People Move Abroad for many reasons. A new job. A change of pace. A desire to see the world. Moving Abroad for love – one of the most exciting and daring reasons is probably also the riskiest.
Most people barely have their day to day finances figured out. With only 44.5% of Americans owning a U.S. Passport, the financial challenges involved in living abroad like foreign exchange, international money transfers, global payments, and foreign taxes can be overwhelming.
As an International Banker and former Expat, I have seen up close how a lack of planning and unrealistic expectations can derail an international romance, and cause regret, stress, and unexpected financial issues.
1.A Pre-Departure Financial conversation with your Partner – It’s essential that you and your partner are on the same page financially before you move abroad.
Even if you and your partner will be on a company-sponsored international assignment thoroughly review the entire compensation package before you say yes. Decide jointly if this international move works from a financial standpoint for both of you.
In many countries, marriage is a sacred institution. It offers the maximum benefits and protection for each party. For this reason, many foreigners won’t move abroad without the benefit of marriage.
If you’re not married, consider registering as a civil or domestic partnership before leaving home. Also, a cohabitation agreement will clearly state the living and financial arrangements you’ve both want.
You can also add scenarios fit for international situations such as will your partner support you financially if you can’t find employment abroad, and if you split up who will pay for your repatriation.
2. A Financial Plan for Yourself – You should always have a separate financial plan that clearly details your financial situation, including all sources of income and ongoing expenses. Don’t go into debt moving overseas. Always have a Plan B Fund (Bye-Bye. I’m leaving). Have at least six months of living expenses to cover both your home and foreign host country expenses.
3. A Solid Career Plan – While your significant other is at the office working all day, what will you be doing for a career in your new home country? Can you afford time away from your career? Are you moving to a country where you will be able to find employment easily?
Instead of quitting your job, ask your company if you can take a leave of absence until you are fully settled into your host country. Many companies offer at least six months of unpaid leave with job protection. As employment contracts in foreign countries usually come with a 3-6 month probationary period, you could take a job overseas. If you decide to return home, you would still have the option of returning to your old position.
If you work for a global company, inquire if there are any global projects you can work on, or if they have offices in the country or region you are moving to so that you can be reassigned. Alternatively, ask if you can become a Digital Nomad and work remotely.
Living Abroad is also a good time to explore your hidden talents (writing, teaching), build new skills (coding), earn another degree at the local University, or even start an online business.
4. Adequate Health Coverage – Purchasing Global Healthcare is a necessity. Don’t wait until you have a 6-figure medical emergency abroad to discover that you don’t have comprehensive global coverage. Cuba, Poland, and the Czech Republic require proof of travel and medical insurance upon arrival. After the Corona Virus (COVID-19) outbreak, look for other countries to make it mandatory. Make sure your Health plan also includes emergency evacuation and repatriation of remains.
5. A licensed Tax professional – Hire someone that is experienced and skilled with working with the complexities of U.S. expat taxes and can help you understand your Federal, State, and Host country tax filing requirement. U.S. citizens are taxed on worldwide income, and some foreign countries are starting to enact the same types of tax rules on foreigners. U.S. citizens are also subject to FATCA and FBAR filing requirements.
6. Tools for protecting your Credit – Living Abroad, you want to preserve your U.S. Credit History and U.S. Credit Score. Take steps to guard against identity theft by enrolling in a credit monitoring service, enacting a credit freeze, and checking your credit annually.
Returning Expats are often surprised to realize they can’t easily obtain a new mortgage or the best rates on a car loan because they have become credit invisible while living abroad. To avoid this, try using your U.S. credit cards regularly, so there is some activity.
If you decide to obtain credit in a foreign country, realize that credit ratings do not travel overseas, and foreign credit activity does not appear on U.S. credit reports. Make sure you understand the foreign credit terms, especially regarding repayment. Penalties for unpaid bills in foreign countries vary from a black mark on the local credit bureau to jail time
7. Several options for Exchanging Foreign Currency, Moving Money, and making Payments – These areas usually cause Expats the most distress because these are not everyday financial transactions. The key to success is exploring your options well in advance of moving abroad. If you are getting paid in a foreign currency, know whether it is easily convertible (Euro), or if there are daily and yearly currency controls (China, India).
Have online and offline (e.g. standing in line at the bank) options for moving money out of a foreign country and making payments in both countries. Technology is not always a sure solution as mobile apps are not seamless across countries. As a foreigner trying to transfer money or make a payment, the old standbys like Western Union and MoneyGram may be the best solution
8. A Well thought out, well-funded exit strategy – Living A Global Lifestyle, the only constant is change. Natural Disasters, Civil Unrest, and Health epidemics are all part of the Global Living experience.
Always have your own exit plan for you and your partner, and if necessary, children and pets. Never rely solely on your employer. Their first line of business will be business preservation and then business resumption.
Make sure that you have built a local network of Expats and local citizens to help you safely survive the crisis and navigate getting out of the country if things become dire.
Always have cash on hand in multiple easily convertible currencies (British Pounds, Canadian Dollars). Have a mobile-only multi-currency bank account outside your host country that you can access from anywhere in the world. Compile an Emergency To Go Bag with a first aid kit, dry food, water, sanitizer, and necessary prescriptions.
Have a designated soft place to land in another country until it is safe to return or get back to your home country.