Many people choose to uproot themselves to explore different parts of the globe. Maybe you want a career change at 30 or maybe you’re simply dying to travel more. While living abroad has many major cultural and learning benefits, expats also often face financial challenges.
Undertaking proper financial planning for expats is an important step, ideally before you leave your native country. In this guide, we’ll review some popular financial planning tips for expats, and go over some of the best financial planning resources for expats.
Top 5 Financial Planning Tips for Expats
As an expat living abroad, managing your money often comes with a number of challenges. From sorting out living expenses and dealing with local banks to paying taxes and getting a health care plan, finances outside your country of origin will definitely be different.
1. Take Stock of Your Investments
It is important to carry out an inventory of your investments before you leave. In many cases, American expats don’t pay attention to how much their portfolio has grown. This means they’re also likely underestimating the amount of effort they should be putting into managing it.
Once you’ve assessed the situation, you can consider whether to make additional investments while abroad. If you decide that you don’t want to deal with the hassle of maintaining your portfolio, you can find a financial advisor to help you out.
2. Think About Cross-Border Finances
If you’re in a cross-border family, where only one family member has gone abroad to find a better source of income, there will be other things you should watch out for. Keep in mind that residing in a country with a different currency may result in higher living expenses than you’re used to.
Without appropriate cross-border planning, it may be difficult to maintain a suitable standard of living. Expatriates who left the United States for economic reasons should not ignore the cost of remittances.
3. Consider the Tax Situation and Regulatory Implications
American expats may think that they do not need to pay income taxes if they’re living in a foreign country. However, they must file both state and federal tax returns if their taxable income surpasses the minimum threshold. If the new country of residence also demands income taxes, you may face double taxation. You need to be aware of your tax situation and the laws of your new home country.
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4. Create a Good Retirement Plan
One thing that you shouldn’t forget about just because you’re away from home is saving for retirement. If you’ve done your retirement planning homework and have already started saving, you may still want to consider opening an international savings account.
It’s also worth noting that all countries have different rules on retirement savings taxation and the IRS does count foreign retirement account distributions as taxable worldwide income.
5. Establish an Investment Plan
An expat should include savings and investments in their long-term financial plan. There are tons of investment options out there, so pick one that will help you meet your specific long-term financial goals. Once you’re in a new country, however, this can be difficult.
For this reason, it is important to develop a sound investment strategy and open investment accounts before you leave so that you can enjoy expat life.
5 Financial Mistakes to Avoid for Expats
On the list below, you’ll find some of the common financial errors that expats make. If you understand these errors, you should be able to avoid them while off on your own international life experience.
1. Disregarding Insurance
There are many expats who don’t bother getting health or travel insurance. But it’s important to know that without international insurance, an injury or illness can cost a lot of money. Every country and business has its own rules about insurance. Some countries even require that all residents have insurance.
This is a good thing for expats, as you won’t have to count costly health scares among the financial challenges that you may face. Remember that there are also special healthcare plans for college students and people who will be living and traveling in multiple countries.
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2. Failing to Set Up a Foreign Bank Account
For expats who have to tackle unsavory tax laws or an unstable currency, foreign bank accounts are a good idea. While this will help secure your savings, offshore investment accounts also limit the taxes you’ll have to pay if you bring a large amount of money into a foreign country. You can also seek financial planning advice from fellow expats who have more experience than you.
3. Ignoring Inheritance Laws
You should research the inheritance laws of your host country early on, particularly if you’re living in the Middle East, as they have their own set of rules on the matter. Local inheritance laws can overrule the terms dictated in a will. If the country you’re heading to has inheritance laws that differ greatly from the US, consider keeping your assets outside your host country.
4. Failing to Learn About Double Taxation
Taxation can become a nightmare for expatriates all across the globe. Even after you get acquainted with the new tax laws of your host country, it is important to ensure that you also pay the right amount of taxes in your country of origin.
5. Neglecting to Budget
As an expat, your financial life will be healthy if you create a budget for yourself. But many expats disregard budgets entirely and spend excessively, ignoring their financial security. You must take into consideration your individual situation and all of your monthly expenses. Compare that to your income, do some comprehensive planning, and come up with a budget that you can stick to.
How to Make an Expat Budget
Making a budget and keeping to it are expat strategies that will help you meet all of your financial obligations. It will ensure that you tailor your spending to only the expenses that are necessary to make your stay in your new country of residence pleasant. Below is a sample of what an expat’s financial budget might look like.
