The Financial Impact of Moving

One of the immutable truths of being an expatriate is this: it’s going to make a difference to your bottom line.

In our case, we knew decades ago that we probably wouldn’t be able to afford to retire in the US and have any kind of a decent lifestyle. If nothing else, the cost of healthcare was going to be ruinous, and housing was getting more expensive every day. We originally assumed that we’d wind up in México or South America somewhere, which is why I spent years learning Spanish. It’s only because of the universe aligning that we wound up in Portugal instead!

At the time we moved in 2020, our cost of living went down by about 40%, and I think that’s probably still around where we are today. Yes, prices have gone up in Portugal, but they’ve gone up everywhere, and the US is even less affordable than it used to be.

So, what will it be like to live in Spain?

To the best of my ability to calculate, we will be in about the same position financially in Spain as we are in Portugal, with some places where we save and some where we pay more. Housing is more or less a wash – the new apartment is basically the same price as the apartment in Lisbon (although if we stayed, that was 100% guaranteed to go up substantially, the owner had already telegraphed his intentions).

Food and wine look like they’re a little less in Spain, surprisingly. However, this is not a place where we try to save money. Our philosophy is to eat and drink what we want, and quality is a lot more important than saving a few pennies. We are very much looking forward to shopping for fresh stuff at the Central Market in Valencia, which is less than a 10 minute walk from the apartment.

Utilities look like they’re going to be less in Spain. Our phone and internet service are definitely a savings. Portugal was already a pretty good deal – unlimited voice and data for two mobile phones, high speed internet (500 down, 300 up), cable TV and a landline phone that we never hooked up. I was getting a corporate rate with my business of €99/month. When you compare that to the over $150/month I paid for a single mobile phone in the US, it looks great.

Guess what? Spain is even less. The internet speed goes to 1GB down/500 up, I get the same unlimited phones, and the cable INCLUDES accounts with Netflix, Amazon, Max, and Disney+, so I can cancel my paid subscriptions to those. Price? €49.99 for the first three months, then it goes to €89.99.

The biggest unknown is going to be taxes. This part gets complicated. In Portugal, I opened a company and channeled all income through it. The tax system allows generous deductions, and because the apartment serves as the “world headquarters” (yes, it’s very glamorous), the full rent is deductible. I pay myself minimum wage as the sole employee, which means I avoid personal income tax entirely.

In Spain, it didn’t make much sense to open a new company. Instead, I’ll be registered as self-employed. Most of my income is royalties (considered passive income), and they’re taxed at a lower rate. I’ll still be able to deduct business expenses, but more like the U.S. model – only a percentage of the rent and utilities can be declared.

Here’s a little win: In Portugal, my company pays over €250/month for my social security contributions. In Spain, that drops to €90/month, and it’s automatically withdrawn from my bank account. Less paperwork and more savings = my kind of bureaucracy.

And since I’m paying into the system, we’re immediately eligible for Spanish National Health, which is very robust. We’re covered for National Health in Portugal, but in practical terms we’ve needed to have private insurance. The Portuguese health system got very stressed during COVID and never completely recovered. After five years here, we still don’t have a family doctor. Although we are registered at the nearest clinic and can get emergency care as needed without any problems, it’s been a lot simpler to go to a private hospital.

Insurance is very affordable compared to the US. We have great coverage with minor copays for €5000 combined in Portugal, but we probably won’t need private insurance at all in Spain. We’re going to have it just in case for the first year, but after that we can get onto the national supplemental program for a mere €2500/year.

Even for medical things where you have to pay retail like dental care, costs are drastically lower in Portugal and Spain, plus as senior citizens we will get reduced pricing on prescriptions (which are already a LOT lower than the US).

There’s still one dead loss in all this: the cost of physically moving. Boxes, movers, deposits, setting up a new place … it all adds up, no matter how clever your budgeting may be.

But I’ll talk more about that in an upcoming post. For now, suffice it to say, it’s all worth it.