Category Archives: College

Relocation & Expat Resources – Education. College and University. Information, Inspiration, How-To Guides and Tools for Trailing Spouses, Accompanying Partners, and Families in Transition and

Creating a Relocation Budget. Defining Moves, the Art of Successful Relocation. Information, Inspiration and Resources for the Global Trailing Spouse, Expat partner, accompanying partner.

8 Money Rules for Creating a Relocation Budget

Creating a Relocation Budget. Defining Moves, the Art of Successful Relocation. Information, Inspiration and Resources for the Global Trailing Spouse, Expat partner, accompanying partner.
Creating A Budget. Striking error in our hearts since 1917..

Relocating plays havoc with your money; the cost of moving, the unpredictable expenses, the loss of local financial history and the soaring banking costs all make creating a relocation budget the greatest work of fiction since Harry Potter.

Despite the uncertainty, financial preparation and clarity is vital to a successful global transition, because if you think cultural orientation is challenging enough, try learning the Mandarin for “Why has my card been declined?”.

So for those of you considering (or already) living overseas, here’s part one of the  commonsense rules to follow for creating a relocation financial plan.

1. Budget no more than 25- 30% of your net household income for housing

– including rent or mortgage, property  tax and insurance and security services. While this may seem low, it gives you greater financial flexibility, so when other unexpected costs crop up, you are well prepared.

It’s especially relevant for homebuyers – while corporate assignment contracts often include a buyout policy, in the current financial climate you may get offered far less than you expect, or even be ineligible for the program. Check the fine print carefully before you buy if you may need assistance when selling or if you move on short notice – but for maximum security the less income you have tied up in property when you lead a nomadic life, the better. Read The Golden Rules of Expat Housing – Buying a Home.

2. Make friends with your tax advisor.

Expatriate taxes are complicated and while you need a qualified tax professional to oversee them, but don’t just relinquish responsibility.

Their priority will be to complete your taxes in a timely and accurate manner, but they have a wealth of information and experience relating to your tax breaks and liabilities for future plans and destinations and can help you avoid making costly mistakes. Higher education and retirement costs continue to rise, and with expat life comes the uncertainty of where these costs will be incurred and what support (if any) is available locally.

Most locations have tax free savings or investment policies for retirements, college funds etc., but you need to get independent expert advice to help you make the right choices. My personal favorite? Grant Thornton, for their knowledgeable, down to earth, easy to understand approach.

3. Plan for the Relocation “Money Roller Coaster”..

Changing location means fluctuating expenses – often much larger than you expect. Healthcare, school and college fees, retirement, cost of living and tax liabilities all vary hugely between locations and having a financial cushion can be the difference between all going well, all going into debt or all going without.

Don’t confuse this with your emergency savings account (for more on that, see part 2);  this fund is purely to manage expat related expenses that you can’t accurately predict. Anything from last minute flights home, the extra security deposit because of your pets or extra tutoring for your children – all are common expenses that most of us will have to cough up at one point or another, so forewarned is forearmed.

Once the dust has settled in your new home, add up how much you spent relocating – it doesn’t need to be accurate to the last penny, just a rough estimate. Divide this figure by the length of the assignment in months, and set up an automated bank transfer to a separate ‘transfer expenses’ account.

If the amount seems terrifying, don’t panic. Even $100 per month over the course of a 2 year assignment will net over $2400, enough to handle most short term expenses. The key to remember is that something is better than nothing, and the earlier you start, the bigger your cushion will be.

For a guide to cost of living expenses, use Xpatulator.com as a starting point but remember to take into account your individual family needs. While local clothing or groceries may be cheap, your preferred brand of  breakfast cereal, school wear or laundry detergent may be far more expensive than the index suggests.

4. Don’t Get Used To Expat Packages.

The days of the longterm expat living in one location for 10 years or more are over – nowadays, the trend is for shorter term assignments or moving the long term employee onto local, local plus or ‘expat lite’ programs. These packages may look seductive on paper, but they are designed to reflect the actual cost of living rather than as a perk.

While your income seems larger in the short term, you are exposing yourself to longer term financial challenges (potential loss of spousal income, international college fees, privatized healthcare and changing pension benefits to name a few), so explore the long term impact of your assignment and budget accordingly before you assume your increased income is disposable.

Read 9 Essential Questions Every Expat Should Ask  and

Don’t Let Your Expat Dream Become a Financial Nightmare.

 

Coming Next: Protecting Your Credit, Life Insurance, The Expat Emergency Fund, Long Term Plan.

The F Bomb – Expat Education Challenge Update

Update – He has just received his PSAT results (yet another test of which we have very little knowledge) and apparently his results were considerably better than his grades predicted. He is now avidly consulting college resources to explore his career options, with the current frontrunner being anesthesiologist. The reason for this? “It’s well paid, and you get to sit down and read magazines”. I can sense a visit to the career counselor coming on, lest he be unleashed on the health service..

We had a particularly interesting moment with the Wiggy One this week. Normally very mellow, he occasionally explodes into a seething mass of hormones, hair, uncoordinated limbs and spectacular examples of poorly thought out accusations.

The latest detonator was the high school ‘Grade Point Average’ system. For the non-US expats amongst us, college entry in the US is based on academic scores over the high school period across the classes. An A requires an above 90% score for the class, and gives you a 4.0 GPA; a B is 80 – 90% and scores a 3.0, and so on. Sadly for all concerned, this level of academic scrutiny is carried out for the next three years, during which they are going through puberty, growth spurts, acne and obsession with all things Xbox, so the potential for disaster is huge.

Needless to say, the grades that prompted the explosion were not A’s. Nor were they B’s. They appear somewhat later in the alphabet, and are usually associated with profanity. Which is exactly the unguarded response that they triggered in the Other Half at the dinner table when we finally learned of their existence.

Parentline, an excellent British parenting resource (which sadly does not have a toll free number for expatriates, but really should have) recommends staying calm in these moments, and maintaining channels of communication with the Tasmanian Devil formerly known as Tom. (They also don’t specifically refer to him by name, but I’m thinking of suggesting it for future advisory publications.) So I took a deep breath, washed it down with a large amount of gin, and reminded him that the longer he took to inform us of these small hiccups in his school transcript, the less able we were to help him resolve the issue, and the fewer choices he would have down the line when he was applying to college. (Excellent Mother Moment, even if I do say so myself).

His response showed the maturity, wisdom and critical thinking skills that can only be gained by an expensive, global, carefully chosen and often privately funded education, which has been our highest priority throughout our expatriate journey. It showed passion, attention to detail and considerable volume. And it took us a little by surprise.

“I don’t even want to go to college – it’s just four more years of work!”

Quite what he felt would happen to those ‘college years’ should he chose not to attend is a mystery. Maybe they give out scholarships for excessive hair growth or ability to sleep for extended periods, without the necessity of attending an institute of Higher Learning? He appears to be under the impression that work and/or college are optional extras only to be attempted as a last resort between editions of Call of Duty, and that living with your parents is a long term life plan.

So I’m off to see the school Career Counselor today. We obviously need to start with the basics. Like ‘Where do  Mummy and Daddy go when they leave for the day?’ and ‘How does money work?’

Wish me luck. I may be some time..