““If you fail to plan, you are planning to fail.” – Benjamin Franklin”

Before, During, and After

I assume you are not independently wealthy and therefore need to make a living? Therefore, you must avoid mistakes at this stage or it will cost you, literally.

Money issues in the overseas teaching world can be slotted into three categories: the before, the during, and the after. I’ll provide checklists of issues to consider, then explain in more detail, and finally provide links for further reading.

The Before

This is the part where you need to get the contract right and understand its features. Many of its elements have financial effects, good and bad.
Planning may mean professional help. Perhaps confer with an accountant about taxes and have in place a a will and limited power of attorney.
You will need someone trustworthy back home to manage the inevitable screw ups and chores.
Many of the day-to-day money mechanics need to be arranged before you get on that plane.
Lots of questions to consider in the before stage, in other words.

The During

The school will no doubt help you set up banking and arrange to deposit your salary. But be sure to confirm:

Will you be paid in local currency or that of your own country? Do you understand exchange rates?
What is the ATM situation? What are the mechanics of paying local household bills?
Is online banking secure?
How will you pay bills and transfer money back home? Do not close your US bank account; just keep the minimum deposited.

The After

*Plan for retirement or risk ending up pushing samples at Walmart.*

This mainly refers to retirement planning.

What exactly will you live on when you quit working?
What kind of retirement savings plan does the school have, if any? Have you made arrangements for automatic retirement savings on your own?
Are you vested in the Social Security system of your home country?
Should you invest in real estate?

This is a good time to sit down with a sharp pencil and maybe even a fee-only financial advisor.

Salary + Benefits = Package

“I’ve pretty much always lived paycheck to paycheck. I never considered it struggling, but it has always been a high-wire act. - Hunter Biden
”

You won’t be paid $50,000 a month, like Hunter Biden, which is all the more reason to to avoid your own high-wire act.

Salary + benefits = package. The synonym is savings potential. Just be careful to look beyond the raw salary number to the contract itself. The right hand giveth and the left hand taketh away. Be wary.

1. If the hiring administrator says the contract contains a thing, that thing had better be in the written contract.

2. Take nothing for granted; do not make assumptions. For instance, do not assume RT (round trip) airfare means every school year, when it is most likely at the beginning and end of contract i.e. every two years. Verify everything you were told.

3. Is the salary schedule available to examine? Think twice about working at a school without a published salary schedule.

4. Are there steps on the scale? Verify how many years of your experience will be credited; this typically maxes out at 5 years. A trailing spouse if employed by the school will probably be paid on the local hire scale, meaning much less money.

5. Is the salary number fixed or can you negotiate a bit? Perhaps you can ask for more money for extra duties and responsibilities like clubs, field trips, or coaching. Maybe try for higher placement on the scale.

6. Is the salary subject to local taxes, about 40% in the EU? Or maybe not now but in the future? In January 2022, for instance, China plans to remove tax-free allowances for foreign workers. There may be a tax-free period of several years. Then you’ll get slammed. Confirm.

7. What have pay increases been in the past and what % boosts are planned for in the future?

Be sure all terms agreed upon are in black and white in the written, board-approved, and signed contract.

Currency

Often salaries are paid in USD with a small percentage in local currency. Just as often, you’ll be paid in the local currency. Just be aware that currencies fluctuate, and if the dollar tanks, your rent could suddenly double since you have to pay in baht or dirhams or rubles.

“We’re taking a gamble that the currency we’re agreeing to be paid in is going to be stable or increase…The exchange rate last week was $1.50 US to €1.00 Euro. This bumped an €8 burger up to $12.”

You may also have financial responsibilities in your home of record. In that case, what about transferring money back home? You don’t want to become a currency trader, but you need to plan ahead to minimize costs.

Benefits

“Money can’t buy you happiness, but it can buy you a yacht big enough to pull up right alongside it. - David Lee Roth
”

If the benefits are thin, you’ll be lucky to afford a rowboat to pull up alongside that yacht. Notice how few of these benefits are only available to overseas teachers.

