Budgeting and Financial Considerations for Americans Moving Abroad

When planning a move overseas, many Americans encounter numerous uncertainties. While some of these can turn into enjoyable adventures, your budget is not something you want to figure out on the go.

It’s essential to anticipate how shifts in your expenses might affect your lifestyle. Here are eight key budgeting and financial tips to consider as you prepare for your move abroad.

1. Comprehend the cost of living.

In anticipation of your relocation to a foreign country, it is imperative to evaluate the potential impact of cost-of-living changes on your financial strategy and everyday existence. Initiate this process by scrutinizing a spectrum of expenditures such as accommodation, utility services, conveyance, food supplies, recreational activities, voyages, and hobbies.

During the investigative and decision-making phase, it is advisable to align your choices with your personal objectives and necessities. For example, should extensive voyaging constitute a significant aspect of your international agenda, it would be wise to consider a more modest yet economical living arrangement, thereby dedicating a greater segment of your finances to travel endeavors. This approach could facilitate a more balanced and fulfilling experience while abroad.

2. Consider the financial aspect of medical care and insurance coverage.

Healthcare costs can differ significantly from one country to another. Some nations are renowned for offering high-quality public healthcare to foreign residents, whereas others may have more restricted coverage options.

Your eligibility for a national public healthcare plan will depend on your country of residence and employment status. If employed by a company, you might be automatically enrolled in such a plan. Typically, countries necessitate monthly contributions to access affordable care in public hospitals and clinics.

If you’re relocating to a country that does not offer public healthcare to foreign residents, you may need to acquire private health insurance. Fortunately, numerous international health insurance plans are available that offer coverage comparable to U.S.-based policies.

3. Familiarize yourself with your new tax liabilities.

If you are residing or working in a foreign country, you will likely be required to pay income taxes in that country. The exact amount you owe will depend on your country of residence and your personal financial circumstances.

Many U.S. expatriates erroneously assume that they are exempt from filing a U.S. tax return while abroad. However, since U.S. tax obligations are determined by citizenship rather than residency, all U.S. citizens are mandated to file a U.S. tax return regardless of their place of residence.

Fortunately, U.S. citizens living abroad can often mitigate their U.S. federal income tax obligations through the foreign tax credit (FTC), the foreign earned income exclusion (FEIE), and the foreign housing exclusion. These provisions can substantially lower the overall tax liability for expatriates.

4. Arrange your finances in anticipation of visa and residency documentation expenses.

Securing a foreign visa and establishing residency in a new country often involves various costs. These expenses can differ widely depending on the country, making it crucial to be aware of your financial responsibilities when planning your relocation.

5. Understand the influence of currency changes on your purchasing ability.

When planning your move, it’s essential to consider the risks associated with having income in one currency while incurring expenses in another. Fluctuating exchange rates can have an impact on your purchasing power, so it’s wise to budget for potential currency fluctuations. Additionally, managing your currency risk can be achieved by maintaining a diversified investment portfolio that includes assets across various countries, asset classes, and investment types.

Aligning your currency with your anticipated future expenses can help reduce the impact of currency fluctuations. For instance, if you intend to spend your retirement entirely in France, it would be prudent to invest significantly in European stocks and bonds to align with the currency of your future expenditures.

Conversely, if you plan to return to the United States after several years, it might be more advantageous to adopt an investment strategy centered on U.S. dollars.

6. Allocating funds for the relocation process.

The expenses associated with moving overseas can accumulate rapidly. When budgeting for your relocation, make sure to account for the following:

• Professional movers for packing your belongings and furniture
• Custom crating fees for fragile items like electronics and artwork
• Sea freight charges
• International transportation costs
• Customs duties and import taxes
• Delivery costs to transport your belongings to your new residence
• Car shipping expenses
• Long-term and short-term storage fees

7.  Identify banks who are willing to serve Americans in your country of choice.

Since the passing of the Foreign Account Tax Compliance Act (FATCA) in 2010, more and more financial institutions around the world have opted to refuse service to U.S. related persons, making very difficult for Americans living abroad to establish banking relationships in other countries. It is important for you to do some research and identify financial institutions who are willing to serve Americans in your country of residence.

8. Identify U.S. based financial institutions who are willing to maintain your investments.

Like foreign financial institutions, most U.S. based financial institutions refuse to serve non-U.S. residents due to compliance issues with FATCA and other jurisdictional regulations, regardless of your citizenship. Many Americans who have notified their banks and investment custodians about their move to a foreign country end up having their accounts closed by financial institutions they have had many years of relationship with. Finding the right U.S. based custodian who will serve non-U.S. residents is like finding a needle in a haystack. Consider establishing a relationship with a professional cross-border wealth manager to help you with your U.S. investments and retirement accounts.

At Abacus Wealth International (AWI) we help Americans living abroad with their cross-border wealth management needs in retirement planning, investment optimization, estate conservation, and tax savings strategies. Schedule your complimentary consultation with a seasoned cross-border wealth manager today!