The Expat way of life is a big goal for many. To live, work, and explore overseas: it seems pretty fantastic right? In our increasingly connected and mobile society, this is more possible than ever. There are a lot of blogs just geared toward people trying to make this transition. But what happens when someone actually makes the jump? When all the basics of international expat life are worked out (employment, lodging, vocation, etc.), how does your new life overseas change your personal finance goals?
Answer: “Not at all” and “Very Much”.
On the one hand, you definitely want to maintain the precepts of personal finance which you have developed during your adult life. These include all the basics: saving, investment, spending reduction, debt payment, etc. None of these go away when you live overseas. If anything, they are more relevant than ever.
Let’s take savings, for example. An emergency fund is especially important for someone living overseas. In a nation that is not your own, you’ll be a lot more socially vulnerable than you are back home. For one thing, you won’t have long standing friends and family nearby, just in case you have a personal setback. You also won’t have the social services which you’ve grown to depend upon in your home country. These may not be lacking necessarily (and in fact, may be better equipped than those you have back home), but you won’t be accustomed to taking advantage of them. Basically, it pays to be self-sufficient when living in a foreign land. The best way to do this is through saving.
Spending reduction can be accomplished in many ways when living abroad. For one, overseas currency transfers can be had at many different price points and terms. Make sure you pick the right one for your economic class, the amount of your transfers, and for the frequency at which you’ll be transferring money. Spending reduction (and it’s cousin, debt elimination) can be accomplished many other ways, but these will likely mirror the methods you already use in your life back home. Retirement and other forms of investment will likely happen just the same way.
So how will your financial life change once you’re overseas? There are some fundamental differences. These include your approach to taxes back home, as well as other factors. If you live in the United States, there are tax rules for expats that are profoundly different, depending on how much or how little you spend time in the United States. These laws will require a good bit of research on your part, in order to best prepare your time abroad.
One of the last financial changes which you’ll experience is that your currency value will change. If you are receiving salary or regular payments from employers back home, you are likely to see these funds go much further than they would in your home country. This isn’t always the case, obviously, but it often is for expats moving from a wealthy nation to a comparatively less-wealthy nation.