An Expat’s Guide to Moving Abroad
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KEY POINTS
Your dream country exists. Now is the time to make it a reality.
Research and compare your options before diving in headfirst
You need to consider the political, economical, geographical, medical, criminal, and cultural aspects of your target destination and plan accordingly
What is your dream retirement / relocation destination?
I immediately start picturing a sun-soaked Caribbean Island or a European country steeped in history and culture. Your dreams may take you somewhere completely different, but they will be full of the same excitement and anticipation.
Now, let’s ask a tougher question.
Is your destination attainable, sustainable, and multi-generational?
You may dream of living in Paris, but your budget may dictate otherwise. Your hopes of living on an island may vanish if the health care system is inadequate. And be careful not to choose an overly remote location as such may limit visits with family and friends.
Reality can be tough.
The good news is that many countries have a reasonable cost of living while providing access to excellent and affordable healthcare, a diverse culture, rich history, balanced lifestyle, and so much more.
We will focus on some of the key factors you should consider before selling all your possessions, moving halfway around the world, and declaring yourself an expat.
Expat Elements
Grab your short list of destinations and let’s work our way through each element.
Each country on your list will have its own unique immigration policies. Such may or may not provide a path to citizenship, and all the benefits that come with it. The following are some of the common methods for obtaining citizenship.
Marriage
Citizenship can often be obtained when a foreigner marries a citizen of the destination country. The granting of such citizenship may be contingent on specified time periods and other obligations. The government may also impose strict oversight to verify the validity of such marriage.
Warning – check the destination country’s definition of marriage as it pertains to citizenship. Same-sex marriages do not qualify in many countries. However, these restrictions appear to be slowly easing as many countries embrace a more inclusive approach.
Blood Relative
A direct blood relation to a parent or grandparent that has existing citizenship in the destination country may provide a pathway to citizenship. Some countries may even extend such to your spouse and children.
Birth
Some countries will grant citizenship to a baby born within its borders regardless of the parents’ citizenship. The baby’s citizenship may have specific requirements and may not extend to the birth parents.
Employment and time
Foreigners often face strict rules pertaining to living and working in a foreign country. Your prospective employer may be required to prove to the respective government office that there are no local citizens capable or willing to take the job you are applying for.
Your chances of securing such employment increase significantly if you can fill a specific need within the population. The following may provide the differentiating factor you require, post-secondary degree, professional designation, accredited trade certification, or specific work experience.
My wife and I went through this process when we moved to Bermuda and worked there for several years. The government issued work permits with time limits that required renewal at set periods.
The road is not always smooth and without risk.
We experienced a change in government while in Bermuda. Such created a high level of uncertainty regarding the status of existing work permits and how the process may change going forward. The change did not end up impacting our specific situation, but it illustrates the potential for unexpected change to occur rapidly and beyond your control.
Many countries will offer a path to citizenship or permanent residency after a specified timeframe. For example, in Bermuda you can become a permanent resident after 20 years.
Investment
Several countries will offer citizenship to you and your immediate family in exchange for meeting specific investment requirements. The investment requirements will vary by country and generally range from USD $100,000 to over USD $1,000,000. Such investment may include buying or starting a business, job creation, or investing in real property or securities.
This option can be a valuable component of a family’s strategic plan. Access to another country can be critical for individuals and families in countries facing any form of instability (political, economic, human rights).
As an example, there is at least one EU member country that offers citizenship in this manner. Their program is very expense. However, the value of an EU passport provides access to several countries and many other benefits that may justify the price tag.
Tax System
A country’s tax system will have a dramatic impact on the taxes you pay related to employment income, capital gains, interest, dividends, foreign currency gains, duty on imported goods (e.g., food, clothing, automobile, gasoline, furniture).
We will highlight the following tax systems,
Progressive tax system
Tax haven
A progressive tax system imposes higher tax rates on individuals and/or households as their incomes rise. Examples of such countries include U.S., U.K., China, Japan, Germany, France, Canada, and Australia.
Tax havens have very low overall tax rates. They are often referred to as tax-free; however, such is not completely accurate. For example, employment income may be tax exempt, but taxes may take the form of payroll tax, customs duties, land tax, license fees, and stamp duty. Examples of such countries include Bermuda, the Cayman Islands, British Virgin Islands, Luxembourg, Jersey, and Malta.
Income
You may have the opportunity to earn a combination of active and passive income.
Active income may include salary, hourly earnings, commission, tips, fees, and other similar sources. As noted above, you may be required to meet specific requirements to qualify for a work permit, residency, or citizenship.
Passive income requires minimal work to generate and maintain. Such may be derived from a government pension, investment portfolio, book royalties, blog, and the list goes on.
As noted under the Tax System section above, your sources of income could be taxed very differently depending on the country you choose.
Cost of Living
Cost of living refers to the cost of maintaining a certain standard of living. Such will vary by country and can be impacted by inflation, taxation (see above), borrowing costs / interest rates, housing prices, rental rates, scarcity of imports, and more.
