“If you fail to plan, you are planning to fail.” – Benjamin Franklin
6.2 Mechanics of Money Overseas
Financial Housekeeping
“Housekeeping ain’t no joke.
”
In the last post, you put your plans in order and got a handle on the variables impacting your take-home pay. Now to the logistics of banking, security, and shopping. This article 15 Things You Need To Know About Working Abroad is aimed at business people but hits the nail on the head, particularly the financial implications.
Here from a business perspective is some advice that might save you thousands.
Banking
There are several ways you might receive your salary. There are also some implications to consider if you need to transfer money to your home country bank. US citizens may have reporting requirements with the IRS.
1. School pays you 100% in local currency. Confirm that this currency can be easily transferred out of the country. What extra fees will you incur? Are there limits on amounts? And what about filing requirements like FBAR (Foreign Bank Account Report)?
And sometimes the local currency collapses and you’re in trouble. Amanda’s article titled Venezuelan Currency is in Freefall paints a horrifying picture of the dangers.
2. School pays in a combination of USD (or Euros, etc.) and local currency.
3. School pays in 100% USD or similar stable currency.
Obviously, the school needs its own local bank to pay bills and salaries. In my experience, one of the school’s first orientation tasks is to help new teachers set up a local bank account and provide ATM access.
But will the school be able to arrange automatic transfers to your home country bank with a locked-in exchange rate? Or do you have go to the expense and trouble of doing it manually, being careful not to miss any debt deadlines? Transfers can take 5-7 days to clear.
How you set up banking depends largely on whether you have financial deposits and withdrawals back home. Mortgages? Student loan payments? Pension income? Clarify this issue with the school if this is the case.
Caveats
Security note: before you leave home, be sure to sit down with your home country bank and confirm their procedure for direct deposits from overseas. (ACH/ EFT/ wire transfer/ automatic deposit?)
When you are traveling or return home for the summer, how will you access money? Be careful to keep the minimum amount in your home account to avoid fees.
You probably want to avoid becoming a currency trader and trying to time the market. This article sums up how complicated it can be. Sorcha Coyle is a savvy expat teacher with complex financial needs and her go-to transfer method is Currency Fair.
Never cancel your US bank account. If you stay overseas for years, you may not ever be able to reopen an account. Plus regulations change without warning. Keep your options open.
Keep a US address on file (thanks, dad!) With changing regulation, sometimes non-resident citizens cannot perform financial transactions. One more job for your trusted helper.
Credit and Credit Cards
A decade ago two Moscow teachers swung by Portland to shop for a condo in the Pearl District and we showed them around. However, they were unsuccessful even though money was no problem. They are Canadian citizens who had never established any US credit by opening a credit card or taking out a loan. Consequently, no American bank would make them a loan. I shudder to think how cheap such a unit would have been 10 years ago versus today. The lesson? keep your options open.
Make sure your credit card company knows you won’t be in Kansas anymore. Rick Steves, European travel guru, says a good idea is to have a backup card just in case; I agree. It’s much more difficult to untangle credit card problems from overseas.
An issue overseas teachers must also consider is fees; read Amanda’s advice. Only a few credit cards do not have foreign transaction fees and boy, do those fees add up.
Some countries require a PIN in addition to the chip for credit card use, something not typical in the US. Send away for the PIN before you leave home and memorize the number.
Capitol One and Charles Schwab Bank come highly recommended. They also refund ATM fees, which can also stack up rapidly. These two comparison sites Nerdwallet and Bankrate provide factual comparisons as well.
You might also want to consider travel hacking which means scoring free points through credit card points. Here is a roundup by Jonathan and Kelly, two international school teachers who travel awfully high on the hog for a couple of teachers with toddlers.
Security Issues
“An ounce of prevention is worth a pound of cure. ”
Some countries are hacker heavens and your financial affairs could be at risk. So take elementary precautions and hope for the best.
1. Confirm that your school has reliable, safe internet access for online banking. If the connection in school housing is slow or unreliable, managing your financial life just became almost impossible.
2. Get a VPN (Virtual Private Network.) Why? This blog post sums up the advantages:
Privacy - helps protect your data.
Censorship - partial work around for government blocks.
Public WiFi - don’t even think about using this without a VPN.
Global Content - to watch the Super Bowl from a foreign country that believes football is played in shorts and shin guards.
3. Practice simple safety ATM precautions and wear a money belt under your clothes; this could save you massive grief. Keep at least a small stash of dollars for emergencies. Cash is king.
