One of the more interesting (and often complicated) aspects of living in a new country can be your finances. Finances as an expat are an exceptionally important part of starting a life abroad. This post will help you think about your finances as an expat, but we are not experts, and our expat financial advice is based on our experience.
Many people struggle to manage finances in their home countries and forget about being in a new one. Yet, being in a new country brings all the same issues and a slew of new ones. We also offer some insight into our finances as travelers.
*Disclaimer: We’d like to preface this article by reminding readers that we are NOT financial experts. We always recommend speaking with a professional about your finances. Our expat financial advice is based on our experiences, our own readings, and our conversations with other expatriates.*
*FTC Disclosure: Links to recommended products may be affiliated. We may earn a small commission at no extra cost if you purchase using our links. We only recommend products we have personally vetted. Thank you for supporting our site!*
Expat Financial Advice – Before You Move
Before moving to a new country, certain areas need to be dealt with regarding your finances
Addresses
Your address is one of the first issues to discuss and resolve regarding expat financial advice. Will you be using an address in your home country? Will you need one? Will you keep one? If so, will you maintain an address or use a friend or family member? Will you use a virtual mailbox? There are plenty of options, but each comes with its pros and cons.
By using a friend or family member, you’re relying on them to be responsible for any mail you may receive, including potentially critical financial documents. Can you trust them not to lose them? Or keep them safe? The upside, however, is that they can easily open and send/scan whatever you may need. It’s also usually easier to deal with banks and other financial institutions with a proper physical address.
You can see everything delivered to you through a virtual mailbox. They can scan, send, or forward what you need when you need it. However, like family members, you also trust them to be responsible for any sensitive information you might have sent that way. A financial institution might also realize you’re using a virtual address and cancel any accounts.
By forgoing all mail back home, you’ll have fewer worries about what gets sent where. This may not be an option for all, as dealing with certain agencies—e.g., the IRS—can be far trickier. However, using a foreign address can also create issues with financial institutions that do not like foreign addresses. For example, maybe you want a credit card but don’t qualify for one where you live. Without an address back home, you may not be able to get one.
Regardless of your choice, think carefully about the possible ramifications of what you do and don’t do. Speak with other expats about how they maintain an address in their home country. Your address
Bank & Investment Accounts
Will you remove all your finances from your home country and start anew where you move? What about keeping a safety net open back home? Will you keep a few things open back home as a safety net? Or do you keep everything open in your home country and have business as usual? All of this comes down to personal decisions as well as circumstances, but there are a few essential items to note as you move to a new country.
As mentioned above, when you’re considering addresses, not every financial institution is excited about having customers who live in other countries. In the US, for example, some of it might be regulatory, while some may be policy. Either way, speak with your bank or institution ahead of time before moving abroad.
If you choose to forgo accounts in your home country and only use those where you live, be aware of some associated risks. If you’re not a citizen or resident of another country, you may have fewer rights regarding your money. Your new country may have lax banking regulations, leading to a possibly greater likelihood of losing your money.
If you keep accounts open at home, you must also be mindful of wire transfer fees if you get paid into a foreign account and want to transfer money. Many banks charge a wire transfer fee, which is typically approximately $15-25 a transfer in the US, though some online banks will waive these fees. Will you need to transfer money home frequently and possibly pay fees each time? Or can you be more selective when sending money to your home account?
Expat Financial Advice – Income & Retirement
Income
This is highly variable from person to person. Some expatriates go abroad to work for a company from their own country, others work for a foreign country, some do humanitarian work, others work for the government, and yet others work remotely or run their businesses.
Whatever your case, you need to decide how and where you will get paid. After deciding about your banking and investment accounts, you’ll have a reasonable idea of where you will keep your money. If you are working for a company based in another country (e.g., not remote work), you may not have a choice. Your employer may only choose to pay you in local currency through a local bank. If that’s the case, then exchange rates are another area to be mindful of. Sending a wire transfer back to your account in your home country is always quite simple. You will rarely need to use services such as Western Union.
