Getting a good grip on your financial situation is one of the most important things you can do in preparation for a move abroad. Usually, this means making a budget based on known income and expenses and then building on that by figuring out how much you want to save, what your possible extra costs are, etc. Additionally, it involves figuring out your new tax obligations. In truth, most of what you should prepare for when moving abroad is the same things you should have a plan for at home as well. The difference is that a move abroad typically comes with some unknowns and a steep learning curve in terms of knowing the true cost of living, figuring out the financial language and learning the tax rules.
The best place to start is with the basics. Find out what the general cost of living is in your area by using a cost-of-living calculator. It won’t be perfect but it will give you an idea of what you are dealing with and it will help with getting an overview of what your new financial situation will look like. Once you have a general budget, you can start thinking about your financial goals — savings, retirement, schooling, etc. Keep in mind that living abroad might add some costs that you would otherwise not have, such as extra travel expenses, health insurance or private school tuition, for example.
Once you have your budget down, the big logistical piece for many expats is figuring out taxes — what will your tax obligations be, in your new country, at home? Rules for taxation vary depending on country and it may very well be worth seeing a professional tax advisor before moving so that you know for sure where you stand with your home country. Once you are in place you’ll have to decide if you need to see a local tax expert as well. If you are considering hiring a tax advisor, think about what kind of help you need:
- Someone to just help file your taxes
- Someone who can give financial advice in regards to your current situation
- Someone with strong knowledge of all the tax laws you are required to follow
It is important to find someone with the right credentials and knowledge. Most countries have strict requirements for certifying financial planners and accountants so do your research and make sure whomever you pick is accredited. If you don’t know where to start your search, ask some colleagues or friends for recommendations.
For your own sake, learn some of the basics about the tax laws in your new country such as how and when to file taxes, whether or not you can get extensions and if you can file jointly with your spouse if you are married. What about late tax payments — will you be fined for a late filing or payment, if so how much?
I would also recommend learning some of the “financial language”. This will be useful not just for tax purposes but in general when you are first settling in a foreign country. Having a working understanding of words and expressions will come in handy as there will be plenty of instances where you’ll be asked to provide a specific piece of information or document or to decide on one option versus another. It is always good to know what is actually being asked of you and to recognize what is being presented to you.
It’s overwhelming enough to figure out your new personal financial situation, add to that learning about new tax laws and it can feel downright impossible to get a grip on everything you need to know. That’s why it’s important to do some due diligence and learn the basics before you head out. There are several books on the subject and most countries have official websites for taxation issues. Also, there are countless expat websites and personal blogs for additional points of view and advice.
- Working Abroad: The Complete Guide to Overseas Employment by Jonathan Reuvid
- Expat Entrepreneur: How To Create and Maintain Your Own Portable Career Anywhere In The World by Jo Parfitt and Debbie Jenkins
- The Global Expatriate’s Guide to Investing: From Millionaire Teacher to Millionaire Expat by Andrew Hallam
By: Felicia Shermis