11 Financial Mistakes To Avoid When Relocating Overseas
When moving to another country, you need to keep your financial situation under control. Too often, expats are enthusiastic about planning everything for life in a new country, but fall short when it comes to organizing their finances. We have compiled the top most common financial mistakes that expats should avoid when relocating overseas
Moving abroad is an exciting adventure that gives every expat new perspectives, opportunities and experiences. Usually, before traveling, people plan in detail everything related to the future country of residence, but very often they forget about the most important component - finances.
Whether you're moving abroad for a new job or retiring, you need to keep your finances under control. So that you don't fall victim to poor financial preparation, we've put together a list of the 11 most common financial mistakes of expats you can make when moving abroad and helpful tips to avoid them. Let's talk further.
Mistake 1 – Misunderstanding of tax officials is obligatory
Lack of knowledge about the procedure for taxation of income and assets of expats in the new country and in the country of origin is one of the most common mistakes when planning a move abroad. Depending on the situation, you can either pay more taxes or receive a penalty for not paying them.
Tip: Consult a qualified tax professional to understand your tax liability and plan your payments.
Mistake 2 – Do not take into account excessive costs
Moving abroad is quite an expensive event, but sometimes expats do not take this into account when planning a change of residence. Visas, preparation of permit documents, attorneys' fees and transportation costs are usually the most expensive.
Tip: Assess your situation and determine what expenses await you during the first few weeks in your new country.
Experts advise to have enough money for 3-6 months of living in a new country before moving.
Mistake 3 – Not predicting the difference in exchange rates
Depending on your country of origin and final destination, your new cost of living may increase or decrease. Also, the exchange rate affects the transfer of wealth from the Motherland to a new state.
Tip: When you take the first step, be sure to consider the exchange rates. It is better to transfer assets with the help of a special money transfer service.
Mistake 4 – Not saving for retirement
Unfortunately, very often expats do not think about planning their retirement budget. Many expats rely on their employer-sponsored pension plans, but that money may not be enough. Other expats neglect to contribute to their country's pension systems, which may later affect their right to benefits.
Tip: Consider your retirement options and build a diversified portfolio accordingly.
Mistake 5 – Not considering possible risks to assets and not protecting them
It is a very common mistake for expats not to protect their assets against currency fluctuations, inflation, political instability and litigation.
Tip: When planning to move abroad, be sure to consider changes in the exchange rate and the level of inflation, which can reduce your purchasing power, and be sure to pay attention to political and legal risks that can affect your property rights, inheritance and other property. It is far better to diversify your wealth across currencies, jurisdictions and asset classes, and to seek professional advice on how to protect your capital before moving.
Mistake 6 – Lack of an insurance policy
Very often, expats forget to take out a health insurance policy, but this document is an important component of moving.
Tip: Make sure you have a health insurance policy that provides adequate coverage for your age and medical needs. Some plans offer worldwide coverage, which is great if you plan to travel a lot as an expat. Other health insurance policies set separate prices for certain regions.
Mistake 7 – Lack of contingency budget
A common mistake among expats is not having a separate budget in case of an emergency or unexpected expenses. While living abroad, various troubles can happen - health problems, accidents, natural disasters, theft or loss of income, so it is better to be prepared for them.
Tip: Take care of a fund that would be enough for at least six months of your living expenses in the host country.
Mistake 8 – Not monitoring the relevance of financial documents
Financial documents must be regularly updated. An expat should keep track of his income, expenses, taxes, investments and assets in different countries. You also need to update your will, power of attorney, beneficiary designations, and other legal documents.
Tip: review your financial documents at least once a year or whenever there are significant changes in your life circumstances.
Mistake 9 – Do not seek help from qualified specialists
Unfortunately, very often expats refuse to seek help from specialists, even when they need it. Planning your budget properly can be quite difficult, especially when you have to deal with multiple tax systems, currencies, regulations and cultures.
Tip: if necessary, be sure to seek advice from qualified and experienced professionals who will help you in the financial planning process.
Mistake 10 – Close all credit accounts at once
An important part of moving is closing credit accounts in the country of origin. However, we do not recommend closing all accounts at once, as this can harm your credit history.
It is also important to inform the bank about your move if you plan to use any of the accounts abroad. That way, they won't see paying in another country as suspicious activity and won't suspend your card, which can stop you from spending when you're in a new location.
Tip: Don't close all your accounts, because if you ever decide to come back, you'll already have established credit.
Mistake 11 – Not planning the pension transfer procedure
Expats who are planning to retire abroad should know that some countries impose certain restrictions and have certain prerequisites for the payment of a pension, for example, if you move from the United States of America, your social benefits will not accrue if you live in Ukraine, Georgia or Cuba.
Tip: Be sure to find out how moving abroad can affect the payment of your pension. Knowing the restrictions will help you better plan your retirement in another country.
Understanding all the intricacies of the financial part of moving can be quite difficult. However, if you consider possible mistakes and do everything right, you can make a big profit.
To ensure a safe move to a new country, I advise you to contact a specialist. My colleagues, qualified specialists with legal education, will help you avoid unpleasant situations during migration.
Daria Rogova, Head of Insurance at Visit World
To move, travel or work safely in a new country, you will need health insurance. You can apply for an extended policy on our website here.
Products from Visit World for a comfortable trip:
Travel guide for 200 countries;
Legal advice from a local specialist on visa and migration issues;
Travel insurance around the world (please select the country of interest and citizenship to receive services);
Medical insurance all over the world.
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