The purpose of money is to get you the lifestyle that you want and improve your quality of life.

If you get rich but never use your money for this purpose, it’s like saving your fire extinguisher when your house is burning down…it’s just hoarding.

Lifestyle includes where you live, who you spend time with and how you choose to spend your time.

And one way to get a lifestyle upgrade (and some extra sunshine thrown in as a bonus) is some sort of Geographic Arbitrage where you move to a lower cost of living area where your money goes further.

In Geographic Arbitrage and The Magic of Having a Plan B I talked about the fact that just the realisation that there is another option (should you need it) can lift a huge weight off your shoulders.

And once you see you have options, you are better able to continue doing the high-stress job that you may currently be doing. Or make the leap. Either way, it’s better than staying stuck in your own mental prison forever.

Portugal is an interesting option and so I asked Beccy (a client of my financial coaching and a successful escapee) to write a post about the pros and cons of a move to Portugal.

Enjoy

The Escape Artist

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But before you stick it to da man and book your flights to Utopia, it might be worth considering recent news articles around why immigrants are leaving in their droves within just a couple of years of arriving and way before they’re able to apply for the sacred maroon EU passport…

I’ve owned property in Portugal for around 15 years, but only in the last 6 years settled on the Silver Coast, north of Lisbon, where I run our home as a summer holiday rental (www.casabrisa.info).  After such a long association with Portugal, I guess there was a sense of inevitability with my friends and family that I would eventually move there.

Without having the nuts to resign from my toxic London job, a business decision to close my unit came just ahead of the first Covid lockdown, so with that summer’s holiday rentals decimated, I worked my notice in Portugal.

I’d already suspected I was suffering from One More Year syndrome, so a Zoom coaching session with Barney and the impending doom of Brexit gave me the kick up the backside I needed to apply for permanent residency.  I just kinda never went home.

It’s been bloody brilliant and bloody hard work in equal measure but after 3 years here, I now recognise that I am part of a problem in a country that’s not the low-cost paradise that the YouTubers & bloggers want you to believe. It’s not that cheap, it’s not an easy ride and if you’re considering geo-arbitraging to here, it’s a move that’s going to take all of the skills you’re mastering as a wannabe Prison Camp escapee to make it work.

Pre Brexit, the residency process at the local city council office here was pretty straightforward – ironically, the least bureaucratic process I have encountered here.  Naturally, when my partner went through the same process, with the same clerk, at the same office a few days later, there were other pieces of paperwork required for no apparent reason.  Variable and localised running of what should be standardised processes are exceedingly common and frustrating.  Resilience will become your most flexed muscle in accomplishing even the simplest of tasks here.  Aim to achieve one thing a day.  If you get that done, you’re winning.

I will be applying for citizenship, when I am able to after 5 years full time residency.  However, that in itself is a process that’s currently averaging an additional 18 months.  For that, I need to evidence that I am basically a good and contributing citizen, have no criminal background and have a proficient level of Portuguese. 

I’m ok on the first two, but in all honesty, I took the Portuguese exam 3 years ahead of time as I wasn’t sure how long it would take me to pass…. even after 5 years of lessons.  My Portuguese neighbours look at me with a kind but baffled look on their faces when I try even the simplest conversation.   It’s a tough gig, but that kind of self-investment is important. 

Sure, you can get by without speaking the lingo; I know plenty of expats that have been here many years that prefer to sit in English bars drinking away the potential of their new lives in the sun.  They can barely muster a “bom dia”.

But how can you want a future in a country where you may need to navigate a healthcare system, at a time when you might be in pain or highly stressed, and the language is alien to you?  How will you resolve any official matters with any level of credibility?  In fact, there is a sign in our local city tax office stating that you need to bring a Portuguese speaking representative with you, or they will refuse to serve you.  Unsurprisingly, busy, low paid civil servants don’t have time to decipher and respond to requests through the medium of Google translate. 

On the subject of low pay, the Portuguese statistics office reports the average take-home pay here is just over a thousand euros, yet the average monthly rent is over 600e – an increase of nearly 50% in the last 6 years.  Alongside, the average house price has almost doubled between 2016 and 2022, in no small part driven by the influx of “estrangeiros” like me, wishing to live the dream.

Most immigrants apply for the Non-Habitual Resident (NHR) scheme to benefit from various tax rate breaks.  For example, 0% on non-Portuguese property rentals, 10% on pension income and some professions limited to a 20% income tax are all pretty appealing.  Afterwards, the sliding tax rates apply as per for all other income earners here, which range from 14% to 48%.  