Verify the details first, as these are items which can affect your bottom line. Here’s a checklist with reminders of what to ask about before you sign the contract.

Meaning, if the school doesn’t pay, you will either have to pay out of pocket or do without. Put the amount into your calculations. Imagine a scale with your salary on one side; it rises or falls depending on benefits.

§ Health Insurance

How much is the deductible and will the school pay upfront or reimburse? How about drug coverage and medical evacuation if necessary?

§ Airfare

Same story here. Most likely RT airfare will be at the beginning and end of the two-year contract period. But will the school make the arrangements and do you need to shop around for the best deal? Is airfare paid upfront or reimbursable?

Are your dependents included in your airfare and housing benefit?

§ Housing

Three questions: if housing is provided by the school, how furnished is the furnished school housing i.e. how much will I need to buy?

If housing is in the form of a stipend provided by the school, what is the local market like and how much help will the school provide? Is there a local agent who regularly works with the school, for instance?

Rarely, housing is paid only during the school year, leaving you homeless for the summer. Verify just in case. However, UAE teacher Sorcha Coyle is a prodigious saver who negotiated a 10-month lease and added this money to her savings account; few of us are that disciplined!

§ Utilities

Some schools pay part or all of water/electric/heating bills. They may have an agreement with the landlord. In Russia the heat went on October 1, period and there were no individual meters.

§ Free Transportation

Cars are expensive, ditto gas. Your bottom line will be improved if you can get along without one. Most often public transport, gypsy cabs and taxis are cheap and reliable. Sometimes the school will provide an interest-free car loan. Inquire.

§ Retirement Plan

More on retirement options in a later post, but check whether the school contributes; if you can match, then do so.

Work Visa

§ Who obtains and pays for the work visa? It’s one thing to deal with all the paperwork (you) and another to pay for it (the school). Confirm.

Shipping Allowance

§ What is the shipping allowance, and does it cover shipping my school supplies? Is excess baggage reimbursed? Will shipping allowance be paid upfront or reimbursed?

This number fluctuates wildly, so ask. Variables affecting this would be how furnished the housing is and what is currently available for classroom supplies and how easily obtained, meaning probably not very.

If you have to pay to ship household and classroom necessities yourself, there is less to spend on shipping personal items.

§ Leave Policies: Personal/PD/Recruitment

Read the contract carefully on this point. You don’t want to lose salary to go home for a family emergency, nor do you want to pay for IB or other professional development. And eventually you will most likely be going recruiting. Is this accounted for? Who pays?

§ Settling-in Allowance

Moving is expensive and costs of setting up housekeeping keep mounting. An allowance to offset costs sure helps.

§ Cost of Living Allowance

Assuming there is a posted salary schedule, is there provision for COLA?

§ Tuition

Generally provided at one tuition per contract since tuition is generally beyond a teacher’s means. For pre-school children, ask about the availability and price of childcare or Pre-K and nursery programs.

Savings Potential

“Don’t build a glass house if you’re worried about saving money on heating. - Philip Johnson
”

Meaning that teachers must take all financial variables into account. So let’s get to the heart of the matter, the bottom line.

Would you rather your salary were $23,000 or $63,000? Depending on the package, I might be happier to take the $23,000.

The lesson is that the salary number is just a number; other factors make your savings potential and quality of life vary wildly.

Search Associates listings provide you an estimated percentage. This article by Andrew Hallam, author of Millionaire Expat, recaps amazing stories of international school teachers who’ve saved over $100,000 per year. How did they do it?

1. Benefits package. Remember, if you do not have to pay housing/taxes/health insurance, that $23,000 looks a lot bigger.

2. This ISR thread illustrates the tradeoffs which account for in the salary + benefit equation. Cost of living is by far the most important variable making that $23,000 swell in value; this Numbeo site will give you a rough estimate. Amanda rounds up more desirable countries here, meaning with low cost of living and high quality of life.

