Home » Five Finance Tips For First-Time Expats

Five Finance Tips For First-Time Expats

Money makes the world go round, or at least it did at one time. Years ago, most people made the decision to work in a foreign country mainly because of the financial benefits that came with it. A majority of them then chose to return home when they had accumulated a significant amount and could lead a comfortable life.However, nowadays people are interested in traveling and living abroad for various reasons, many of which may have nothing to do with money at all. Some do it so that they can enjoy a better standard of living, while others relocate just for the experience.

People today are also settling overseas so that they get the chance to see a new place, interact with various people, and learn about a different culture. While money may be an important factor in their decision to relocate, it is no longer the main motivation for many people to migrate, especially in comparison to times gone by. In fact, stories of people saving next to nothing in spite of working hard in another country for years are quite common, and this does not just happen with low-paid workers.

Well-qualified and experienced professionals are more likely to get higher compensation packages if they work with a multinational company in a foreign location. Businesspeople, entrepreneurs and freelancers also stand a good chance of earning more than what they do back home, if they have innovative products, services and ideas to offer. Unfortunately, many of them do not meet the financial goals they had set for themselves. The issue here is often not that these expats aren’t making money; is it the lack of planning finances in the right way. There could be a few reasons why a well-paid expat may fail to save up, including high living costs and high general expenditure.

The cost of living is similar for a majority of the residents of a given location, as it generally takes into consideration the amount they pay towards rent, utilities, groceries, transport, education and healthcare. For example, most people living in Switzerland feel that the cost of living is high. You may not be able to control the baseline cost of living in a country, and it is therefore important that you know how much you will be spending each month, compared to your income.

Monthly expenditure varies from one person to another, as it depends entirely on the type of lifestyle one leads. For example, if you rent property in the city center, eat out regularly, shop at branded stores, and travel to work by taxi every day, you are bound to incur higher expenses compared to others. It is largely up to you to control your monthly expenditure. Many expats reduce their monthly overheads by getting their employers to pay for rent, utilities, transport, healthcare, and even their children’s education. The more you can cut down on your expenses, the easier it will be for you to save money.

Again, saving money and just letting it lie in a bank account is not necessarily a good idea. If you ever speak with a financial advisor, you are likely to hear them say “Don’t work for your money; let your money work for you”. Contrary to what many people believe, this piece of advice is actually quite easy to follow!


Get Our Best Articles Every Month!

Get our free moving abroad email course AND our top stories in your inbox every month


Unsubscribe any time. We respect your privacy - read our privacy policy.


Whether you live alone or with your family in a foreign country, proper planning is very important when it comes to managing your money effectively. Once you set a goal for yourself, you need to chalk out a path, work towards it and monitor your progress regularly, to see if you are getting close to where you want to be.

While there is no substitute for expert advice, you may find the five finance tips for first-time expats below quite useful.

Plan for your retirement

Youth is not the only thing that is wasted on the young; very often, money is too! It is absolutely great if you are raking in the cash in your newfound home at the moment, but do keep in mind thatthis will almost certainly not be the case for the whole of the rest of your life.

If you want to live your golden years in comfort, you will need a nest egg to rely on. In all likelihood, your pension and social security will not be enough.

The first thing to do when planning for your retirement is taking an estimate of how much you will require. The general rule of thumb is that a person needs around 70% of their annual pre-retirement income to lead a comfortable life. However, this only applies to those who are in excellent health and mortgage-free. If you are prone to health problems or have to pay for your accommodation on a monthly basis, you will probably need 100% (if not more) of your current income.

Housing and healthcare costs have become two of the biggest expenses faced by the senior citizens today. Ask yourself what you can do to make things easier for your older self. The obvious answers will be to purchase your own house and get a private healthcare insurance plan. However, both come at a very high cost.

Once you have an idea of how much you require each month, look at your social security benefits (or equivalent depending on your country of origin), as well as your pension payouts. The shortfall is what you must start making arrangements for beforehand.

