here’s what an extreme cost of living comparison looks like:

 

An Extreme Price Comparison

I decided to try to compare some common household prices between my hometown San Diego, California and the small Andean village, Villa Abecia, where I’m living for a year.  This is about as big of a cost of living difference as you can find between any two places on the planet.  Sure, San Francisco, New York, and London are all more expensive than San Diego.  But all that’s rounding error when compared to a place like Villa Abecia.  Southern California is among the more expensive places in the world, and rural Bolivia is among the cheapest.

 

No, I don’t have the time, resources, nor desire for some kind of real price survey.   So, I decided to do the next best thing: estimate.  As they say, 90% of statistics are just made up anyway.  And in that spirit, I also decided to make up a few of these numbers myself.  But, nevertheless I think they are fair estimates.

 

Apples to Oranges

This is just based on my own personal experience, and I’m doing my best to compare “apples to apples”.   But the reality is that these two places are very different.  It is often difficult to compare prices due to differences in quality or service.

 

For example, if you take a taxi ride in San Diego, you’re going to be in a nice car.  Even Uber has standards!  Here in Bolivia, your taxi ride will be much less…. comfortable.  The car will be old, beat up, noisy, perhaps even blowing smoke out the air vents.  So how do you compare the prices of those two experiences?  A nice ride in California vs. a jalopy in Bolivia.  Well, like I said, I did my best to be fair.  Let’s just leave it at that.

 

A Different Basket

Besides the apples and oranges, one of the biggest drivers of the cost of living difference between these two places is a difference in lifestyle.  Or, more technically, a difference in the basket of goods you consume.  For example, in California, most people own a car – sometimes two.  In Bolivia, most people don’t have cars.  They take public transportation, or they walk.  Those types of lifestyle differences have huge impacts on your cost of living.

 

So, cutting to the chase, here are some sample price comparisons between one of the most expensive places and one of the cheapest, along with how much of a discount you get by moving from Southern California to rural Bolivia.

 

Housing Costs

 San Diego PriceRural Bolivian PriceBolivian Discount
Rent, 1,600 sq ft house $2,900$200(93%)
Electricity $100$12(88%)
Water, Sewage $100$1.50(99%)
Cell Phone Service, 1GB $25$10(60%)
Internet Service, 1 Mpbs $35$55157%

My frugal family of four had a house and utilities budget of about $2,800 per month in San Diego.  That included our mortgage, property taxes, insurance, and utilities.  If we rented instead of owned, it would have been more expensive – about $3,300 per month for rent plus utilities.

 

Here in rural Bolivia, an equivalent housing budget for rent and utilities for a family of four would be about $300 per month.  That’s a 91% discount from San Diego!  Now, the kitchen and bath won’t be as nice, and you won’t have the mail delivered to your door in the Andes.  But, there’s a roof over your head and running water (most of the time).

 

Transportation Costs

 San Diego PriceRural Bolivian PriceBolivian Discount
Gasoline, gallon$2.75$2.05(25%)
Taxi Ride, 5 miles$20$2(90%)
Taxi Ride, 100 miles $200$7(97%)
1 hour flight, round trip $350$150(71%)

Our family budget in San Diego for transportation – gasoline, car insurance, and maintenance for two cars was $195 per month.  We had no car loans or leases.  That would have made it much higher.

 

Here is rural Bolivia, we don’t own a car, and we rarely even get in one.  We walk everywhere, because that’s the most convenient way of getting around.   We only take a taxi ride if we want to go somewhere far away, like the city.  In the last few months, we’ve been going to the city a lot, and we’ve spent an unusual amount on transportation because of it – $150 per month.

 

But, if we were living full time in our pueblo, a reasonable transportation budget would be about $50 per month – enough to still take a couple of trips into the city.  Even though we had no car payments in San Diego, that’s still a 75% discount in transportation costs! 

 

Household Goods

 San Diego PriceRural Bolivian PriceBolivian Discount
Twin Bed Frame, wood $250$13(95%)
Microwave Oven$75$100133%
Kitchen Set of Pots & Pans $150$15(90%)
Coat Rack$60$7(89%)

We outfitted our house with new furniture in our Bolivian pueblo for less than $1,500.  We bought two beds and mattresses, some blankets and sheets, two dressers, two coat racks, a kitchen shelf, a bunch of pots and pans, utensils, a microwave, and who knows what else.

