Have you ever heard of the concept of Flag Theory? Harry D. Shultz discovered the theory in the 1960s. I first heard about it through Andrew Henderson, the founder of the Nomad Capitalist.

The concept of it was simple. As Henderson states, “You should go where you’re treated best.” You should live in a country that gives you more opportunities and where you’ll have a better quality of life.

Quality of life is not a focal point for many in the United States. The reality is the United States runs on the theory of capitalism. A system where private individuals own businesses that thrive off of the supply and demand of goods. I’m not complaining. A healthy democracy and capitalism often go hand in hand.

However, we should ask ourselves what our end goal is? Is it to spend the rest of our lives trying to amass the most amount of wealth? Or is it to enjoy our life and enjoy the fruit of our labor?

The basic concept of the Flag Theory is to be cognizant of what your country is offering you and to look around for other opportunities.

I’ll be the first to admit this is a privilege. Your passport can make it easier or harder to apply the Flag Theory. I understand some have no choice. I don’t take this lightly. As of now, the United States passport grants us immense flexibility. Let’s hope it stay this way.

As some of you may know, my husband and I traveled for two years after the birth of our son. We even saved 80K while traveling in Europe. We then lived in Spain for 5 months and loved the quality of life.

During this trip, I read all about Flag Theory. I was fascinated by the idea of living where you were treated better. But what does that mean exactly?

It depends on the person.

Let me explain.

How to Apply Flag Theory

Flag theory for university or grad students

For a student, applying the Flag Theory may mean foregoing college in the states for free college in Europe. Student debt in the United States is a debilitating issue for many young students.

In 2020, student debt totaled 1.6 trillion dollars. According to Forbes, the average students owes about $32,731 in student debt.

For graduate students, the sum is much more. I went to law school in Boston and I can tell you firsthand — graduate school debt is ludicrous. Still, it was the right choice for me. I had no other choice. At least I thought so.

I’ll never forget a trip to Paris I took post-graduation. I was speaking to several Parisians about life in the USA versus France. They were relaxed and conversing about the subtle and blatant differences we had. One of them asked me how much I owed in student debt. After I told him, he literally spat his drink out in disbelief.

I asked him how much he owed — zero. He was a graduate student from the University of Sorbonne — one of the best Universities in the world.

Did you know that as an American (and many other nationalities) you can study for FREE in many European countries? Sounds too good to be true? It’s not.

France, Germany, and Iceland are among a long list of countries offering us free education. In 2015, more than 4,600 American students were fully enrolled at German universities.

In Sweden, free education extends to getting a Ph.D. As an added bonus, classes are taught in English.

While living in the Czech Republic, we hired an American student as our babysitter. We have a 3-year-old son and needed extra help. I asked her why she lived in the Czech republic. She said she was only doing it for the free education. Impressive!

I would be remiss if I didn’t mention that there are other considerations. These European countries won’t pay for your room and board. But your room and board in Europe will be a lot less than paying full-tuition in the United States. Also, you need to figure out visas and you may also be required to show you have funds in order to sustain yourself. Language requirements may be a barrier for some countries, but not all. It’s important to do your research.

Flag theory for digital nomads

Digital nomads refer to people who work online or remotely. They either have their own online businesses or work remotely for a company. For a digital nomad, flag theory can mean working in a country with a low cost of living and low or no taxes. This means maximizing your savings by choosing to live in a less expensive country.

Bali, Indonesia is a city that comes to mind for digital nomads. Its cost of living is very affordable and many nomads flock to Bali for the serene quality of life and low-cost luxuries.

Nomads can also practice Flag Theory by acquiring a new legal residency in a country that doesn’t tax foreign income.

Panama, Paraguay, or Malaysia are all countries that are relatively easy to emigrate to and don’t tax you on foreign earned income. Panama has a territorial tax system. This means they don’t tax worldwide income.

Please consult with an expert in international accounting for further information. We went to Panama this year and met many foreigners who had settled down in Panama because of the tax benefits.

For some, it’s a no-brainer.

Flag theory for retirees

It was the last trip of our 2 years of travel when we landed in Panama City, Panama. At the airport, I was surprised to see so many foreign retirees waiting to enter Panama. One woman struck up a conversation with us and told us she lived in El Boquete — a mecca for retired ex-pats.

In Panama, we discovered there were tours aimed at showing retirees around. They advertised beautiful inexpensive homes and a cluster of restaurants from all over the world. It was safe, beautiful, affordable, and it had a warm climate. What else could you want?

I wasn’t surprised to see Panama as the second-best country to retire in 2020. Jessica Ramesh told the Business Insider she lives off $2,600 USD a month. This includes rent, groceries, utilities, and entertainment. She also pays $20-$60 for a doctor’s visit.

Portugal tops the list of the best place to retire in 2020. Portugal has excellent tax benefits for online business owners and retirees. It’s a gorgeous country with a temperate climate and a relaxed quality of life.

Tricia Pimental told Business Insider she retired in Portugal for “the overarching sense of well-being we experience here.”

Final Thoughts

Flag Theory can be applied subjectively and depends on what is important to each individual. For some, the weather is their most important criterion for a good quality of life. For others, it’s healthcare and taxes. Some things to consider when looking to apply Flag Theory are the following:

• Quality and accessible healthcare
• Education
• Taxes
• Weather
• Internet access
• Housing prices
• Ease in obtaining residency
• Government stability
• Entertainment
• Benefits for seniors
• Childcare
• Safety
• Cost of living
• Quality of life

So, figure out what’s important to you. Then, use Flag Theory to figure out what’s your next move. Maybe this time next year you can be living in a different country living your best life. Bon voyage!