The costs of housing and transportation are typically the two biggest parts of any budget along with taxes and health insurance. For some people these four items can account for 80 percent or more of your overall monthly spending.
But there are ways to reduce that part of your budget significantly. Instead of spending the majority of your monthly income on necessities, you may be able to get that amount down to less than 50 percent by retiring in another country. Here are four costs you will be able to significantly cut by retiring abroad.
[See 5 Things About Retirement You May Not Have Considered.]
Reduce your housing costs. In some appealing, safe, and welcoming places, including Medellin, Colombia; Las Tablas, Panama; Chiang Mai, Thailand; and Languedoc, France, your housing expenses can be $500 per month or less. In these and other regions you could find a comfortable rental for as little as $300 per month.
Control transportation expenses. In many places around the world your transportation expenses could be negligible, such as the cost of metro tokens or occasional bus rides. In some places, you could live without a car altogether. Medellin is a great city for walking, and it boasts a clean, efficient, and super-cheap metro. And in Panama, low-cost buses are a great way to get around the country.
[See 10 Tips for Retirement Overseas.]
Trim health insurance bills. In-country health insurance can cost $100 a month or less in some places, depending primarily on your age. And in some countries around the world, medical care can be so affordable that it can make sense to go without health insurance. A doctor's visit might cost $20 in some countries, for example. Not everyone is comfortable going without insurance, but in places where health costs are very low this can be a reasonable strategy.
Cut your tax burden. Depending on where you relocate, your overall annual tax bills can be reduced dramatically or even eliminated altogether. Panama and Belize, for example, are two countries that offer significant tax advantages to foreign pensioners who retire there. And residing overseas eliminates any U.S. state or city taxes you're now paying.
If you can reduce you housing, transportation, insurance, and tax costs, your monthly budget has been turned on its head. Now, rather than making up the majority of your living expenses, these big-ticket items are controlled, leaving you with more money for the things that matter.
[See Are Your 401(k) Savings Enough For Retirement?]
It's a matter of shifting your spending perspective to focus less on the expenses that you've spent your entire life until now trying to cover and more on the expenditures you've likely been sacrificing and doing without for a long time. I'd argue that it's these day-to-day indulgences--dinners out, parties with friends, ice cream cones, gifts, and travel--that make life better. If you restructure your budget by relocating overseas, you will have plenty of money left over for what's really important.
Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter. Her book, How To Retire Overseas--Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.
PHILADELPHIA (Reuters) – Consumers are struggling with higher gasoline costs and a weak housing market, Federal Reserve Governor Elizabeth Duke said on Tuesday, in remarks that suggested she is unlikely to be pressing for higher interest rates soon.
Federal Reserve Bank of St. Louis President James Bullard struck a similar tone in a speech late Monday, saying a pause once the $600 billion quantitative easing program ends in June would give the Fed time to assess the strength of the economy. Bullard said U.S. economic growth had disappointed in the first half of the year.
The Fed cut interest rates to near zero in December 2008 and has kept them there since. Bullard said keeping monetary policy on hold signals no change to the Fed's pledge to hold rates extremely low for an extended period.
Duke's remarks, while focused primarily on financial literacy, offered a flavor of her views on the economy.
"The financial crisis and the slow recovery from it has obviously had a dramatic impact on the financial decisions made by American families. Many now have fewer financial resources and limited options," Duke told a conference sponsored by the Boston Fed.
"Many families, particularly those with low-to-moderate incomes, are actually facing the decision between buying gas to drive long distances to work and paying their mortgage."
After a retreat in crude oil prices, U.S. gasoline costs fell to $3.85 a gallon in the latest week, the lowest level in five weeks, the Energy Department said on Monday. Although prices are down 11.1 cents from the previous week, the national gasoline price is still $1.06 higher than a year ago.
The economy appears to have hit a soft patch in recent months after several quarters of strong growth. U.S. gross domestic product expanded at an annualized rate of just 1.8 percent in the first quarter.
Speaking in Philadelphia and St Petersburg, Russia, respectively on Tuesday, Kansas City Fed President Thomas Hoenig and Boston Fed President Eric Rosengren offered their views on financial regulation.
Hoenig made the case that banking organizations under the public safety net should be restricted to activities that don't hamper the assessment, monitoring and control of risk -- such as making loans and taking deposits.
Dealing, market making, brokerage, and proprietary trading, he said, are not core banking services and should thus be off limits.
"The consequence of expanding the safety net to an ever-increasing range of activities is to invite a repeat of our most recent crisis," Hoenig said.
"The social costs of additional activities and the associated complexity can greatly exceed the private benefits to an individual bank," said Hoenig, who has been amongst the most vocal Fed officials calling for a break up of banks deemed "too big to fail".
