What to Think About Before Moving Overseas
Many Americans planning a move overseas face a wide range of unknowns. While some of these unknowns can be fun adventures to navigate, such as discovering the best local espresso or establishing yourself as a regular at your favorite restaurant, one thing you don’t want to figure out on the fly is your budget.
Before moving abroad, it’s important to plan for how changes in your expenses may impact your lifestyle. Following are six important budgeting tips to consider as you plan your move overseas.
Access Now: Expat Guide to Investing and Financial Planning for Americans Living Abroad
#1 – Understand the cost of living.
As you’re planning your move overseas, be sure to consider how changes in your cost of living may impact your budget and lifestyle. Begin by researching expenses such as housing, utilities, transportation, groceries, entertainment, travel expenses and leisure activities.
As you research and make decisions, focus on your priorities. For example, if you plan to travel extensively while living overseas, it may make sense to choose a smaller, more affordable home and set aside a higher percentage of your budget to fund your travel adventures.
#2 – Consider the cost of healthcare and insurance.
The cost of healthcare can vary widely between countries. Some countries are known for providing excellent public healthcare for foreign residents, while others offer limited coverage options.
Depending on your country of residence and employment situation, you may be eligible to participate in a national public healthcare plan. If you’re actively working for a company, you may even be automatically enrolled in the plan. Countries typically require you to make monthly contributions in order to access affordable care in public hospitals and clinics.
If you plan to move to a country that doesn’t offer public healthcare to foreign residents, you may need to purchase a private insurance policy. Fortunately, there are many international health insurance plans that provide similar coverage to U.S.-based plans.
#3 – Understand your new tax obligations.
If you’re living and/or working in a foreign country, it’s likely you’ll need to pay income taxes in that country. Of course, your specific tax liabilities depend on your country of residence and individual financial situation.
Some U.S. expats mistakenly believe they don’t need to file a U.S. tax return while living abroad. However, because U.S. taxes are based on citizenship, and not residency, this means all U.S. citizens must file a U.S. tax return, regardless of where they reside.
Fortunately, thanks to the foreign tax credit (FTC), the foreign earned income exclusion (FEIE) and the foreign housing exclusion, many Americans abroad can avoid paying U.S. federal income taxes on their earnings, which can significantly reduce their overall U.S. expat tax bill.
#4 – Prepare for the financial requirements of visas and residency permits.
There are often expenses associated with securing a foreign visa and establishing residency in a foreign country. Like many expenses, these costs can vary significantly by country, which is why it’s important to have an understanding of your financial obligations as you plan your move.
#5 – Understand how currency fluctuations impact your spending power.
As you plan your move, it’s important to be aware of the risk presented when your income is in one currency and your expenses are in another currency. Fluctuating exchange rates can reduce your spending power, which is why it’s important to budget for currency fluctuations and take steps to manage your currency risk, including maintaining a diversified investment portfolio that spans multiple countries, asset classes and investment types.
Also, matching your currency to your future expenses can help mitigate the impact of currency swings. For example, if you plan on spending your entire retirement in France, it may be wise to hold a large portion of your investments in European stocks and bonds to match the currency of your future expenses.
On the flip side, if you plan to return to the United States after a few years, it may make more sense to maintain a U.S. dollar-focused investment strategy.
#6 – Budget for the move itself.
The costs of moving overseas can quickly add up. As you budget for your move, be sure to consider the following:
- The cost of professional movers to pack your belongings and furniture
- Custom crating expenses for fragile items, such as electronics and artwork
- Sea freight expenses
- International transportation expenses
- International customs and import taxes
- The cost of delivering your belongings to your new home
- Car shipping
- Long-term/short-term storage fees
Could you use help preparing financially for your overseas move? Creative Planning International is here for you. We support U.S. expats and cross-border families with custom financial strategies to help them maximize their wealth and successfully navigate the specific challenges they face.
To learn more, request a meeting with a member of our team.