Expat Sample Budget
|Expense or Income||Amount (per year)|
|Total Income||+ $50,000|
|Utilities and Bills||– $2,400|
|Debt payments||– $3,600|
Financial Planning Resources for Expats
There are several resources including books, classes, and software that can help you learn more about creating a financial plan while living abroad. Below, we’ll look at some of the best ones that you can refer to both before you depart your home country and once you’re getting settled abroad.
Financial Classes for Expats
- Live or Retire Abroad — Is It for You? In this class from GetSetUp, you will learn about the pros and cons of living abroad, the best global retirement destinations, and healthcare and visa basics.
- US Expatriate Taxation. In this free CPA Academy class, you will learn about double taxation. The short video course covers which tax positions are best if you’re working abroad to help you figure out how to avoid or reduce double taxation.
- Building and Refining Your Financial Plan. This webinar class explores a live case showing how a financial plan is built. It also teaches you how to create your own investment portfolio.
- Masterclass in US Inbound/Outbound Financial Planning. The Global Financial Planning Institute offers this class on the cross-border considerations that are at play when you’re working with clients as an American living abroad.
- Senior Executive Global Employee Benefits. This webinar is also from the Global Financial Planning Institute. The organization regularly offers one-off courses such as this one, which will teach you about the average benefits packages that senior employees can expect while working abroad.
Financial Planning Books for Expats
- How to Own the World: An English Guide to Thinking Globally and Investing Wisely. This book enlightens you on the tricks of the investment trade and how you can make your money work for you. It explains everything you need to know about investing abroad.
- Expat Money: The Definitive Personal Finance Manual for Brits Abroad. This book discusses the idea of “offshore money” while providing financial advice on how to manage investment funds when you’re not in the UK. Many of the same ideas can be applied to Americans living abroad.
- Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School. This book, based on the experience of a school teacher who became a millionaire through their investments, offers tips on how to achieve financial independence. It shows that you do not need to be a financial wizard to make a lot of money through sound investment decisions.
- Expat Secrets: How To Pay Zero Taxes, Live Overseas & Make Giant Piles of Money. This book is a detailed guide on living overseas, traveling around the world, and making money while you do it. It also explains ways you can reduce your tax burden.
- Millionaire Expat: How To Build Wealth Living Overseas. This book serves as an investment tool for expatriates. It will tell you how to build wealth while living overseas, and how best to save for retirement.
Financial Planning Software for Expats
- Intuit Mint. Intuit Mint is a popular app and website for money management. It is easy to use regardless of where you are in the world. You can set out your budget by breaking down your spending by category, which will help you stay on track.
- XE. XE is a top currency conversion website. It also comes in a handy app form so that you can store and compare the currencies you use most often.
- Prosper. This app is used for managing investments. It allows people to make small-scale investments in each other. Borrowers can also go on the app to ask for small, fixed-rate loans.
- Expensify. If you are a global freelancer and your entrepreneurship has led you to relocate to another country, you should get Expensify. This app helps you track your travel and other business expenses, and make sure your employer receives them.
- Excel. Excel is a great resource for financial planning. It’s early to learn to use Excel and there are many helpful tools and formulas available in the software.
Meet Your Expat Financial Goals in 2022
As an expatriate living in a foreign country, it is easy to lose track of your expenses. With different taxes and ways of living, making smart financial decisions and managing your foreign accounts wisely will help you reach your goals for 2022.
With many resources out there to help you along the way, including investment advice from financial professionals, you should be able to achieve financial stability outside your home country.
Financial Planning for Expats FAQ
The best plan of action is to invest primarily in the currency in which you eventually plan to use the funds. For example, if you plan to retire in Europe, it is wise to invest in stocks and bonds in euros.
No, you do not necessarily need to employ a financial advisor. If you have done sufficient research, from books and classes, you may be able to create an effective financial plan on your own.
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An offshore investment bond can offer tax benefits for nonresidents and expats. However, they can be complex investment products and are normally only available to sophisticated professional investors. Many are used for lump sum investments and can’t be accessed in the short term.
A SIPP refers to a self-invested personal pension, which is designed for people who want more control over the funds in their pension. Typically, SIPPs provide a wider range of investment options than other pensions.
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