In early 2020, I made the leap across the Pacific pond from San Francisco to Southeast Asia. Growing my career internationally led to one of the biggest growth phases of my career and personal life.
But I’ll be totally honest. When I first moved to Singapore, my system for tracking money broke down. Without fancy automation tools at my disposal, to having to deal with taxes and cross-border investments, managing money abroad can be an overwhelming process at first.
Today, I’ll share 6 practical tips that I wish I had known to be more financially prepared earlier on in my relocation journey. Without further ado, let’s dive in.
Tip #1: Create a financial plan for your move
Irrespective of where you will be moving, you’ll need a financial plan to support your ideal lifestyle.
- Firstly, set a long-term vision for your dream life: Be honest with yourself about the things, experiences, people, and feelings states that you truly want to have in your life. Having this clear intention from the outset will help you from getting stuck in the expat hedonic treadmill.
- Calculate how much cash flow is needed: Break down your financial goals and understand how much income you’ll need to achieve them while living abroad. Numbeo, the world’s largest database of cost of living is a great handy resource to help you get started.
- Don’t forget to budget for hidden costs of relocation and always set aside a contingency fund.
🗯️ A top tip from Rohit Nadhani, co-founder and CEO of Kubera
- Track your net worth, not just budget: Budgets give you a snapshot of your monthly cash flow, but don’t show your broader financial picture.
- Here is a free Net Worth Tracker template that I created for expats, which allows you to input your assets, income and expenses across currencies and track current/ future net worth.
- Negotiate non-obvious parts of your compensation package: in addition to base salary, many employers can subsidise or deduct personal expenses from taxable income or offer retirement contribution matching. In this case, check if the US has tax treaties with your local country.
Tip #2: Set up your expat money system
Since I keep most of my investments in the US and maintain a few credit cards to maintain my credit history and accumulate perks, creating a “set and forget” money system has been a huge lifesaver.
For cross-border accounts, Wise is my personal go-to, due to its low fees, easy to use UX and automation feature. For best credit cards, I recommend the AMEX Platinum, which is best for premium lounges and no foreign transaction fee.
After linking my local and home accounts via Wise, I schedule a monthly remittance from my Singapore to American checking account, which is then used to fund my US-based savings, bill payments and investments.
Tip #3:Be mindful of tax implications
For US citizens living abroad, taxes can seem downright overwhelming. In fact, it is a top concern for almost three in five of the future relocators (IA). If that includes you too, here are some things to keep in mind.
- Pay for a tax professional. ROI pays off, since they help you find savings. I used Greenback Expat tax to file my 2020 & 2021 US tax returns with a positive experience.
- Plan your big upcoming tax decisions. Particularly if you intend to buy or sell your company stock options, other securities, real estate, and/or start a business.
- File US expat tax returns & compliance reports even if late. Use tax amnesty and tax treaties programs.
- Foreign Earned Income Exclusion (FEIE): if you qualify for FEIE, you may reduce your taxable income up to $107,600 per individual.
- Investments in foreign ETFs, mutual funds, and REITs are treated as passive foreign investment company (PFIC), which means you’ll likely have gains that may be treated as ordinary income and need to file a report. The workaround is to invest in US-domiciled funds or if you must, foreign individual stocks and bonds are OK (doesn’t trigger PFIC).
Tip #4: Get a virtual mailbox and phone number
Avoid getting locked out overseas when confirming your payment or receiving a new PIN because you no longer have a valid local address or phone number.
For the best virtual mailboxes for expats, I use Stable (use link for 20% off) but there are other service providers such as Earth Class Mail or Anytime Mailbox.
To keep your cell phone number, I use Google Voice. A real life saver for confirming payments, logging into bank accounts and completing your 2FA.
Tip #5: Don’t forget your expat health insurance
A huge lesson that I learnt over the years is to consider geo-arbitraging your insurance. This means that insurance can be cheaper in your home country compared to your residence country. Also, excluding high-cost regions (e.g. US) can result in more affordable premiums.
For example: I chose FWD’s International Health Insurance for its SEA coverage plan due to my work travels.
Tip #6: Think ahead for retirement planning
- Foreign retirement accounts: depending on your country of residence, some may offer local tax-advantaged accounts (e.g. Supplemental Retirement Scheme in Singapore for expats). However, local tax-advantaged accounts aren’t always interoperable across borders. eg once you move back to your home country, make sure it’s not taxed by your home country.
- Bilateral tax treaty: to prevent double taxation, check if your country of residence offer pensions (e.g. SIPP in the UK) that qualify under the US bilateral tax treaties.
- For US expats, as long as their earned income isn’t entirely excluded by the FEIE, they can still contribute to their IRA and Roth IRA, which reduces their taxable income.
Here are 6 things I wished I had known when moving abroad:
- Prepping for your move
- Automate your expat money
- Be mindful of tax implications
- Get a virtual mailbox and phone number
- Don’t forget healthcare insurance
- Think ahead for retirement planning