Rosengren, for his part, told a conference of international regulators that capital should be narrowly defined as that which is easily available to absorb losses during a financial crisis.
Rosengren said that during the 2007-2009 crisis banks that had adequate capital according to broader definitions were unable to calm investors.
"Clearly we need to focus on the narrow definitions of capital -- that which can readily absorb losses," Rosengren said.
Some U.S. regulators have raised concerns that capital required under the new Basel III global regulatory standard could be differently defined around the world.
DETROIT (Reuters) – Chrysler Group LLC was set on Tuesday to repay $7.5 billion in U.S. and Canadian government loans from its 2009 federal bailout, a move that will allow the U.S. automaker to distance itself from an unpopular bailout and deepen its ties with Italian automaker Fiat SpA (FIA.MI).
Under the original terms, Chrysler had until 2017 to repay the debt.
Sergio Marchionne, the chief executive of Fiat and Chrysler, is scheduled to appear at a Chrysler assembly plant in Sterling heights, Michigan, Tuesday afternoon to express thank to the governments for their financial support. Also at the event will be Ron Bloom, the Obama administration's point man on auto restructuring, and General Holiefield, head of the United Auto Workers union's Chrysler department.
Marchionne noted on Monday that Chrysler's repayment of its bailout loans was even faster than that engineered by Lee Iacocca, who led the U.S. automaker through a government bailout in the late 1970s and ran the company through 1992.
Chrysler paid more than $1.2 billion in interest on its debts in 2010. Marchionne's frustration with the terms of the government loans seemed to bubble over earlier this year when he denounced them as "shyster loans.
Chrysler is swapping out government debt with cheaper debt from institutional investors. The refinancing will not mean it has less debt on its books, but it will save the company more than $300 million a year in interest expense, Marchionne said on Monday.
Nor will the company have completely ended government involvement. The U.S. Treasury will still own a small percentage of the equity in Chrysler, which Fiat can buy over time.
Yet Chrysler's ability to pull off a deal at all is a sign of Wall Street's renewed faith in the company, which was nearly left for dead two years ago at the height of the financial crisis.
"When we did this deal back in 2009, we couldn't have borrowed a buck from a 7-Eleven store -- the banking system was shut," Marchionne said earlier this year.
The repaymant will put Chrysler on firmer financial ground and draws it closer to Fiat, two things investors and bankers have said would make Chrysler more attractive in an initial public offering that could come this year or next.
A sharp drop in auto sales pushed the Auburn Hills, Michigan-based company to the brink of collapse in 2009 before its federal bailout.
U.S. Treasury officials were initially divided on saving Chrysler, but ultimately decided to prop up the company to preserve jobs. Chrysler emerged from bankruptcy nearly two years ago under Fiat's management.
Marchionne was a central figure in laying the groundwork for the Chrysler deal in 2009. He refused to have Fiat put up any cash for Chrysler.
Instead, the U.S. Treasury devised a series of tests that allowed Fiat to raise its stake. Over time, Fiat can increase its stake to 76 percent, according to a recent regulatory filing.
As a result of the loan repayments, Fiat's stake in Chrysler will rise to 46 percent as of Tuesday. This puts Fiat within striking distance of its 51 percent goal in 2011. Once Chrysler develops a vehicle that gets 40 miles per gallon on a Fiat platform -- a development expected in the fourth quarter -- Fiat can go to 51 percent.
Marchionne can also bolster Fiat's earnings by moving quickly to integrate its operations with Chrysler's, analysts said. Chrysler generates "structurally stronger" profits than Fiat, which relies heavily on Brazil, Cheuvreux analyst Bruno Lapierre wrote in a note.
Bernstein Research analyst Max Warburton said there was little obvious commonality between Fiat's production of small cars in Italy and Poland and Chrysler's manufacturing of pickups in Michigan and Mexico.
"But Marchionne seems determined to make this work, and is pushing the companies together far faster than any previous example of M&A," Warburton said in a May 19 research note.
Chrysler's lineup, which is heavily skewed toward pickup trucks, minivans and SUVs, remains a concern for investors at a time when pickup sales are faltering. In the first quarter, Chrysler's U.S. market share was 9.1 percent, tracking below the 10 percent goal for the year.
Additionally, meeting upcoming federal fuel economy standards is expected to be a challenge for the company. Funds from the Department of Energy would help the company meet those standards.
"Chrysler is not yet fixed," Warburton said. "But it is clearly in a much better place than we could have guessed 18 months ago."
(Reporting by Ben Klayman in Detroit and Deepa Seetharaman in Chattanooga, Tennessee; editing by John Wallace)