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: http://andrewhallam.com/ 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 www.moneyinfant.com 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.
The Stoic Investor 
I personally have never thought about working overseas. I find your story interesting. I will look forward to future posts on your experiences.
This is a little off topic, but I just watched the movie The Whistleblower last night, and it really opened my eyes to the problems of some US companies and even the UN with their employees working overseas, keep in mind this was around Bosnia.
How do you find relations between US expats and locals? How do you occupy your time off work, similar to when you lived in the States or very different? Hope my questions aren’t too invasive, just curious. Feel free to reply or not 🙂
MSS– Thanks for reading. I’ve never seen The Whistleblower, but I’m sure that the presence of U.S. multinational companies can be a potentially problematic arrangement. The company I work for is a non-U.S. company so I don’t have those issues to contend with. The company was actively seeking U.S. as well as many other nationalities.
Your questions are not invasive at all, I really enjoy everyone who comments. However, if I answer your question now it will ruin the suspense for the next post. So, check back Thursday 😉
Nice article on a subject close to me though I moved to the US and not away. I’m British and never considered the idea that I may live abroad. Then I met the woman who would later become my wife – only problem is she lived 6000 miles away in California – and it came down to one of us should move. So I gave up a good paying job I probably would have retired in, gave up my apartment and packed everything in two suitcases, threw away the rest and jumped on the plane. Now 4 years later I am earning more money than I ever have with another promotion in sight. The financial benefits have been good. California is expensive but not as high as my old home in London, England. Here in CA i hear people complain about the price of gas. They should live in central London for a while!
IRF–Thanks for stopping by. You should consider writing an article on your blog about your experience in moving to Cali. I would find that perspective very interesting. I agree with you 100% on the gas issue. I use to be one who always complained about gas prices. Now that I’ve seen how much higer the prices are for most of the world, I’ve toned down my complaining.
So, how do you like living in the U.S. Do you ever get home sick? I still fight that one from time to time. Have a great day.
Writing an article on my experience here is a good idea. I will look in to that.
I got home sick the first 6 months I was here. Hated it. Nobody liked “my football” or soccer as it is called in the US 🙂 and it was super hot. Now I am more settled down and will probably spend the rest of my life here. Now I have not been back to the UK yet. I guess when I do the home sickness will come back.
IRF– The first 3-4 months for me was the honeymoon phase. After that and normal life stuff set in I started dealing with home sickness and thoughts of returning. I dealt with that towards the end of last year and now I’m getting to that comfort phase which is nice.
Yes, “your” football is crazy popular over here. I didn’t realise how populare it was. Cricket is much more popular than I realised as well.
Nice perspective here.
Although I’m not looking to work abroad, I am very open minded to moving abroad for an international early retirement. I’ve considered Thailand, Ecuador, the Philippines among other countries as a good fit where my dividends would go much further. The expensive plane tickets to/from said countries to visit family is one of the main detractors from the plan so far. I think fitting in, becoming accustomed to local societies, immersing oneself in local cultures and practices would be really wonderful and a great way to walk the road less traveled.
Good stuff!
Hey DM, glad you stopped by. I’ve thought of the retirement overseas as an option as well. I’ve considered Thailand and a few other SE Asia countries just like you. You could always go the Ecuador, Panama, or Belize route and be much closer to home for shorter flights. One thing about it DM, as long as you continue the path you’re on and achieve FI you will have several options.
Cheers
Thanks for the mention! One quick question regarding the FIT credit. Is it applicable to ALL income or just that earned within the foreign country? I was under the impression that it was only applicable for income earned overseas. So, for example if you do consulting work back in the US via Skype and are paid via Paypal that income wouldn’t qualify? I should really check with a tax guy, although FIT doesn’t apply to me for 2011 since we were only out of the country for 6 months.
Thanks for stopping by MI. I think you’re right concerning the FIT and Foreign Tax Credit. My understanding is to qualify for it the income has to come from employment you did outside the U.S. I don’t think the consulting work would qualify. However, since every situation is different I would certainly talk to your tax advisor. I use a company who specifically deals with expat returns. It makes life much easier. Have a great day!
This is something that I’ve dreamt of doing for a long time and it would be a great experience. I would love to work for an international organisation which aims to improve the standard of living for needy countries and people.
Thanks for stopping by! I think if it something you want to do you should certainly look into it. I believe that fear and comfort usually keep us from doing the things we really want to do. Had I not been “pushed” to make radical changes in my life I’m not sure I would have ever taken the chance, but when you feel you have nothing to lose what is there to hold you back?
Wish you the best.
That sounds like an absolutely amazing experience 🙂 I would personally prefer to ex-pat in Europe than in the Middle East due to the…different culture around women there. But I definitely agree that it’s a once-in-a-lifetime experience and am really enjoying your story!
Thank you Leigh. I can understand your preference for Europe especially being a woman. I’m sure that my experience here as a man has been very different than it would be if I were a woman. However, there are several women here from Europe, U.S. Canada as well as other regions who have adapted and enjoyed the experience as well.
It does take a little adjusting though regardless of your gender.
Have a great weekend!
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