Before we get to the table below, we caution you that all cost-of-living models are subject to significant assumptions that could impact the analysis and your conclusions. For instance, the basket of goods used for comparative purposes may not be representative. Or the data could represent the cost of a very expensive city as opposed to an average for the country.
The model utilized the United States as the reference country; therefore, its Cost Index and Purchasing Power Index equal 100. The monthly income is calculated from the gross national income per capita (i.e., it is not salary or wages).
The table consists of countries that utilize the progressive tax system as well as those that are considered tax havens. It illustrates the relationship between prices and relative income.
For example, Bermuda’s cost index is 57.6% higher than the United States. However, Bermuda’s average monthly income is 72.7% higher. When you consider both variables, Bermuda has 9.6% more purchasing power than the United States as reflected in the Purchasing Power Index column.
The table above is only a starting point. It provides valuable guidance, but it is too general when you are contemplating moving across the globe. You need to refine the data. Take the concepts and consider your income potential and what your cost of living will look like. Afterall, your budget will be as unique as you are. You may choose to buy a home instead of renting, own a scooter and not a car, or buy a yacht instead of canoe.
We encourage you to research the cost of living of your target country. Search the internet. Network with people that live there or have visited. Best of all, visit the country so that you can research so much more than the cost of living.
Currency
Expats working in a foreign country may be compensated in the country’s local currency instead of the currency of their home country.
Such poses multiple risks. The examples below will assume pesos as the local currency and United States dollars (“USD”) as the home currency.
First, let’s look at expats that have the intention of moving back to their country of origin at some point in the future. There could be a substantial wealth erosion if the expat is paid in pesos and the peso weakens against the USD. Alternatively, there could be relative gains if the peso strengthened against the USD.
Next, let’s look at expats that have no intention of moving back to their country of origin. Conceptually, a weakening of the peso will not have an impact on earnings. However, the weakening of the peso could have a detrimental impact on an investment portfolio that is heavily weighted in peso denominated securities.
Be aware that currency fluctuations can also have a major impact on your employer. They may suffer dire economic consequences during periods of extreme exchange rate fluctuations.
The above only considers the financial impact of changes in exchange rates. The foreign currency exchange fees charged by your bank can often exceeds 4%. Company’s like Wise can eliminate your bank fees and help you keep more of what your earn.
Insurance
You need to prioritize obtaining insurance as soon as you relocate. It is not something you want to defer until you feel more settled.
I can relate to this from personal experience. We moved to Bermuda, and we lost the diamond to my wife’s wedding ring within the first 3 months. Ironically, at the time of the loss, we were in the process of obtaining the insurance that would have covered such a loss. The cost of our poor financial planning was buying a new diamond when the budget was tight and tensions were high. Ugh.
At a minimum, you will want to immediately secure health insurance coverage (e.g., doctor care, hospital visits, prescription drugs, medical devices, etc.). Such is often provided by the government, to some degree. In addition, you should consider securing additional coverage for vision, dental, paramedical (chiropractic, physiotherapy, massage therapy, naturopaths, etc.).
You will also want to research and consider obtaining other types of insurance including home / renters insurance, life insurance, critical illness insurance, and disability insurance.
Budget
If you made it this far, you probably feel the urge to create a budget.
Everyone should have some form of budget to ensure they stay on track towards achieving their short-term and long-term goals.
A budget becomes critically important to an expat when moving abroad.
You may begin to feel overwhelmed and overly stressed due to your changing financial situation. You may need to make a series of upfront payments related to housing, utilities, insurance, phones, and more. Your accommodations may come unfurnished and require substantial outlays to fit your lifestyle. A job or simple geography may dictate the need for an automobile.
A budget suited to your needs and personality can reduce your stress and help you with the transition. We highlight 6 different budgeting approaches in our post How to Make a Budget That Works for You that will guide you through the process.
There are many legal issues to consider when moving abroad. We will highlight two: wills and religion.
Wills
A legally binding will is an essential part of your estate planning process.
You will need two wills if you plan to have assets in both countries. Your current will should be up to date and legally binding prior to your departure date. Such is often referred to as an attested will.
Upon arriving in the new jurisdiction, you should obtain local legal advice to draft a new will and ensure it is legally binding and compliant with local laws and regulations. Legal counsel will explain which country takes precedence, how taxes will be imposed, and how the estate will transition to the beneficiaries.
Next, religion.
Religion
Religion plays an integral role in many societies and can be reflected, to varying degrees, in a country’s respective laws and regulations. For example, it may be unlawful for unmarried couples to cohabitate. It may also be a criminal act for such a couple to give birth to a child. Relationships may also be found to be criminal based on homosexuality or transgender identification. As noted above, many countries are becoming more inclusive, but you will want to understand your destination country’s laws governing such situations.
We already stressed the need for medical insurance. This section deals with,
Access to Medical Care
You need to understand the standard of medical care offered by the destination country and how you can access such care. There are potential misconceptions that only first world / industrialized countries provide adequate medical care. Such is not a universal reality. We hope the following table obtained from CEOWorld will provide a more realistic perspective.
