Changing Your Life By Working Abroad: The Financial Benefits

by stoicinvestor

Perhaps your life is not in need of change.  Perhaps you have built a comfortable life just were you are.  This was my life three years ago before it fell apart.  I was happily married working a job I enjoyed and finishing my degree. 

I’ll save you the details; suffice it to say I ended up divorced, bankrupt, and trying to figure out how to rebuild my life out of the rubble of  happier times.  This is how my journey abroad began.  Your story may not have such disheartening beginnings; maybe you’re just ready for a change, something that stirs your soul.  Regardless of your circumstances, working as an expat overseas has many benefits and over the next couple of posts I want to share these benefits with you.  Today I will examine the financial benefits of living and working abroad and follow-up with a future post discussing the other non-financial benefits of life overseas.

I. Income

This usually ranks high on the list of reasons why someone would consider leaving their home country and taking up residence in a foreign land.  Although I list it first and it is significant I don’t think it is the most important factor when considering a compensation package and I will list why when I cover the next couple of benefits.   Companies understand that to lure employees from their homeland that they will have to be compensated generously.  This will vary depending on your profession, but you can expect to earn significantly more than you would earn doing the same job back in the U.S.  Here is an example of a fellow expat who enjoys much more popularity than I do:   FYI, his books is not bad and his blog has some really good information if you have ever thought of retirement overseas.   Also check out for even more perspective on taking the plunge.

II. Tax Benefits

As I mentioned earlier the higher income is nice, but the tax benefits are even better.  Under the Foreign Earned Income Exclusion a U.S citizen working abroad can exclude up to 95,100 in 2012 for federal tax purposes.  This amount is adjusted yearly to reflect changes in the rate of inflation.  As anyone working in the U.S. knows, FIT takes a big bite out of your earnings and being able to keep this money for yourself is highly appealing.  There are requirements to receive this benefit, the biggest being the need to visit the U.S. no longer than 35 days out of 365.   Basically you are not allowed to be in the U.S. longer than 35 days in a year if you plan on claiming the Foreign Earned Income Exclusion, if you do you will be required to pay all FIT at normal income tax rates.  *Disclaimer: I am not a tax advisor.  If you are considering working abroad consult a tax professional to discuss any tax issues*

III. Low Cost of Living

A person can live as lavishly or frugally as they want regardless of where they are.  It is a testament to the capitalist system that if you have a want for luxurious items or experiences and the means to acquire them someone will be there to fulfill that desire.  My path to frugality happened the same time I was earning the highest income I ever had and living overseas afforded me an opportunity to save even more money by reducing my living expenses.  What I have learned is this: it’s not what you earn, but what you keep that matters while you are building wealth.  Since taxes and fixed living expenses eat up a large percentage of earnings you can see why I think that the tax benefits and low-cost of living are better than the higher income.  For example, my rent and utilities cost me 170.00 a month.  That is rent, electricity, water, phone, and internet.  Hell, my electric bill was more than that most months when I was living back in the U.S.!  Obviously this will be different depending on what region of the world you decide to work in and for what company, but don’t underestimate the benefits of reduced living expenses.  Combined with keeping my discretionary spending in check, the low-cost of living is what allows me to achieve high savings rates.

IV. Retirement

With the defined benefit (pension) plan becoming a thing of the past for corporate America I’m grateful to have both the defined benefit and the defined contribution (401k) retirement plans where I work.  The company offers a match for the 401k and I can become vested in the pension after five years of service.  Again, please remember that what I’m describing is my experience.  Each company has its own compensation plan and you may find less or more attractive options available.

V. Inflation

The final financial benefit of life abroad is the lower impact of inflation on purchasing power.  I’ve yet to see my rent or utility costs go up.  food prices are a little more susceptible to increases, but it depends on what you buy.  For example beef products are imported and are significantly more expensive.  Seafood, on the other hand, is abundant here and cheaper.  Although I have not purchased a vehicle here, gas is ridiculously cheap and we all know how increased fuel prices impact every sector of the economy and we end up feeling it by the higher cost of everything from gas to food.  Keep in mind that I’m living in the Middle East and I assume that inflation would be more of a factor in say a European country.

There you have it, a quick synopsis of the financial benefits of living abroad.  These benefits have certainly contributed to my current fiscal health and allowed me to pay off just under 5ok in debt last year.  Deciding to leave home is not without its challenges, but there are some nice rewards for accepting those challenges and I will discuss those in more detail in my next post when I look at the non-financial benefits of life as an expat.

Have you ever considered working overseas?  Have your own expat story?  Leave me a comment and let me know, I’d love to hear about your experience.

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