If you work remotely or get directly into your home account (or send money home frequently), you’ll need to decide how much of your income to keep in a local currency. Many countries currently accept digital payments (e.g., tap to pay, Apple or Android Pay). Even so, it’s ALWAYS a good idea to keep some local currency available to you. You will never know when you’ll need it, from possibly paying a fine to perhaps getting a haircut from a small business that only takes cash.
Another big consideration is the obligations you have back home. When you move to a new country, the obligations you have at home don’t magically disappear. Perhaps you are paying a mortgage or a storage unit. Maybe you owe on student loans. No matter what it is, you’ll need to decide how much of your income you must send to account for those obligations. Will you have enough to live comfortably in your new country? These are questions every expat needs to ask themselves.
Retirement
An essential part of any expat financial advice page is retirement planning. When you’re earning money in a foreign country, at least from a US perspective, you’ll have things to consider: how will you save for your financial future?
Planning for retirement is a personal choice, whether you’re investing, buying property, or just winging it. When you choose to invest for your retirement, however, there are restrictions depending on where your income is coming from. For example, IRAs and 401Ks need US taxable income to contribute. If your income isn’t taxed, you’ll have to look at other options (see our page on taxes for US expats to learn more).
If traditional paths aren’t available to you, or your company doesn’t provide any retirement benefits, you might consider investing. Perhaps that’s Target Date Funds with companies like Charles Schwab or Vanguard (there are others). Be sure to check requirements when living abroad with each company, as not all are expat-friendly. Or perhaps it’s simply investing in stocks or something else on your own.
We would also recommend two books: Ramit Sethi’s I Will Teach You to Be Rich, which covers how to pay off debt and automate your finances so you can retire well (at no point does he offer to make you rich quickly – he’s a believer in investing over your lifetime). We also recommend Andrew Hallam’s Millionaire Expat to help you learn more about how to plan for retirement and grow your wealth when living overseas.
If you choose to buy and manage the property, you’ll need to figure out who will manage your property physically, if needed, while you’re not there. Property is a personal choice to use as an investing and retirement tool, but it takes planning. Many expats come abroad not to have property as a second source of income but rather to be able to save up to buy a house.
Taxes
Taxes, at least and especially from an American perspective, are one of the most complicated areas a person needs to navigate, whether at home or abroad. As such, we’d be remiss to not include these in our expat financial advice page.
Many companies who hire you to work for them abroad will help you navigate the ins and outs of the local tax system. They may even pay local taxes on your behalf.
For many expatriates (at least Americans), you may be able to avoid paying taxes back home. While you must always file your taxes in the US, your status abroad might qualify you for the Foreign Earned Income Exclusion (FEIE). This exclusion has several different criteria that need to be met. These include time spent out of the US or whether you are paying local taxes in your country of residence or have legal residency there. You can check out the IRS page about the FEIE for more information.
We are not affiliated with this group in any way, and there are many expat tax services out there, but we recommend using TieTax for completing and filing taxes back in the US, especially if, like us, you find yourself overwhelmed or annoyed with services like TurboTax.
For more information regarding expat financial advice and taxes, please see our Expats and Taxes page.
Final Thoughts – Expat Financial Advice
These are just some of the bigger factors one needs to consider when moving to a new country. Without sufficient money and/or income, finding a way to stay abroad (and be comfortable doing so) becomes incredibly arduous, not to mention possibly dangerous.
Managing your finances as an expatriate can be tricky and time-consuming. We highly recommend speaking with a financial professional, preferably one well-versed in expatriate finances and taxes, before embarking on your move.
If you’d like to discuss expat financial advice (or international teaching) further, please Contact Us or schedule a consultation.
*Disclaimer: We’d like to remind readers that we are NOT financial experts. We always recommend speaking with a professional about your finances. Our expat financial advice is based on our experiences, our own readings, and our conversations with other expatriates.*