Hedging Against Inflation by Living Overseas

Inflation is soaring and Jeff Opdyke with International Living has a “A Personal Solution for the Inflation Crisis.”

We’re seeing inflation here in Europe, but not quite as hard hitting as it is in the U.S. One area in Europe that consistently beats the U.S. is the price of gas. Current figures show that the average price of gasoline in France is $8.11 compared with $4.80 in the U.S. My daughter and I felt the pinch when we filled the rental car with gas in Portugal. So, it’s tough to hear Americans complaining about the price of gas, when as a country, they do little to reduce the use as they do in Europe. (Have you noticed the size of the gas guzzlers American drive compared to the small efficient European models?)

Aside from gasoline, the cost of living in the U.S. continues to rise and likely isn’t coming down any time soon. Opdyke reported that the U.S. inflation rate was 8.3 percent in April and prices are set to soar for just about everything Americans consume. Rents are up on the average 14 percent from last year. Mortgage rates have soared.

Why? The Russia/Ukraine war, the COVID-induced global supply crunch, financial stimulus from mainly Western governments dumping monumental sums of money into shattered economies and, most of all, the Federal Reserve and central banks pouring money into overly indebted nations. Money was created out of thin air by the Federal Reserve and now we’re paying the price.

So, what can you do to hedge against inflation? Opdyke says, move overseas! I second that motion. We live a whole lot better for a whole lot less in Europe than in the U.S. He and his wife are planning a “relocation tour.” His top three choices were: Mexico, Portugal, and Greece, based on a cheaper cost of living.

I wouldn’t have approached it the same way. I’d have first considered the lifestyle and culture before worrying about the money. Life is not about money. Money is not what makes us happy, in case you haven’t already figured that out. Sure, we want to have more for less, and we want to feel secure that we have enough money to live on till we leave this earth, but this our happiness we’re talking about here; not just a way to save money!

I just spent a week in Portugal and while it was lovely on every level, would I want to live there year round? No. As others who do live there have told me, Portugal is inexpensive, but lacks the culture, sophistication and refinement of France. Would I want to give that up just because my rent or mortgage might be a bit less? Not if I can help it.

The best way to reduce the list of possible contenders is to first compare the countries, then the cities within the country you have chosen, to determine what fits your needs best.

His criteria may or may not be yours:

Where can I both live and work?

Good question if you need to work. If not, and if you’re retired, then skip over this entirely. And guess what? The right to live and work in any European country for an American is basically the same. Getting a working permit in Europe is actually easier than it is in the U.S. for a foreigner, but it’s still not easy. Anyone wanting to work in Europe has to set themselves up in a way that makes it legal and doable. We know how to do that (we’ve helped hundreds of people) and if you can work remotely, then you’re way ahead of the rest.

Different from France, Portugal has a D7 visa that allows foreign nationals to work locally. Other incentives include the Golden Visa that can grant rights to live and work in Portugal. To obtain a Portuguese passport, all you need to do is spend €280,000 on a home.

As a retiree, France does not tax your social security, pension income or dividends. The tax treaty between the U.S. and France means that you won’t get taxed twice on the same earnings, so that keeps you safe. Uncle Sam is the one we have to watch out for…since the U.S. has citizenship-based taxation (we’ll be fighting this the rest of our lives, I’m afraid). Regardless of where you live or earn your money, you as a U.S. citizen will always be owing to Uncle Sam. Sad, but true.

Where are my daily costs lower?

I’m going to say it again…money isn’t everything. Portugal was definitely less expensive than France for dining out and cost of goods seemed a bit less. That may stay that way for a long time to come, but if my budget allows for France, then why would I want to give it up? What costs less, even in France? Housing, health care, education, property taxes, food, utilities and a whole host of things! These are the biggies and they make a big difference.

Where do I feel comfortable?

Opdyke claims that he’s visited more than 70 countries now and likes to have an international airport nearby. He got that right. From my perspective, people who want to travel and really make the most of their last years on the planet, should only consider destinations near international airports. This gives you the ability to go anywhere any time easily and inexpensively. The three international airports in France are: Paris, Nice and Marseille.

Opdyke noted that Lisbon ranked his favorite city ahead of Barcelona. He was right when he wrote that “The food is exemplary.” That was certainly true the eight days I was there. He goes on to say that “Lisbon is far from the cheapest spot in Portugal. Along the northern coast toward Porto, down along the southern coast toward the Algarve, and particularly in the hilly interior covered by vineyards, Portugal offers a dream lifestyle on a budget.” The Algarve is lovely, but let’s face it…it isn’t the Riviera! I found the Atlantic water too cold to love going to the beach; it’s certainly not like floating on the Baie des Anges in Nice!

One thing Opdyke and I completely agree upon is that the real solution is to own foreign real estate and right now is the right time. The U.S. dollar is strong against the euro and that means your greenbacks go a whole lot further than they used to. But, it won’t last long. With a recession on the horizon, the dollar will weaken.

International Living property specialists advise buying in high-demand tourist markets. That can be true, as long as the local authorities aren’t making short-term rentals with high revenue yields near to impossible. Otherwise, my advice is to seek out destinations with general popularity, for those with more interest than just the tourist trade that is so volatile. Look what happened to tourism during the pandemic! Are our memories that short? And while many turned to more rural pastures during the pandemic, mark my words that ultimately, urbanity will win out because of the cultural lifestyle it can offer…as well as easy access to other places by virtue of that international airport we talked about in the beginning.

Opdyke says that “Now is the moment to seriously consider a cost-of-living reduction and a lifestyle upgrade abroad, because there is nowhere in America where those two desires can co-exist. But overseas, the options are boundless.”

He’s right, but he’s wrong about WHERE to land. My money is on France.

And btw, the rate of exchange is almost a parity! As of this writing the rate is 1 EUR = 1.01712 USD, a 20 year low. Bloomberg.com says that “With the European economy lurching toward a recession, traders are growing more convinced that the euro breaking parity with the dollar is imminent. ”

NOW IS DEFINITELY THE TIME TO BUY PROPERTY IN FRANCE!

A bientôt,