By Ward C. Naughton and Doug Johnson
So you landed that exciting assignment abroad! Most transfers take place between May and September and according to U.S. News & World Report, as many as 400,000 employees relocate internationally each year ("Taking a Foreign Flier," March 12, 2006). That means thousands of Americans like you are contemplating or undergoing a move to a city across the globe.
New opportunities await, but they come at the price of stress on uprooted family members and the challenges of moving house. From finding schools for the kids to locating a new doctor or dentist, to the daily details like grocery shopping with a foreign currency, many aspects of an international move compound the major tasks of making living and moving arrangements.
The one thing you won't have to worry about is getting paid, right? Well, it's a little more complicated than you might think. For example, if your employer doesn't make the necessary frequent adjustment, your U.S. salary could be transferred into foreign currency and therefore your day-to-day spending will be subject to changes in exchange rates. Important personal finance considerations like this often get overlooked in the rush of preparation for an international assignment.
Fortunately for you, your company-sponsored assignment means you have additional resources at your disposal to help ensure the details of life abroad run smoothly. Here are some valuable tips for people who are transferring to offices overseas this summer, or at any time of year:
1. Consider your human resources team as an advocate, not just the authority. It's tempting to rely on HR to make your important decisions for you -- after all, they usually know what's best. But providing HR personnel with your priorities will help ensure that they work with you to achieve what's best for you (and your family).
First and foremost, take steps to ensure the stability of your income abroad. Research cost-of-living information for your home base as well as details about currency rates for the location of your new assignment. Ask your HR department to ensure that information like this is taken into account as they draw up your contract and pay package. Ask your employer whether your pay will be set up in U.S. dollars or the local currency, or some combination.
In many cases, there are advantages to using a currency expert to lock in a set currency rate to protect your paycheck from currency swings. It's called a Regular Payments Abroad (RPA) program, and lets you protect your paycheck from swings in the exchange rate -- at no transactional fee for the service.
2. Take the time to forge financial relationships now, that you'll need later. Ask HR if your company already has an international banking relationship set up for corporate purposes, and whether you can get a personal account set up at the same institution.
Ask for help finding a tax specialist, as well. Come April, you'll be glad that you don't have to figure out the rules and track down the forms required to pay U.S. taxes while you're abroad.
3. Calculate daily expenses before you go, so that you can get a sense of what you'll need to spend in your new country of residence.
Make your weekly grocery shopping list and go to online sites to calculate your food expenses. Do the same for transportation costs like gasoline and other essentials. Do you plan to join a gym? Are there medications that your spouse requires? Does your child plan to continue her violin lessons?
Measure your estimates against the cost-of-living allowance from your company and evaluate the discrepancies. Your company may not be able to adjust your allowance, but you'll be spared any surprises and will be able to adjust your budget accordingly.
Living and working abroad can be exciting and rewarding. If you take a few steps toward financial peace of mind before you go, you and your family can focus on the fun and enriching aspects of this once-in-lifetime experience.
Ward Naughton, President of HiFX, a foreign exchange consultancy that assists with global relocations. Doug Johnson is Private Client Manager of HiFX, a foreign exchange consultancy that assists with global relocations. Last year, HiFX assisted more than 30,000 individuals with their international transactions.