An expatriate can be defined as a citizen who has left his or her country of citizenship to live in another, usually for a prolonged period. Moving to another country can be a very rewarding and memorable experience. However, there are quite a few things, financially, that one must consider before taking on this daunting task. Read on to learn how to handle financial situations and managing money as an “expat.”
Types of Expat Circumstances
• Short-Term Experience: This situation is typically brief and can last anywhere from half a year to two. These are becoming more popular because it is not as big of a process as the long-term experience. Typically, young, single, and month-by-month rent payers seek this type of assignment. Managing money as an expat for this experience can be very scary at first, but it gets easier over time.
• Long-Term Experience: This assignment typically last anywhere from three to five years, and the person must completely relocate his or her family and belongings for an extended period of time. Although it is more difficult with a family, this is more common for those who are well established. Typically, if one is high up in a company, they may need to do some kind of training overseas which requires his/her whole family to move as well.
Taxes, Taxes, and More Taxes
• Tax returns are difficult as a US citizen. Add in another country, and things start to get confusing.
• Discuss your expat move with an accounting firm before you leave. They will handle your United States and your new country’s tax returns.
• The accounting firm can offer assistance with tax equalization, which helps to lessen the loss of salary due to getting double, taxed (for both countries).
• Be careful with taxable earnings, though. Your earnings can be rounded up resulting in a yearly payment to the IRS. Typically, the accounting company can pay you back for that amount.
• Your life can get a little hairy when you are getting paid in US Dollars but your apartment will only take their country’s currency.
• As soon as you can, go to the local bank in your new country and learn how to transfer the US Dollars across the border.
• The easiest way to manage your money as an expat is to take out cash without being charged a crazy amount of fees.
• Set up a bank account within your new country as soon as possible. ATM fees can get out of control, and this is one way to avoid those.
• You will most likely need some form of I.D., a Visa, address verification, as well as your new salary and place of work. This should all verify your legitimacy as an expat.
There’s No Place Like Home (Payments)
• Don’t forget that you will still have payments due back home! Sort these out before you leave town and consider strategies like automatic withdrawal.
• You can also complete wire transfers that do have wiring fees and sometimes pretty high spot rates.
• Try to find a foreign payment service that allows you take money from your US account and send credits to your new country’s account.
• The easiest way to manage your money as an expat is to continuously pay yourself. In some cases, it can take up to a week for transfers to go through depending on your location.
Know the Gap!
• If you are not dealing with large amounts of money, the difference in the two currencies may not be that much.
• You may find that being paid in US Dollars will be more beneficial in the long run, even though it might take a little more work on your end to pay your way around your new country.
• This can allow you to have a more accurate depiction of what you’re bringing in or allow you to easily transfer money to your US accounts.
• Thankfully, most people today prefer online payments anyway, so once you get your cash, deposit it into your new account and pay bills, or whatever you can, online.
• Although this can seem tedious and annoying, and you may be a little bit skittish about the whole process, the process can be easy if you talk to the right people.
• Be proactive by paying your bills on time, and make sure you are always aware of the currency exchange rate.
• Don’t forget the basics of managing your budget, and not to get carried away with the craziness of your new home.
• Still feeling lost? Visit this website that helps expats organize their trips.