3. Lifestyle choices also make a huge difference. If you live on the economy (this link lists typical expenses in Thailand,) do not party like an oligarch, avoid imported goods and Western venues – you can have a lot of adventures and still save money.

4. You may run across chances to make extra money, mainly tutoring, which can be amazingly lucrative. Be sure to check with the school first on their tutoring policy.

Planning Ahead While Overseas

“Plan for the worst, hope for the best. ”

As always, it depends on your situation in life. To sort out the planning options, let’s divide you into two financial teams.

Team Footloose

*Footloose - no kids, no mortgages, or much in the way of household goods.*

This means you are unencumbered. So you just:

Gave your landlord notice and moved out.
Either sold everything or stored your stuff in mom and dad’s basement.
Brought one suitcase and maybe paid excess baggage charges for one duffle.
Plan to buy what you need once you arrive or arranged to buy stuff from a departing teacher in the garage sale.

Team Complicated

*Lots more decisions and complications before you go overseas. Plus “stuff.”*

Your group may have:

A mortgage or even rental properties.
Debts and loans, especially student loans.
Various investment and income accounts back home.
Stuff you didn’t sell but stored.
Family members still tied to you financially.

Tasks

But no matter which team you belong to, some tasks and caveats apply to both. The reason? Murphy’s Law controls the universe.

1. Deputize someone you can absolutely trust back home to handle the inevitable screw ups. Arrange a limited power of attorney for them.

2. Be as liquid as you possibly can, meaning access to ready cash. This does not mean you carry literal currency, just money you can access immediately. Start saving now to build an emergency fund, even if you have to take a second job.

3. Set up online access to whatever accounts you do have. Advice? Use a password manager like 1Password.

4. Automate as many financial functions as possible with an eye to safety and minimal fees.

Professional Help Before You Move Overseas

“If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur. - Red Adair
”

Attorney

Even if you are on Team Footloose, I would suggest setting up a will, but certainly an Advanced Healthcare Directive. Just in case…This will make things much easier for those you might leave behind.

Fee-Only Financial Planner

Pay them for an hour and hear what they’d suggest for a person in your situation. We’ll talk about this more in Retirement, but international school teachers need to take care of their own futures

Accountant

Particularly if you are on Team Complicated, pay for a bit of their time to be sure you have situated yourself as advantageously as possibly. Why leave money on the table?

Taxes

International school teachers most likely will not need to pay Federal income tax, although state taxes may be due. FEIE (Foreign Earned Income Exclusion) shields your gross income from federal taxes. In 2020 it was $107,600, so you should be fine.

Also bear in mind the requirements to avoid paying taxes. You must either be a bona fide resident of a foreign country OR meet the physical presence test of 330 days per 12 consecutive month period. The latter is easier.

Yes, you still need to file taxes although it’s not the end of the world if you don’t. And if you don’t know what FATCA and FBAR stand for, make a quick appointment with an accountant with expat experience.

Expert Advice

Consider studying the book Millionaire Expat: How To Build Wealth Living Overseas carefully. Andrew Hallam is a reputable and knowledge financial advisor with sensible, practical advice for expats.

What if…

Let’s run a few scenarios in which money plays a part, then consider how overseas teachers might first prepare, and then act.

Your parent(s) can no longer live independently and somebody needs to take charge. Is that somebody you? Will you need to return home, either temporarily or permanently?
You inadvertently make a big deposit to the Stupid Fund, a concept taught us by a long-time international school couple. It has given me great comfort over the years. Do you have the mental fortitude to just let it go? Not that you have any choice, actually.

*Which do you prefer? Beach in Thailand or a deposit to the Stupid Fund?*

So to recap. You need to earn a living, you want to have fun, and you’d like to retire comfortably someday. Like Benjamin Franklin said, “If you fail to plan…”