Whether you’ve been offered a job overseas, are unhappy with the U.S. political climate or just want to experience living in a different country, moving abroad can be a tempting opportunity. Retirees and digital nomads wishing to keep expenses low often look to some of the cheapest places to live in the world.
But a lower cost of living or a high-paying job aren’t the only factors to consider when moving overseas. The wrong money moves can leave you worse off than if you’d stayed home. Here’s what you need to know to make your experience as an expat a financially fruitful one.
[See: How to Live on $13,000 a Year.]
Compare the cost of living. Before you move overseas, make sure you can actually afford to live in a different country.
Take Singapore, for example. Because of its higher earning potential, it’s the top country for expats, according to HSBC’s 2017 Expat Explorer Survey. However, a higher cost of living often comes with higher earnings.
When you use a tool such as Numbeo to compare the cost of living in Singapore to the cost to live in the U.S., you’ll find that Singapore has higher rent and grocery prices. So, you’ll need to adjust your budget accordingly.
Make a plan to convert your money. The U.S. dollar can go further in many countries. However, you should know exactly how far your money will go in your new country. You can do this by looking up the country’s exchange rate.
For example, if you use Google’s currency converter, you’ll see that $100 in U.S. currency buys roughly $145 in New Zealand, which initially looks like a great deal.
However, this exchange rate — also known as the mid-market exchange rate — isn’t necessarily the rate the bank will pass on to you. When you convert your money through a bank, you’ll likely get hit with hidden fees and charges. To save money, look for services that are transparent with the fees they charge, especially when converting your money to a different currency.
[See: 8 Big Budgeting Blunders — and How to Fix Them.]
Decide which credit cards and bank accounts to keep. You might be tempted to close your U.S. bank accounts and credit cards and bank locally overseas. But that’s not always the best idea.
Before you close your U.S. credit cards, figure out how that might impact your credit score. There’s a possibility that closing your credit cards could damage your credit, which might make it hard for you to get credit if you decide to move back to the United States.
If possible, maintain your local bank account and at least one credit card to keep your score up. You might want to keep some or all of your credit cards open.
When deciding which card to keep open, choose the oldest credit line to show stability — but make sure it doesn’t have high interest rates or foreign transaction fees. Also, let the credit card company know you’ll be using the card overseas to avoid having it shut down for suspected identity theft.
You don’t have to close your U.S. bank accounts, but you might want to consider using an account that can help you manage, send and receive U.S. and foreign currency without paying high foreign transaction fees or exchange rates.
Research visa and passport fees. Moving overseas can be costly, and the process begins long before you pack your first box. Before moving, research the requirements and associated fees the U.S. and foreign governments might require. This can include passport fees, visa fees, the cost for medical examinations and more.
Your first step: Get a passport if you don’t already have one. The cost for a first-time applicant can be as high as $165 (for a passport book and card).
If you plan on working in another country, a work visa might be needed — and these can get pricey. Let’s say you’ve been offered a skilled job in the United Kingdom. That visa can cost around $589 to $1,550, depending on your situation.
Or you might want to get a resident visa in a country. For example, you might be able to apply for a skilled migrant category resident visa in New Zealand. The approval process can take up to six months, and the online application can cost around $375.
You might also need to prove you’re in good health before you qualify for a visa. For example, you must have a chest X-ray and medical examination to meet the criteria for the skilled migrant category resident visa for New Zealand.
[See: 12 Habits of Phenomenally Frugal Families.]
Prepare to pay U.S. taxes. If you dread tax season here in the U.S., your taxes will likely only get more complicated when living abroad. Even if you make more money overseas, the gain can be marginal when you calculate how much you’ll pay in taxes. As a U.S. citizen, you’re still responsible for filing a return and paying U.S. income tax, no matter where in the world you live.
You’ll also likely be obligated to pay taxes to the country where you’re residing and earning your living. However, you might be able to qualify for a foreign tax credit. This can reduce your double tax burden, which occurs when your foreign income is taxed by the U.S. and the foreign country.
Make the move. If you don’t work for a company that’s paying for your relocation expenses and providing housing, you’ll have to arrange your own housing and pay to have your necessary household items shipped overseas.
Relocation specialists can help make the process easier by giving you quotes on packing, unloading and moving your household items. But do your research to make sure you’re dealing with reputable and fairly priced companies.
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Your Ultimate Money Guide to Living Overseas originally appeared on usnews.com
