Finance Management Strategies for Expats

The lower cost of living is one of the most appealing aspects of living as an expat, even if only for a short time. While this may not be true for all places, countries like Mexico, Costa Rica, Thailand, and the Philippines are attractive expat destinations.

But it’s not simply just about getting more value for your hard earned money. You need to consider the ease of transacting, banking, and protection of your finances.

As an expat, you need to ask yourself several questions before saying yes to an assignment.

“What would I require to live comfortably? “

“What is the cost of living on a daily basis?”

“How much money can I save?”

“Will it be easy to transfer money back home?”

Expats who fail to handle their finances properly can very well end up in worse situations than simply running out of money.

Here are some strategies to improve your money management and protection in the long run.

Map out your goals

It's easier to plan if you already know what you want to accomplish. Before you choose a date for your move, make a list of all the objectives you intend to achieve.

Do you plan on making real estate investments? Do you plan on renting a two-bedroom apartment or purchasing a home? What kind of lifestyle do you want to have?

You can then decide how much to save, how much to withdraw, and when and where to retire.

Many expats end up retiring in their place of assignment. In this case, make your forecasts long term. Account for investment returns, inflation, alternate sources of income, etc., till retirement and beyond.

Be aware of Taxation Regulations

Tax laws differ from one country to the next. When you start living overseas, taxes become much more complicated.

The majority of countries collect taxes based on where you live. You must follow their regulations if you reside and work in their territory which is why you must be aware of the regulations that must be followed before your journey.

Some countries, on the other hand, collect taxes based on citizenship. Even if they live outside the country's borders, people in countries like the the United States are accountable for filing and paying taxes to their country of origin.

Foreign tax credit, for example, can help to alleviate the expense of double taxation. You may need to consult with tax specialists to ensure that you do not pay any additional charges, or incur legal penalties. You can also ask these specialists for advice specific to your situation as an expat.

Open a local bank account

Although you can continue using your account from your home country, it is recommended that you open a local bank account. This will save you a lot of money on ATM fees and other international banking services.

Most ATMs in industrialized nations will accept your foreign card. Nevertheless, you will be charged not just by your bank, but also by the local bank as well. International banking transaction costs can be as high as ten dollars per withdrawal. Having a local bank account will save you money in the long run.

Also, be cautious of transaction fees if you plan to transfer money from one country to another. These fees can be substantial, especially if you are doing regular transferals. Work with banks that are internationally compliant, safe, and transparent in order to avoid hidden expenses like exchange rate fees which some banks add to an international transaction.

There are international banking standards against money laundering that your bank should adhere to each time you make a transaction. If you suspect something isn't quite right, always demand further information.

Consider getting an Insurance Package

If you live overseas, most health insurance plans will not cover you. When you remain for a long amount of time, your travel insurance coverage also expires. There are options for international health insurance, however, these are known to be very costly.

Private healthcare is very expensive, and government facilities are sometimes overburdened with patients, resulting in mediocre service. Your best alternative is to purchase insurance packages in your host country. These insurance packages are likely to be much less expensive than those in the United States.

Some insurance firms also offer health insurance packages that can be utilized as a retirement savings fund if they are not used for a certain period of time. Life insurance, permanent disability insurance, and multi-purpose insurance are some of the other insurance packages you can consider as well.

Identify your Needs, Wants, and Savings

Budgeting entails more than just paying bills on time. It's all about putting together a well-thought-out plan that allows you to confidently live within your means, pay off or avoid debt, and eventually attain your financial goals.

The 50/30/20 rule, as advised by Senator Elizabeth Warren, is the most well-known strategy.

• Needs = 50% of your income

Your requirements are the costs that must be paid first and on schedule. Your auto loan, mortgage, utility payments, medical expenses, and so forth.

These are expenses that you just cannot live without, which is why they account for half of your after-tax earnings. This is also the only part of your budgeting approach that can be scaled up or down as needed. It's perfectly OK if you need to go over and beyond the 50% mark.

• Wants = 30%

Wants are non-essential expenses that improve your quality of life. Despite the fact that these expenses are considered non-essential, it is nevertheless necessary to strive to reward oneself.

Dessert? It's fine, but you don't really need it, do you?

Your wants may conflict with your requirements, but you should keep your spending to no more than 30% of your income.

• Savings = 20%

Savings are an investment in your future. Your money could potentially be put to use on rainy days. It's usually a good idea to keep some cash on hand as a safety net in case of a financial emergency.

Your 20% might be set away as an immediate cash source in case of an emergency, or it might be invested in a future retirement fund.

Oftentimes, financial planning experts would advise you to invest in insurance packages apart from your cash savings. It would be wise to consult an expat financial advisor or investment experts.