Protecting your finances while living abroad

Work visas and paperwork often overwhelm expats while planning a move abroad; this results in many expats leaving financial planning for later. Figuring out managing and protecting your finances abroad, however, should be one of the first steps you make as an expat in a new country. This is especially the case if your new country’s financial regulations differ widely from those in your home country. How can expats can manage their finances while living abroad over the short- and long-term?

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Day-to-day money management for expats

You’ll need to be able to access your money when you move. This is necessary in order to complete tasks ranging from getting Internet access to buying groceries. As a result, it’s important to set up a bank account as soon as you arrive in your new country. Explore the banking options available to you, as banks in your new country may be much more tech-savvy than you’re used to.

Keeping a bank account open in your home country as an expat, however, is another decision to make. Anyone planning to eventually return to their home country may find it beneficial to keep them open as long as possible, depending on how expensive any fees may be. For those who plan on staying abroad indefinitely, it often depends upon two factors: debts and the difficulty of opening a new account if you ever do return. Either way, carefully consider how you set up your cross-border banking activity.

Pay your debts before and after moving abroad

Those with debts in their home countries, such as a credit card or student loan, may find it more expensive to use a foreign bank account to make payments. Transferring money overseas has become easier than old-fashioned wire transfers; however, these services often come with high transfer fees and unfavorable exchange rates. Keeping an account in your home country is valuable to pay off debts, provided that the banking fees amount to less than the cost of a wire transfer or service.

Note that forgetting about these debts is not a wise option. Not only can creditors follow you overseas — especially if they also operate within the new country — your credit rating in your home country can take a big hit for non-payments, making a move back financially unfeasible. Interest and penalties may also accrue, and the creditors may very well begin legal proceedings to recover the debt; any assets left behind in the country, such as a rental property, could be subject to a charging order.

Arrange debt payments before or as soon as you arrive in your new country, ensuring that no bills are left behind — though you may have canceled services in your home country, you may receive a bill in your absence that still must be paid. Keeping up-to-date on your debts will help in protecting your finances abroad.

Impacts on savings and investments

If you keep a bank account in your home country, you may have a savings account as well. Interest accrued on a savings account is considered income; as such, you must report it when filing taxes in your tax residence. Other financial products that you have abroad may also be subject to tax.

Taxes may apply to pensions or investments held overseas. However, they may be handled differently according to country of origin and country of tax residence. If you are a resident (or were a resident in the past five years) in the United Kingdom, for example, you must pay tax on foreign pension payments; conversely, American expats participating in a non-qualified foreign pension plan may be surprised by double taxation.

Investing money elsewhere may complicate things, too, with each country treating capital gains taxes differently. Expats with foreign pensions or investment income may be subject to double taxation. Cryptocurrency holdings remain risky due to their unregulated nature. An expat financial adviser will be able to help wade through the complexity of each country’s varying regulations.

Protecting your finances for the future

Even if you don’t know whether you’ll live abroad for the rest of your life, planning is key. Many adults don’t save up enough for retirement: financial literacy isn’t high, complex regulations don’t help, and a global financial crisis can hit at any moment. Moving abroad is a great endeavor; don’t mar it with unnecessary financial troubles.