The Do’s and Don’ts of U.S. Expat Finances
It’s happening. You’re moving to a new country– a new way of life. Now you’ve got to plan everything– from housing to transportation and more. You’ll have little time to yourself over the next few months, making arrangements and dealing with curveballs. The best thing you can do when transitioning to a new country is to plan. With all the planning going on, it can be easy to forget about your finances (possibly the most important part). So we’ve compiled a list of Do’s and Don’ts of expatriate finances for you to keep handy.
Do: Have a Backup Plan
Living in a new country is a new territory and you may not have the financial support system you once had in the US. For this reason, create a backup fund. Consider making a fund in a bank at home that has international support. You may have a language barrier, so a backup plan is crucial. Make sure your bank will be able to assist you internationally if the need arises.
Don’t: Exchange on a Whim
Many countries have their own currency– and they won’t accept the US dollar. $10,000 could be absolutely worthless in a foreign country. In order to use your wealth, you’ll want to exchange your currency into the local variety. Do not go to just any currency exchange shop. Currency exchange is based on rates and there are fees involved. Shop around for foreign exchanges which have good rates. If you will be exchanging currency often, then it may make sense to find a solid exchange to use for your transactions.
Pro Tip: Your bank may be able to exchange currency for you.
Do: Consider a US Bank
When moving abroad, it may make sense to transfer your assets to a bank in the local area. But watch out, foreign banks may charge hefty fees. Consider staying with your US based bank. They may provide better value to you than a foreign one. Especially if your bank can operate internationally. With foreign banks sometimes having fees up to 250%, it may make sense to continue with your US bank.
Don’t: Hide Accounts (FATCA)
A good rule of thumb is to document all your accounts before you move off to a foreign country. And similarly, be prepared to document any new ones you open up while abroad as well. The US requires expatriates to document their foreign holdings according to the FATCA rule. The FATCA rule allows the IRS to track bank accounts held by US tax residents. Any bank account which surpasses the $10,000 threshold at any point in the year must be reported to FinCEN (according to FATCA). Make sure to keep your accounts up to date (with FinCEN) or you may receive a fine.
Do: Read up on International Agreements
Some expatriates travel back and forth between two countries quite often. If you are this type of expatriate, pay extra attention. Some countries have special agreements with others which could benefit you as an expatriate. These agreements tend to cover double taxation, pension benefits and others. So, speak with your financial advisor today about the type of agreements present between your domestic and foreign country. It could do a lot for your bottom line.
By Beacon Financial Education, Chris Gitre
Beacon Financial Education does not provide financial, tax or legal advice.
None of this information should be considered financial, tax or legal advice.
You should consult your financial, tax or legal advisers for information concerning your own specific tax/legal situation.