It doesn’t matter WHERE you are living – there’s usually a direct correlation between the average income and costs of living.
You can decide to live in a place that has low costs of living where you spend $5 per day on food and $200 per month on accommodation. Chances are jobs that are available in that city or country don’t pay much.
In the end, if you deduct the costs of living from your salary, you don’t get to keep much of what you worked for.
As a result, you might decide to move to another country – perhaps Dubai – because you’ve heard that salaries are high and there’s no income tax.
Well, of course any place in which people earn a lot of money, prices for literally all goods and services are going to be high as well.
You might earn $4,000 per month in Dubai, but the accommodation is now gonna cost $2,000 instead of $200 per month. Food and groceries are $600 instead of $100 per month.
Once again, if you subtract expenses from earnings, you are left with roughly the same amount of savings.
Of course, there are exceptions to this but for the most part it applies – and there isn’t really a way to escape this dynamic because anywhere where a lot of money is made, it’s only natural for prices in the private sector to be very high.
Online Business = Cheat The System
When you make money online, your income is not tied to any physical location. You can make those $4,000 living in a country with low costs of living.
That’s when the game changes because the equation changes.
Now there’s a significant gap between the money you earn and your expenses, which means more of your income is for you to keep.
The Downside of Online Income
It takes work.
That’s the main downside – and most people aren’t willing to go through the process of building a sustainable online business.
Getting a job means almost instant income, instant gratification but in the long-run, you are worse off because of the costs of living/earnings dynamics I mentioned is always at play.
When you decide to build an online income stream, literally ALL the work is front-loaded. There are no rewards at the beginning. No instant income.
But once you’ve reached the tipping point, you get all the rewards.
That’s when you are reassured that you did the right thing. Ditched instant gratification for long-term results.
Online Business Tax Benefits
When you have no geographical location that your income/business is tied to, you can also play around with tax optimization.
By that I mean, you can decide where to start your company – often times local tax regulations don’t apply – which means more money for you to keep.
When you are starting out, it’s unrealistic to get it all right from the get-go. Starting your online business as a sole proprietor means you are taxable in whichever country you have tax residency.
That’s not what we want.
Neither is a complex company structure the solution because it’s very costly to setup and operate.
That’s why I usually recommend an inexpensive solution such as the e-Residency program to establish your company.
You can receive revenue under your company’s name, keep the funds in the company bank account (0% tax as long as you keep them there) and decide what you want to do with the money at a later point.