A move abroad is both exciting and overwhelming. From finding a job to snagging a new pad and maybe even picking up a new language, you’ve probably got a to-do list a mile long. One item you don’t want to leave off your checklist? Financial planning.
Your financial goals don’t need to take a backseat to your adventures – in fact, finances play a major role in any international move. You still have to pay bills and buy groceries, but now you have the added challenge of a new currency, culture and cost of living. Where do you begin?
We’ve rounded up seven steps you can take before you go to get your finances in order, from finding a new bank to handling taxes and everything in between – let’s get started.
1. Find a Financial “Home”
The first step to organizing your finances is choosing where would be most convenient to house your bank, financial advisor, or any other financial items you’ll need regular access to once you’ve moved.
Although you may think it best to house your finances close to wherever you’ll be staying, that isn’t always the best scenario. Actually, the best financial home for you will largely depend on the type of move you’re making.
Types of International Moves
If you know that this international move will be short-term (think less than five years), it may not make sense to move all your financial information outside of your home country. On the other hand, a permanent move to a new country probably warrants a new financial home as well.
But what if you’re somewhere in between those options – like if you’re planning to stay in a new country for closer to a decade?
Although the paperwork can feel a bit tricky, there are actually ways to meet in the middle for your unique needs. For example, you could choose to move some aspects of your financial life (such as bank accounts or insurance), while leaving others behind (like investments and retirement accounts).
Everyone’s financial home is different, so your best bet is to consult with a financial advisor and devise a plan that perfectly fits with your lifestyle and the countries involved.
2. Pick a Bank
Next up, you’ll need to choose a bank. Even if your bank has a super-convenient app for banking on the go, you may still want a local bank to handle taxes and exchange rates in-person.
Some countries require you to establish residencies before opening a new bank account. In other cases, your passport is the golden ticket. Do your research and find out what requirements your new country has before you move so you aren’t caught by surprise in an unfamiliar place.
Remember Exchange Rates
Keep in mind that different currencies have different values, and you’ll likely need to exchange currencies before paying bills or making purchases.
If your move is short-term and your financial life is uncomplicated, you may want to consider a service like Wise. Wise is an online service that allows you to transfer money from U.S.-based accounts to pay bills, and can even provide you with a debit card for regular use. In that case, you may not need to open a new bank account at all.
3. Decide What to Do With Investments
If you choose to invest while abroad, be aware that you could trigger Passive Foreign Investment Company (PFIC) rules. This occurs when you hold certain investments abroad as a U.S. tax resident.
If you’re investing in foreign entities, it’s probably best to consult with a financial advisor to make sure all your money, assets, and taxes are above-board.
4. Set a Budget on Exchange Rates
Next up, you’ll need to organize your spending – with an added challenge: exchange rates! A dollar in Milwaukee isn’t the same dollar in Calcutta, so grab your calculator before you set that new budget.
Beyond exchange rates, you may also want to research differences in costs of living. With a new currency and unfamiliar prices, your new budget may require an adjustment period.
5. Choose a Financial Advisor
If you’re planning to live abroad long-term and will likely retire abroad, it would be wise to find a financial advisor to help you plan for retirement in a tax efficient way.
Depending on the country you move to, your financial advisor might also be able to help you with financing, insurance planning, and getting established in your new home country.
6. Determine How You’ll Handle Your Taxes
Next up, it’s time to think about taxes.
As an American citizen, you will need to file taxes in your new home country as well as back in the U.S. It would be wise to find a tax preparer in the U.S. that specializes in expat tax returns. There are a number of unique reporting requirements (and high penalties) if you get them wrong, so do your due diligence come tax season.
7. Get Your Retirement Accounts in Order
What you do with your retirement accounts will depend on several factors, including the length of your move, your age, and the country that you’re moving to. Some countries have tax treaties that make things easier and address the specifics of taxation, while others are more ambiguous.
Pro Tip: If you choose to leave your retirement accounts in the U.S. when moving abroad, it may be difficult to log in and make changes, so make sure you have them invested appropriately, or you have a professional managing them for you.
Make Your Next Move with Clarity
With a resident expert in international moves, Clarity has all the tools you need to financially prepare for your new home. Click here to connect with a Clarity team member today.