Relocating to another country can be a tricky affair, especially if you don't do these 5 things with your finances.
If you’re moving abroad, the first few months can be a headache - you’ll have to learn the layout of a new city, absorb new customs, and perhaps settle in the family. The last thing you want is to also be worried about your finances. Here are the key steps to avoiding financial complications when relocating to another country.
1. Open an International Bank Account to Facilitate Easy Transfers
Transferring money between local and overseas accounts can be slow, and expensive. One particular problem is the exchange rate. Most local bank accounts can hold only one currency, so money sent to and from home has to be immediately converted. If the exchange rate is unfavourable, this can result in hundreds or even thousands of dollars in losses.
The best way around this is to open an international bank account, such as a Global Account with Citibank International Personal Bank (IPB) Singapore. This is a multi-currency account, which means you can hold different currencies at the same time.
More importantly, you’ll bypass any fees or paperwork in transferring your funds. Whether you’re receiving the cash at home or abroad, it all goes into the same bank account, which you can access from anywhere.
Citibank IPB Singapore serves a wide range of global clients, many of whom are expatriates who regularly performs global fund transfers with the assistance of the bank’s specialists. As such, you won’t have to spend time explaining why you need to transfer funds abroad whenever you do so. You can also easily transfer online for free.
2. Ensure Your Insurance Policies are Updated
Never assume that your various insurance policies, from life insurance to Personal Accident policies, apply at all times and places. Verify that these policies continue to provide coverage, even after you relocate to another country.
It may be time to consider international insurance, as the premiums or riders for extending your existing policies may not be worth it. Engage an independent financial adviser, to compare policies from multiple insurers to find the best deal.
If you’ll be travelling to and from your home country quite often (e.g. at least five or six times a year), then consider getting annual travel insurance. You can pay a one-time premium, rather than pay for a policy on each trip. This can result in significant cost savings, over the span of a few years.
3. Consult a Tax Advisor on What to Expect
You should have a clear idea on what taxes you’ll have to pay, while residing abroad. Besides income taxes, don’t forget to consider capital gains taxes (e.g. a tax when you make a profit reselling your stocks), or mortgage taxes (a tax applied when you take a mortgage from the bank, to buy property).
Remember that certain countries may have taxes which don’t exist in other countries, and that the rules may apply differently to foreigners. For example, Singapore doesn’t have capital gains taxes, whereas the United States does. Also, US citizens buying their first property in Singapore are exempt from the Additional Buyers Stamp Duty (ABSD), whereas most other foreigners are not.
If the tax laws seem too complicated, consult a tax advisor in the relevant country.
Do note that, in some countries, tax laws are complex enough that you may need to hire accountancy services. Ask the locals whether this is necessary; they’ll have a good sense of the complexities involved.
4. Set Aside Six Months’ Worth of Expenses
Things can get unpredictable, especially during the first year of your relocation. Set aside at least six months’ worth of your expenses, to deal with any unforeseen emergencies. Remember, the more well-prepared you are, the less you’ll need to depend on high-interest loans.
You should also consider that you have no credit score yet, as you haven’t taken loans with the banks abroad. In Singapore, for example, the Credit Bureau of Singapore (CBS) has no cross-border data exchange - your credit score in Singapore does not apply while abroad, and vice versa.
This can make it difficult to take big loans initially, so your savings must be sizeable enough to sustain you.
5. Decide Where to Hold Your Investments
If you’re planning to buy assets such as stocks and bonds, you need to consider which is the best country to hold these investments. A wide range of factors, from taxation to political stability, has to be considered here.
Don’t assume that you should simply put your assets in the lowest tax environment. Some governments can be volatile, and are known to pass sudden legislation that may restrict you from selling assets, or impose sharp tax increases for foreigners.
In some countries, the insurance cost for certain assets - such as physical gold - may be too high to justify keeping it there.
A good place to start looking at would be Singapore. Speak to a qualified wealth manager from a reputed bank such as Citibank IPB Singapore, on the safest and most cost-effective way to hold your various assets. You should have a clear plan on this, before opening any accounts or buying any assets abroad.