We chose selected countries and provided their worldwide rankings.
It may be surprising to see the United States and Canada ranked relatively lower than their reputation may otherwise suggest.
Similarly, it is noteworthy that Panama, Costa Rica, Colombia, Mexico, and Portugal are ranked relatively high. These are highly sought after retirement destinations due to their cost, climate, and culture. You can now add access to medical care to the list of reasons to consider these destinations.
Be prepared to experience some degree of culture shock when you move to a new country. This is normal and should be expected.
As much as it may be normal, it can be stressful and have a noticeable impact on your mental health, physicality, and emotions. You may become lonely, depressed, and uncertain of your decision and what you should do next.
Afterall, you may be adjusting to a new language, government, economy, currency, healthcare system, climate, history, geography, transit system, road system, customs, traditions, and so much more.
Again, we recommend visiting your destination country, prior to making a permanent move. No amount of research, chat boards, or first-hand accounts from friends and family can truly prepare you for the change in culture.
On a positive note, the anxiety associated with the transition usually subsides in due course.
Personally, my wife and I processed our transition to Bermuda slightly differently. We shared the experiences together, but their impact on us as individuals was very different.
Similarly, we spent several weeks on vacation in Europe without speaking English to any more than a few individuals (this was before streaming on your phone was mainstream). It was a welcome relief when we checked into a hotel with cable (we never watched so much BBC News, or since).
These are small anecdotes, but they illustrate just how impactful even a small change in culture over a limited time can have, and how such may not be processed the same way for everyone in your family.
Nothing can be more important than the health and safety of you and your family. We discussed access to healthcare above. We will now address safety.
There are varying degrees of safety concerns. There is the national crime element that will often vary by province, state, city, and neighborhood. There is also an international crime element that may include terrorism, risk of war, and conflict zones.
Crime rates are influenced by a myriad of interrelated variables including, but not limited to politics, political will, inequality, protection of human rights, police effectiveness, gangs, economic prosperity, unemployment, age, education, and more.
The following table was derived from WorldPopulationReview.com and includes select countries.
As noted above, moving to a new country can create a prolonged period of stress that can impact your mental and physical health. Therefore, if you are moving with a job, as opposed to retiring abroad, we strongly encourage you to strive for a heathy work / life balance as excessive work demands can exacerbate the problem.
You need to plan beyond the initial transition period.
Ask yourself what you envision your life looking like 6 months after moving and thereafter. Here are a sample of factors to consider.
Geographical
Geography can impact your lifestyle. For example, islands may provide abundant outdoor activities; however, they are lacking in opportunities to explore large expanses of land like a country in Central Europe.
Relational
Your ability to connect with the local population will directly impact your lifestyle. Consider if there will be a language barrier that could impede your ability to develop relationships. Also, does the country offer activities you are interested in and capable of participating in.
Financial
Your financial situation will also dictate what activities you will be able to participate in. The financial section above is critical to ensure you are well prepared to live in the country with the right expectations. We cannot stress how important it is to do your research and create a realistic budget before you decide to move.
Climate is likely one of the first things we think of when moving to a new country.
The Caribbean is hot and humid all year round. Canada has all four seasons, but the winters are brutal and much too long. The United States has a bit of everything depending on where you live. The United Kingdom is mild, but it tends to rain a lot.
These perceptions may not be 100% reality, but they highlight the importance and impact of climate.
We loved the hot humid weather while living in Bermuda. However, the humidity created perpetually damp bed sheets and our shoes would grow mold. I loved having basically two seasons; however, my wife missed the four seasons we grew up with.
The right climate can be a great complement to your lifestyle. Sunny weather supports lunch on a patio, boating, fishing, hiking, biking, bird watching, sightseeing, and so much more. Snowy weather is great for skiing, snowmobiling, skating, and ice fishing.
We highlighted several countries above with varying economies, access to healthcare, and crime rates. We are confident there is a country tailored made for your unique desires.
Bottom Line
With great change comes great opportunity.
Your move abroad is an exciting chance to start a new chapter. Take the time to do your research and make sure you land on your feet ready for the adventure of a lifetime.
We encourage you continue your research with the help of the following links to selected government websites:
The following books may also be of interest:
Elisa provides practical advice in a relatable and humorous manner. Sabbaticals can be daunting for any family. This book covers a lot of ground including learning a language, schooling, housing, finances, and more.
Barry Golson provides a roadmap to retiring abroad. He gives an in-depth overview of 10 specific countries and covers critical topics including finances, healthcare, real estate, taxes, and immigration.
U.S. citizens are taxed based on citizenship as opposed to country of residence. This book is topical and easy to read. It highlights several tax risks and proposes solutions to minimize taxes.
Jessica spent 15 years living, working, and travelling abroad. Her book provides a real world perspective on key topics including community, long-term visas, language, finances, taxes, and so much more.