 

Most household goods are about 90% cheaper in Bolivia.  The exception is luxury goods – like a microwave.  Very few people in Bolivia use microwaves, so it’s an expensive luxury import – more expensive than what you’d pay at a big box store in California.

 

Food

 San Diego PriceRural Bolivian PriceBolivian Discount
Lb Ground Beef$8$5(38%)
Lb Flour$1$0.50(50%)
Gallon Milk$3$2(33%)
Fresh Spinach, Bunch$2$0.25(88%)
6-pack beer$8$5(38%)
Restaurant Meal – Prime Steak House for one$75$20(73%)

Our food and restaurant budget in California was $875 per month.  Here in our Bolivian pueblo, we spend about $500 per month on food, a 42% discount.  One of the reasons food is cheaper here is that it’s always going to be basic, fresh ingredients.  There are no frozen or prepared foods.  This means lower prices.

 

In California, we very rarely ate out – it was almost entirely supermarket spending and eating at home.  Here in Bolivia, a huge chunk of our food spending so far – perhaps 40% – is at restaurants.  Thanks to FX magic, we’ve been taking advantage of cheap, high quality restaurant food.   If we avoided restaurants in Bolivia like we did in California, an equivalent food budget would be only about $300, a 65% discount.

 

Clothes

 San Diego PriceRural Bolivian PriceBolivian Discount
Kid’s Shoes$25$10(60%)
T-shirt$20$2(90%)
Jeans$75$15(80%)
Winter Coat$100$35(65%)

Are you starting to see a pattern here?  Everything is 50% – 90% cheaper in rural Bolivia.

 

Medical

 San Diego PriceRural Bolivian PriceBolivian Discount
Dental Cleaning$100$15(85%)
Dental Root Canal$750$50(93%)
Hospital Stay, 1 night$7,500$100(99%)
1 month Health Insurance, Family$800$0(100%)

Here’s where we really get wrecked in California – medical costs.  In Bolivia, there is no such thing as health insurance.  That’s good, because you shouldn’t buy insurance for something that is perfectly affordable – like my wife’s two-night Bolivian hospital stay that cost only $600, or my daughter’s braces that cost $275 for six months at a Bolivian dentist.

 

It’s tough to compare equivalent budgets for medical expenses.  In California, your costs depend on your employment situation, as well as your income.  But, without a doubt, medical procedures in Bolivia cost pennies on the dollar compared to California.

 

An Extreme Cost of Living Comparison

Our family of four living in San Diego had an annual budget of $40,000, excluding our mortgage.  Here in rural Bolivia, we could very easily live in our pueblo for about $10,000 per year.  That’s an overall 75% discount on our discretionary budget from Southern California! 

 

Financial Independence

The cost of living has an enormous impact on how much you spend, as well as how much money you need to be financially independent.  The rule of thumb is that you need to save 25x your annual spending to be independent.

 

In San Diego, I figure we need about $1.3M to achieve financial independence (that’s 25x our $40k budget = $1M, plus the remaining mortgage).  But here in rural Bolivia, I only need $250,000!  That’s such a huge difference!  Just a quarter million to never have another boss!

 

Of course, moving to a small town in the Andes is not all cakes and unicorns.  It’s definitely not for everyone.  But, that kind of massive cost of living difference is nothing to be laughed at.  And if your alternative choice is to work another decade, then you may just want to think about it.  So, the next time you’re planning your future, don’t just think about a tiny little reduction in your cost of living.  Think about going extreme!

 

Cheers,

Jojo Bobo

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1 Response
  • Ann
    September 17, 2017

    Yes, you are definitely a “hopeless dreamer”!!
    And we do remember the taxi in Bolivia – had a HUGE hole in the floor-board, which blew wonderful dirt/dust all over me in the back seat – to say nothing of the 5 flat tires we had between Tarija and Villa Abecia.

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