International Geoarbitrage - Cost of Living Showdown

Having worked and lived in two countries, I've had the opportunity to experience the differences in cost of living between the two places I call home - Penang, Malaysia and Huntsville, Alabama.

Before I dive into the numbers, here are some interesting facts about these two cities:

Penang, Malaysia - Malaysia ranked #6 on International Living's “10 Best Places to Retire Around the World in 2017", and #4 on Time's "The 10 Best Places to Retire Abroad". Penang ranked #10 on CBS's "10 Best Places to Retire Overseas" and Forbes "The Surprising Top 10 List Of Best Places To Retire Abroad".
Nuff said, Penang is awesome (and I'm proudly biased). =P

Huntsville, Alabama - Contrary to most people's perception of the South or Alabama (Alabama ranks in the bottom 10 US states for educational attainment and median income), Huntsville is the home of NASA's Marshall Space Flight Center, Army's Redstone Arsenal, and is ranked #7 on Smartasset's "The Best Places for Pay in STEM Jobs". As illustrated in this Bloomberg article, the high STEM pay vs. the low cost of living in Huntsville allows your salary to stretch further.

In short, I moved from a low cost of living country in Southeast Asia to a state in the US  with low cost of living. =) For the purposes of comparison, I will use local currency (without conversion) to better reflect how salaries and expenses line up (i.e. earn RM spend RM, earn $ spend $). Scroll to the end for the converted data. Note that all examples below are based on the spending habits of someone who is relatively frugal (like us). For more detailed data on cost of living, Numbeo has lots of  good information on the comparison between both cities.
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RM 5,000/month​

USD 5,000/month

These are pretty good estimates for slightly above average salary (before taxes) in both cities. 
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Rent - RM 1,500/month
Mortgage - RM 2,500/month

Penang is on an island, hence, the housing market is "seriously unaffordable" according to Bloomberg.  Even so, it is not uncommon to see young people buying 3-bedroom apartment that costs at least RM500K, with mortgage of approx. RM2,500 per month. For those who choose to rent, it is still possible to find a 3-bedroom apartment at a decent location at a fairly reasonable rent of RM1,500 per month. 
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Rent - USD 1,000/month
Mortgage - USD 1,000/month

Contrary to Penang island, Alabama has a lot of land and most houses are 'bungalow' (Malaysian term of stand-alone residence that doesn't share any wall with another house). Huntsville is known for it's low housing costs, and it is not difficult to find a 3-bedroom house in a good location for $150K, with mortgage of approx. $1,000 per month. Renting would cost almost as much as the mortgage payment.
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Cost - RM 30,000
Loan - RM 540/month
Insurance and registration - RM 50/month

Even though there is public transportation in Penang, most people still own at least one car. Imported cars (including Honda) are expensive because they are taxed heavily, so the financially savvy option is to get a local car (i.e. Proton or Perodua). But even a 5 year old used local car costs approx. RM30,000, which is still expensive for someone making average salary in Malaysia.
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Cost - USD 15,000
Loan - USD 270/month
​Insurance and registration - USD 60/month 

Public transportation is pretty much nonexistent in Huntsville, so a car is a necessity. I was surprised when I first learned how cheap a used car cost here in the US. For just $10,000, you can easily find a used Honda or something similar with pretty good condition. Another advantage of getting an older car is the cheaper auto insurance.

RM 200/month
Internet - RM 160/month

Malaysia is a tropical country and it is summer all year round. Air-con and fans are essential for most houses and there is no need for heater, apart from water heater. Majority of houses use ductless mini split air-con, which is more energy efficient as they are only turned on when needed. The electricity bill is highly dependent on the air-con usage. There is no need for dryers in Malaysia because the weather is hot enough to hang dry your clothes.
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USD 140/month
Internet - USD 50/month

Most houses in the US use central heat and air conditioning system, and we keep it on 24/7 to 'condition' the house to a set temperature. Even so, utility bill is still reasonable. The utility bill fluctuates during the year depending on the season, with summer and winter being the highest. Dryer, oven, dishwasher and centralized water heater are commonly used by most households as well. Unfortunately, Alabama is not solar-friendly yet so that's not an option.
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Average (budget) - RM 800/pax/month

