Setting off to seek your fortune abroad? Congratulazioni! Before you saunter off into the sunset, however, take a moment and run through this simple five-step checklist to make sure your financial bases are covered.
1. Make a budget
It’s simple, but effective: creating a reasonable budget before you leave the country is personal financial management 101.
You’ll be considering a whole host of different costs: housing, food, transportation (airfare, bus, metro, etc.), storage for your stuff back at home, medical and dental coverage, travelers insurance, a local mobile phone, and much more. You can’t predict everything, but knowing what to expect (in addition to taking the road less traveled) makes all the difference.
And remember, costs may be higher or lower than what you are used to in the United States, so budget accordingly.
2. Avoid fees with your credit and debit cards
Foreign transaction fees are a well-planned budget’s worst nightmare. Purchases made with your credit card usually incur a 1-3% fee and can add up quickly.
Fortunately, there’s a host of transaction-free credit cards out there. Don’t want to waste time trolling through all the fine print? We’ve got you covered. You can find an up-to-date list of some of the best no-fee credit cards here.
It’s the same story with debit cards. You’re probably familiar with your bank’s out-of-network withdrawal fees. It works the same way when you’re traveling abroad, except in addition to a flat fee, you’ll often be charged an additional percentage of your purchase or withdrawal, and the ATM may tack on additional charges.
What’s a globe trotting grad to do?
Your best defense is to be prepared. Before you go, confirm what fees you’re likely to incur for using your cards, and see if your bank has any partnerships with ATMs within the country that can help you avoid penalties. Inform your bank that you’ll be using the card outside of the country, write down the telephone information for the banks so you can easily contact them, and make note of any other restrictions (e.g. a daily withdrawal limit).
3. EMV Compatible?
America refuses to switch the metric system, and American credit card companies remain slow in switching over to the more secure electronic signature chip cards (EMV) common throughout the world. Stubbornness may just be a national trait.
The problem? A lot of merchants will decline your regular magnetic strip card, so make sure ahead of time whether your card is compatible. Not sure if your card is EMV ready? Run yours against our list of current American EMV-enabled cards, and you’ll be sure not to run into trouble.
4. Pay your taxes
Just because you’re leaving the country doesn’t mean Uncle Sam has forgotten about you. You’re still expected to file your taxes like the rest of us (though you can apply for a two-month extension if living abroad).
The IRS views any income you earn in a foreign country as taxable, so make sure to hold on to pay stubs and bank statements.
That said, if you are in the foreign country for a full tax year, or 330 full days, you may be able to exclude your income from taxation or qualify for a foreign tax credit to reduce your burden.
5. Save smart
If you plan on saving for retirement while abroad, there are a number of issues to consider—any foreign savings plan may not automatically roll over upon your return, you’ll want to avoid twice-paying social security taxes, and you may not ever see the benefits of contributing to a foreign plan.
It’s always smart to talk to your future employer about costs or deductions, and to check and see if the US has any standing treaties with your country employment regarding savings and retirement (many do).
Article contributed by Ashwin Warrior