Living abroad could force you to take a second look at your finances. This might include finding free power of attorney forms so that others can make decisions for you. In this blog, we’ll show you how to stay on top of your financial future.
Always Do Your Research
Our first tip is to understand the long-term cost of living in your new country. Is your host country likely to have an economic boom? Or will costs continue to rise over time? If things get bad, you might need to go back to the US.
Your new country might also have a different standard of living entirely. If your salary doesn’t suit this, you might dip into your savings sooner than you’d like. You might even need to find a whole new job if your employer doesn’t increase your salary.
If you’re earning in one currency but spending it in another, take this into account. You’ll have to keep up with currency fluctuations and conversion rates.
Navigating International Bank Accounts
It’s possible that your bank will already have a branch in your new country. This will make it a lot easier to switch to a new account. Some international brands allow for simple transfers between countries. However, making a new account entirely is more convenient.
This means you won’t need to worry about international transfer fees. However, you might have business back home to take care of. If this is in the form of investments, open an international brokerage account. You can also ask someone back in the US to invest for you.
SWIFT transfers and online wallets (such as PayPal) are also decent options. You’ll still run into conversion fees, but these are often unavoidable.
Planning Your Budget Abroad
This may seem like an obvious step — but too few people properly budget their expenses while abroad. Keep track of every outgoing, and find everything that’s non-negotiable. If you need to pay more tax, you may have less money to spend on these expenses.
Always keep your priorities at the forefront of your budget. For example, if you want to help your child thrive, it’s okay to spend more on their education. Not every country has English-speaking public schools. Sending them to (and paying for) a private school might be your only option.
Aim to spend a maximum of 50% of your income on essentials. This should include housing, groceries, healthcare, and insurance at a minimum. You must also account for (likely infrequent) trips back to the States.
Checking Your New Tax Laws
Every country handles taxes differently. Make sure you know everything about your new country’s tax laws before moving. If you’re originally from the US, you might be subject to double taxation. This is because the US taxes people based on citizenship, not residency.
You may be eligible for foreign-earned income exclusion. This will require you to make your new country your tax home. American expats can also get deductions through foreign tax credits.
Beyond your income, differences in taxation may also hurt your investments. For example, they might be subject to higher capital gains tax as their value increases. Your current tax home also depends on how long you’ve been living in your new country.
Deciding Your Power of Attorney
You should also set up a power of attorney in case of an emergency. For example, if you end up in a coma but still have serious financial decisions to make. Where you set this up depends on how you plan to use it.
For example, is this to help you manage investments back home? If so, your POA should reflect your home’s laws. You could still set this up while abroad. Your closest US embassy will then be able to notarize it on your behalf.
You should still put together a local POA. This will help you manage your affairs while in the host country. This helps if, for example, your family ever needs to access your assets on short notice.
Saving Up Long-Term
In any country, it’s important to build up your savings. This could fund a full relocation if you ever want to go back to your original home. You also might face hardships you weren’t expecting. It’s good to put between 10% and 20% of your monthly income towards a savings account.
You should be able to reliably access 3-6 months of living expenses in an emergency. If you live in a particularly expensive host country, however, this could take a while. You can even continue putting money in your US retirement or pension plans.
Final Thoughts
Any budget or long-term financial plan will involve a lot of careful considerations. If you now live abroad, this could then add a few extra complications. By following the right steps, however, you can chart your course ahead with peace of mind.
Jessica has a flair for writing engaging blogs and articles. She enjoys reading and learning new things which enables her to write different topics and fields with ease. She also strives to break down complex concepts and make them easy for anybody to comprehend.
