4 Tips to Keep Your Finances Healthy While Living Overseas
Similar to your physical health, your financial health needs and challenges can change over time. And, as an American expat living abroad, you face unique financial complexities. That’s why it’s important to conduct regular financial wellness check-ins. The following tips can help keep your finances healthy long into the future.
#1 – Schedule regular check-ups.
Just as you schedule regular preventative care appointments with your doctor, it’s important to schedule annual financial check-ups with your international wealth manager. While annual financial reviews are important to everyone, it’s especially vital for U.S. expats, who face additional financial complexities. Taking time to schedule an annual review of your finances allows you to check in on how changes to tax treaties, exchange rates, international regulations, etc., may impact your particular financial situation.
Here are some important financial wellness topics to cover with your wealth manager in your annual review:
- Any changes that occurred in your life over the past year and how those changes may impact your financial planning strategies
- Any new multi-jurisdictional challenges that may impact your investment, tax and estate planning strategies
- Tax planning considerations, including any updates to tax laws in the United States or your country of residence that may impact you
- Investment performance, with a focus on maintaining an optimal asset allocation across countries, currencies, etc.
- Estate planning considerations, including any recent changes to inheritance laws in your current country of residence
- Banking and currency considerations to help ensure you continue to manage your finances in a cost-effective manner, you maintain appropriate local bank accounts and you continue to minimize foreign exchange fees whenever possible
- Compliance with foreign financial reporting requirements, such as Foreign Bank Account Reporting (FBAR), the Foreign Account Tax Compliance Act (FATCA) and other IRS requirements
#2 – Plan for emergencies.
An unexpected healthcare emergency has the potential to upend your entire life. If not properly planned for, financial emergencies can do the same. And, as an expat, you may face additional challenges in a financial emergency, such as potential liquidity issues and exchange rate considerations.
To protect yourself and your loved ones, it’s wise to save at least three to six months of living expenses in local currency held at a local bank. Doing so allows you to quickly access funds without the need to exchange money or sell investments at an inopportune time.
#3 – Pay your monthly “premiums.”
You may be paying monthly health insurance premiums to maintain coverage while living abroad. Consider using the same strategy to allocate money toward your long-term savings. Commit to a savings strategy that is sustainable and helps you make progress toward achieving your financial planning goals. This is one of the best ways to keep your finances healthy over time.
#4 – Avoid “unhealthy” habits.
Just as bad habits can wreak havoc on your physical health over time, bad money habits can similarly wreak havoc on your financial health. Consider correcting the following habits before they have a chance to harm your long-term financial wellness:
- Making poor investment decisions, including investing in passive foreign investment companies (PFICs)
- Failing to plan for international tax complexities
- Not having an estate plan in place, or failing to update your estate plan to account for local tax and inheritance laws
- Spending without a budget
- Overspending on nonessentials
- Not setting specific savings goals
- Carrying too much debt
- Not having an emergency fund