According to CNN Money, a US expat should consider a minimum of US$ 15 to US$ 20 as investment savings, to cover every dollar of the difference. For example, if the shortfall is US$ 20,000 per year, you will need US$ 300,000 to US$ 400,000 to bridge that gap.

Maintain a good credit rating back home

When you apply for a mortgage, a car loan or even a credit card, your credit worthiness is one of the key aspects that finance companies take into account. The interest rates that you are offered will also depend a lot on your credit history. Many banks and financial institutions across the globe are also now running credit checks on prospective employees before hiring them. It is therefore important for everyone to have a high credit rating at all times.

The easiest way to ensure a good score is by paying off all credit card bills and bank EMIs on loans regularly. Use your credit card when required, but try to pay off the entire outstanding amount for the month, instead of making a minimum or part payment. Avoid having too many cards, a huge outstanding balance, or very high credit limits. Most financial companies advise their customers to set up direct debits for all their payments, as it may earn them a few brownie points.

Even the most brag-worthy credit score may completely vanish, if you spend an extended amount of time away from the nation in which you built it. You may therefore face this problem when you return after a number of years. To avoid this, use a credit card from your home country at least once or twice a year and pay off your monthly bill off in full. This can actually be quite useful when have to pay for something online and even a couple of transactions every year will help keep your credit rating pristine.

Have an account in both countries

Before you set up a business or start working in a foreign location, you should open an account with a local bank, so that all your transactions or salary credits can take place without any problem. This will also let you make quick deposits and withdrawals, or use your debit card without incurring a heavy foreign exchange fee.

At the same time, avoid transferring all your funds to your new place of residence. Keep a few accounts (with a healthy balance) and at least one credit card active back home, as they can be used to pay for any expenses that may arise.

It has now become very easy to monitor accounts and make transactions from any part of the world, thanks to online banking facilities. The internet has also made it easy to transfer money from one nation to another within a matter of minutes, at the click of a button. You don’t have to carry a huge amount of cash hidden in your sock every time you travel between places! Visiting the bank or calling a customer service representative isn’t required either. Just log on to your online account and process the transfer on your own.

For taxation purposes, it may be imperative for you to maintain an account in your home country as well as the location that you are residing in. Accounts in two nations can be very useful if there is a state of emergency in either of the places.

Convert before spending

A new currency and the difference in exchange rates can throw you off initially and you may end up spending much more than you intended until you get used to the change.

Before you hop on to the plane or even book your ticket for your new destination, you should know what the cost of living is going to be. Keeping in mind your income, look at the prices of various goods and services in the local currency. Then calculate what that amounts to in your home country. If the cost of something is much higher than what you pay at home, you may want to look for alternatives or even consider going without that particular service or item.

Draw a budget (with provisions for relocation costs as well as emergencies) and make sure that you stick to it each month.

Understand your tax obligations

Moving to a new destination will not rid you of your responsibility to the government. In fact, your obligation may actually double, as you will be required to file your returns in your host country but also pay taxes back home. Fortunately, this does not mean you will be double taxed. Do keep in mind that taxation laws are very complicated and are best explained by a lawyer.

As mentioned earlier, it is always a good idea to seek professional advice from a qualified and well-experienced finance consultant as soon as you start making money. It may also be worthwhile to speak with close friends, relatives and colleagues, who have already made some investments and are seeing some returns. Putting away even a small amount in the right place as early as possible can go a long way towards insuring your financial security.

When it comes to making an investment, some believe in taking risks since the yields are likely to be higher. However, while a few people may have been lucky enough to make a lot of quick money, many individuals have lost their life savings in such schemes. A majority of working professionals therefore prefer safer channels such as fixed deposits, government bonds and mutual funds. The returns may be comparatively lower, but at least they know that their money is going to be safe.

Remember that there is no real “right formula” for you to manage your money effectively. What may work well for one person may not necessarily be ideal for your situation. Just keep your financial goals in mind, consult a specialist and start investing as much as you can and as soon as possible.