NHR, alongside schemes like the Golden Visa, which has enticed foreigners to invest here with minimal residency, enabled the country to bounce back from the days of the EU emergency bail out in 2011.  Meanwhile locals that are not offered such tax breaks.   “Sorry.  Brand new customers only”.

Personally, I don’t benefit from NHR status. Capital gains tax is a standard 28% on investment gains, and I’m also taxed on the holiday rental income.  The internet is full of advisors that can fix you into euro-based investments promising lower tax rates after a period of time. I just couldn’t get comfortable with the level of drag of the fees, the set-up costs and what I feel is less flexibility in access to my funds in the medium term. This gal’s gotta be able to sleep at night. I keep my funds in Vanguard UK (possible after a move) but I’m no longer allowed to add to the investments. 

Now, in the same way as when I was a “higher earner” in London, I have a grasp of my income and expenditure and I live to a budget.  I’m 45, so I still have a whole another lifetime to fund.  Now, like then, I’m not interested in “stuff”, nor am I a “brand monkey”. 

Here, I spend less than £20k a year (dependent-free, plus the house and cars are already paid for) and within that I spend the summer travelling in my campervan.  It’s definitely cheaper to camp here – I spent more on washing than on campsite fees this summer. The (very NON-passive!) income from the summer rentals then goes on property maintenance that I don’t need to find from my own money. 

As part of what can be a lower cost of living, free healthcare is another big attraction tempting older immigrants to relocate, but this is another area where times are tough. Like many countries, the health service has been underfunded and is struggling for staff.  Many young Portuguese people don’t see a future in their homeland, and will take their medical careers abroad where they can earn more money.  This is also true of many other professions.   I’ve heard the phrase “you don’t come to Portugal to earn money, you come to Portugal to spend money” and it’s true – it’s an aging population with no clear idea on how to solve its brain drain.

Fortunately, I’ve not needed much by way of healthcare here yet, and I’ve now decided to prioritise investing in my own health and well-being to try to keep it that way.  I make the most of being outdoors now that I don’t commute to hell in a handcart on a daily basis.

Unsurprisingly this has been great for my mental and physical health – the Atlantic wind smashing you in the face on a 7.30am cliff top dog walk is a great perspective shifter. I’ve also rediscovered a love for half marathons, road cycling, playing netball and rounders and I walk rescue shelter dogs – all activities that are low or no-cost. 

Since dumping the gym membership and shit convenience food that made up my UK sustenance, I’ve lost 4 stone.  I also recently completed my first year alcohol free.  None of these things just happened:  once the decision was made to move, it was one to change my life for the better, not just escape the tax burdens or boredom of my old one.

As far as geo-arbitraging goes, I think I’m doing ok, but I moved somewhere that I’m emotionally as well as financially invested in and was able to adapt my life and my expectations. I didn’t just move here to save money and recreate Little Britain.

Some things are cheaper here – local wine, local food haunts, dentists, vet bills and hair-cuts.  Some things are more expensive – British branded food, the cost of fuel and cars.  And like the UK, living in a city or next to the sea will cost more.  Some things are worse – the teabags are crap.  And some things are much, much worse – animal care (or lack of) is a very difficult thing to live alongside every day.  Dogs chained up alone and outside is a sad and common sight and the shelter I work at (www.redeleonardo.pt) deals with some heartbreaking cases.

Housing quality in Portugal is often poor: humidity, damp and mould are problems in much of the country. Heating isn’t commonplace and, away from the Algarve, the winters can be cold and wet.  Energy prices are high here (as they are everywhere) and if you arrive expecting to live like you did at home before #cozzylivs, you’re in for an expensive ride.  It doesn’t have to be full monk mode but make like the locals and when you can’t let the sunshine in, pile the blankets high and get some earlier nights.

It’s a great life In Portugal if you want and you work at it.  The country packs diverse landscapes of deserted windswept beaches, sun drenched resorts, record breaking surf, fishing villages, arid stretches of cork and olive plantations, mountainous and wine regions into a relatively small and proud country that only emerged from a dictatorship 50 years ago next year.  It’s not an easy place to settle and even though I’ll probably always be seen as one of the “estrangeiros”, I’m grateful to call it home, hopefully for many decades to come. 

To paraphrase:  adapt, overcome, improvise improve yourself.   Getting out of The Prison Camp is only the first step.  Depending on where you go and why, geo-arbitraging abroad will probably mean you’ll need to continue to adapt and evolve.

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