This is a guest post from Pauline of InvestmentZen.com
In the past 12 years, I have lived in four foreign countries, on three continents. While it has been amazing for the most part, there are also things I wish I had known before relocating, and that is why today I would like to share my tips with anyone who is thinking about taking the leap and moving to another country.
Relocating abroad is an amazing experience. So much is involved in terms of logistics, finding a new place, learning the language, making friends, … that it is easy to forget about money matters. But if you are not careful, that international experience can cost you a lot. Here are a few tips.
Research the country you are moving to
I would suggest before relocating abroad that you spend at least a couple of weeks in the country you want to move to. You know, just to make sure you really like it before moving all your belongings and pets to the other side of the world. The romantic idea you may have of Thailand might not be what you’d experience in reality. Paris is a city of lights, but also of air contamination and traffic jams!
Join expats forums on Facebook and dedicated sites to make sure you can afford to live there, and that your expectations match people’s experience on site. Finding expats from your country will be easier to know what they miss from home and how they deal with it.
Talk to a tax lawyer
There are many tax benefits on relocating abroad. Talking to an international tax lawyer should pay for itself the first year. You might be eligible for the Income Tax exemption if you spend less than 35 days in the US each year. Ask them how you should handle your US investing accounts, your 401k, Roth IRA, and rental property if you are renting your house while you are away.
US citizens are required to pay taxes to the IRS even if they live abroad, but nothing prevents you from opening a company in your new country, which will be taxed locally. Again, these are just a few examples of things you should consider, and only a professional can give you advise fitting your precise needs.
Master international banking
One of the main concerns of expats is how to send money home or bring money to their new country. It can be tricky if you are unprepared. On the US side, I would not recommend closing any account you own. Even if they stay a bit dormant while you live abroad, re-opening them when you come back will be complicated. Same thing for your lines of credit, brokering accounts, and credit cards. It’s more, you can apply for a travel credit card to start earning free miles and hotel nights, as well as a credit card that doesn’t charge you a transaction fee when you use ATMs or buy things abroad. Expat forums are again a good place to ask for the latest cards and their perks.
Your local bank may have branches in your new country, so that might make things easier to talk to your branch manager and explain your plans of relocating abroad. Otherwise expect to have only a savings account in the new country, with a debit card at most, and plan accordingly.
Many companies have emerged lately offering affordable international money transfers, but if you have an account in US dollars in your new country, you can simply deposit a check from home and bring your money free of charge. There might be a delay of a few weeks for them to confirm the check though.
Live like a local
When I first moved to the UK, I though everything was so amazingly expensive, I got concerned my salary wouldn’t allow me to live well. Then, I talked to my coworkers who had lived there for years. They told me about the loyalty card at the supermarket, and the reduced meat you can buy after 5pm. They gave me the dates of the farmers’ market, and the URL of a money saving site that always sends tips and special offers. By month 2, I was living large on less than when I arrived.
Living like a local may also mean that instead of having milk and cereals in the morning, that are expensive goods, you could try the local breakfast. Splurge once in a while on the things you miss from home, but if you expect to live exactly like you do in the US, maybe relocating abroad wasn’t such a good idea.
If you are relocating abroad and have little information on your new city, renting a furnished place for a month might save you a lot of problems compared to directly signing a one year lease. Yes, it will be a bit expensive. But it gives you a month to get to know the city, the best neighborhoods, where your new friends live, where you’d like to go to the gym, and so on.
I have generally found that for stays over three months, getting a long term lease and buying furniture is worth it. Just get basic things until you’re sure you are going to stay. You can always donate it to charity if it won’t sell.
Relocating abroad is a wonderful way to experience new things, and if you are careful with your finances, it can also be a great move, allowing you to live cheaper and save a lot!