4. Arrange secondary storage of important papers and information, with duplication (Rule of Three.) Write up a data document with your financial information, keep it updated, and make sure family and your trusted advisor have a copy.
Make copies of your passport, visa, marriage and birth certificates, transcripts, Advanced Health Directive - any piece of paper or number you might need. Save an online copy.
Remember that Murphy’s Law controls the financial universe. If disaster strikes, it’s way too late to organize this data.
Overseas Shopping
“Keeping bread on the table”
You can obtain that bread in more than a few ways, from most local (open air market around the corner) to not local at all (big box Western imports only.) So let’s run down the options.
Farmers’ Markets
Our Russian pickle lady
With any luck there will be a market in your neighborhood. We used to make a regular Saturday visit for the week; not everything was available but it was all fresh. Plus you’ll have a genuine foreign experience, which is why you moved overseas in the first place.
Generally, prices are posted although sometimes you can bargain. Expect to pay more than a local; vendors will have you marked as an expat before you open your mouth.
Cash is king naturally, but these markets are still cheap. In some countries you might need to take sanitary precautions to avoid getting sick. Do some research.
Local Stores
In Austria it was the Julius Meinl chain, the Fred Meyer equivalent but more high-end. We also used other local chains like Billa, Spar, and Merkur. In a big city these stores, much smaller than American supermarkets, are sprinkled generously throughout neighborhoods since at least in the old days, people shopped every day.
This is where we first encountered bottle recycling and learned to bring our own bags. They cater to locals mostly and you’ll need to learn enough language to get by or bring a translator app or dictionary to work out what things are.
Catering to Expats
In some expat-heavy neighborhoods and in the outer districts, you can often find the equivalent of the kind of bulk shopping you were used to back home, like Costco. No bargaining is allowed and prices will be higher than back home; think import duties and shipping.
The Example of Peanut Butter
But if you want exactly the brand of peanut butter you ate in Duluth, this may be your only option. Of course, this is where we gave up on peanut butter and discovered Nutella long before it was available in the States. Another reminder of why you moved here in the first place.
Alternate methods for obtaining peanut butter might be bringing it in your shipment, although it’s hard to imagine who’d have that much of a weight allowance.
Visitors could bring peanut butter over, although airlines have gotten picky about excess weight. Mailing is way too expensive. Or you might just do without or find a local brand or buy a grinder and make your own.
In Vienna, we had access to the PX, in Russia we had Embassy privileges, meaning peanut butter from home, and in Chiang Mai we shopped at Tesco, a British chain. Dubai featured a giant Carrefour big box store where of course there was no alcohol, a 100 yard long row of various olives, an unending variety of box fruit juices, and the store closed for prayer at midday. But isn’t that why you moved overseas?
Online
Things have changed and in some countries/cities Amazon and other delivery services are available. Not all items and all countries make these services available.
In addition the buyer (you) must pay customs fees and import duties and delivery will naturally take longer. Here is a roundup of hints to make the process easier. Overnight delivery? Not likely.
Clothing and Household Goods
School housing will probably come furnished, but you may still want other items. Locally made furniture can often be extremely well-made and reasonable, so don’t be afraid to go shopping.
If you are lucky enough to live in a locale with an IKEA, you’re home free for household furnishings. If you don’t have a car, they even deliver, although the service is spendy.
And remember the teacher garage sale? Departing teachers may not have the shipping allowance to take heavy items to their next school; inquire.
Clothing might be problematic on several fronts. Westerners are frequently a lot bigger than host nationals. Good nutrition and much bigger portions, I guess. A size large for a Thai person would often not even fit a child, and you’ll find yourself in an XXL if you can even find it.
However, tailors were cheap and talented, so you could have a custom wardrobe for very little in SE Asia. Check out the issue on the school grapevine; there may even be a used clothes store at the school. That’s where I bought my Vienna ball gown which I wore only once.
Souvenirs
An Aussie friend calls these TTR or Tacky Tourist Rubbish.
This is the fun part. Some travelers love to bargain and haunt the souk or night market looking for that perfect memorabilia. Some return home only with photographs or memories of meals and experiences.
Whichever kind of traveler you are, be sure to bargain; here’s a roundup from the points-and-miles blog, The Points Guy. Think ahead to the future; do you really want a plastic Mosque alarm clock waking you up 10 years down the road?
So there’s a roundup of your everyday financial life, meaning the present. In the next post we’ll get back to planning for the future, meaning retirement.