Penang is known as a food paradise and offers plenty of delicious and cheap food. For budget eats, street food and 'economy rice' cost approx. RM5 per person. Mid-range restaurants costs about RM35. According to the Big Mac Index as of Nov 2017, Malaysia ranks #3 behind Egypt and Ukraine with the cheapest Big Mac at RM8.60 ($2). With such low food price and not- so-cheap grocery prices, a lot of people prefer to eat out than cooking at home.
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Average (budget) - USD 200/pax/month

When my parents ​visited few months ago, my mom noticed how cheap groceries cost over here as compared to Malaysia (dollar to dollar). A dozen of eggs for $0.18 and a gallon of milk for $0.98 are still cheaper even after conversion. The low grocery cost makes it so much cheaper to cook your own meals than eating out. It costs at least approx. $7 for fast food, and $20 (plus tips) for restaurant. We spend only about $150/pax/month by cooking most of our meals.
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Mid-range Adidas Sneakers - RM 270
​MacBook Air - RM 4,199

Don't get me wrong, apparels can be very cheap in Malaysia​, especially the non-branded ones from China and Thailand. But for branded stuffs, it is a total different story. For those who have been to factory outlets in the US, you know how overpriced all these cost in Malaysia. As for gadgets, it costs the same as dollars after conversion, but is considerably expensive for people making average salary in Malaysia.
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Mid-range Adidas Sneakers -  USD 80
​MacBook Air - USD 999

One of my observations living here in the US is that people are actually less brand-conscious as compared to Asia, maybe it is just this part of the country. Perhaps I'm just insensitive but owning a Coach or Kate Spade handbag doesn't seem to be that big of a deal here. For those looking for bargains on branded apparels, there are cheaper alternatives like factory outlets and ROSS, where you can find Adidas sneakers for $18!
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Short haul (beach) - RM ​​50 return
Long haul (Europe) - RM 2500 return

Thanks to Airasia, flying within Southeast Asia and Asia have gotten so much cheaper. For a beach vacation, it is possible to fly to Langkawi Island for RM50 (roundtrip). For fair comparison, we use Europe as a long haul example. The cheapest flight would cost at least RM2,500 (roundtrip). On top of that, the weaker currency makes traveling to foreign countries more expensive. For e.g, 1 Euro is equal to RM4.91 (Nov 2017). One good example was our 14-day trip to Norway and Stockholm. The total cost per person was RM7400, which is equal to $2,300.

Short haul flight - USD 200 return
Long haul flight - USD 800 return

Huntsville is an expensive airport to fly in and out of, and there is no budget airline to and from this airport. To fly any of the budget airlines, the nearest airports are Nashville or Birmingham, but you have to factor in the additional transportation and parking cost. The nearest beach destination is 6 hours drive away, and would cost at least $200 (roundtrip) to fly. A flight to Europe cost approx. $800 (roundtrip). The stronger currency makes traveling to foreign countries more affordable. For e.g. 1 Euro is equal to $1.20 (Nov 2017). 

One major advantage in the US is the ease of earning points and miles from credit card signup bonuses, which is not available in Malaysia.
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Summary
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Assumptions:
- RM 1 = USD 0.24 (Nov '17)
- Cost per person (potential
   savings for double income 
​   couples/families)
- Excl. health insurance/medical
   expenses (employer paid)
- No parental assistance
​- No kid

Based on the 'guesstimated' numbers above, this is how long it will take for you to be financially independent according to Mr. Money Mustache's Shockingly Simple Math Behind Early Retirement:

P.S. It may not be obvious, but every dollar you spend directly impacts how much you are able to save and invest.
​This is just a simplified calculation. You can play around with the numbers on Networtify.com​

Here are my two cents:

• For those working and retiring in Penang, the numbers may look demotivating but there are several factors that could further improve the numbers. The savings rate above doesn't include the 12% employer's contribution for the Employees Provident Fund (EPF), your income will most likely grow over your working years, your household income will double and the annual expenses will be shared between two people if your spouse works.
• For those working and retiring in Huntsville, notice the advantage you have over people doing the same job but living in other parts of the world. If you are smart with your money and don't succumb to lifestyle inflation, you could potentially work 10 years less than people doing the same job in Penang. The savings rate would be even higher for double income households. Count yourself very lucky to even fathom the idea of retiring early.
• For those lucky and adventurous ones who wish to leverage the superpower of Geoarbitrage to achieve financial independence even earlier, you could potentially shave another 11 years off your working years. We are very fortunate to have families on both sides of the world and with Penang being on the top 10 list of best places to retire, we will certainly consider taking advantage of this superpower in the future. =P​