Thinking of moving abroad? Before you start packing your bags let's take a look at what you need to know before you go. Taking a vacation to a exotic place is one thing but living there has a completely different set of considerations. Take a look at the list below to help build an understanding of how to pick a foreign country. Keep in mind that the world is a dynamic place and you can always move if changing conditions warrant the move. Technology changes now allow us to become citizens of the world and moving around has only gotten easier.
- Immigration – Some countries welcome expats with easy immigration policies. Some don't. Before deciding to move to the country you've been dreaming about, make sure you are allowed and welcomed. What is the immigration policy of the country you plan to move to? Do you need a visa to visit and how long can you stay? How difficult is obtaining residency and what is the cost, if any? Can you become a citizen as well? What are the advantages of residency or citizenship in the country you plan to move to? Can you stay without either becoming a permanent resident or citizen? Are you going to feel welcomed by the local community or seen as an intruder?
- Risk – Life is full of various risks. Every decision has risk. To do nothing has risk. When moving abroad there are various types of risk to consider. In my presentations I list them as political, social, economic, environmental and personal risk. Typically we are moving abroad to lower our risk. I live in the Florida Keys. Environmental risk to me is hurricane season. It also creates economic risk since the cost of insurance for our home is now nearly $15,000 per year. Environmental risk includes earthquakes, tsunamis, hurricanes, oil spills, droughts and tornados to name a few. Political risk examples might be Nicaragua with the election of Dan Ortega of the Sandinista party or Ecuador with a left leaning government and shaky political stability. Economic risk can vary from being in a country experiencing high inflation to a country where poverty is extreme and results in crime against expats. Countries have experienced economic collapse in the past like the Soviet Union and Argentina as examples. Presently Greece, Italy, Ireland, Hungary, Portugal and Spain risk economic collapse. We are seeing economic collapse in the US as well with cities and entire states declaring bankruptcy. An example of social risk would be Mexico's drug wars. Other examples exist all over the middle east where social uprisings topple governments and completely change the playing field. Look at the various forms of risk as they relate to any country you might be considering for relocation.
- Eating, Drinking and Going Out – This seems like a no brainer and not important but let me explain why it is on the list. Dietary options, habits, requirements or aversions have strong influence on your happiness. If you can't live without your daily fix of Starbucks or Krispy Kreme Donuts perhaps you need to check availability before you go. Seriously however if you are vegan, vegetarian, gluten free, kosher, etc you might be limited to your choices. Do you have a health condition that warrants no fried foods? If you love to cook and want access to things like Vietnamese spring roll wrappers, toasted sesame oil or truffles, you might have a tough time in some countries. If you can't live without Sam Adams beer or Patron Tequila, be prepared to tote a suitcase full with you when you go. Another issue is availability of public places you would eat at. I've been to some countries where I had a hard time finding a bathroom I wanted to use let alone a restaurant I would want to eat at. What is the hygiene like or did they wash the lettuce with water that will make you sick? Be sure what you want is readily available and affordable as well.
- Social Habits and Customs – Will you be upset when at midnight on New Years a bunch of Ya Ya's point handguns in the air and shoot them? How about music into the wee hours of the morning? My good friend Margaret Summerfield of Pathfinder International ended up living next door to a unlicensed dance club in Panama City that goes until all hours of the night. Are you a type A with hard to change habits? Are you frustrated by slow response? If so, you might want to stay away from many Caribbean island nations and much of Latin America. But learning to relax might add years to your life!
- Form of Government, Personal Freedoms, Stability – This one goes back to risk and stability but also to the amount of freedom and rights you have in a foreign country. Most people don't put much emphasis on this one but living in places but I remember being in the Mariscal area of Quito Ecuador on a Friday evening when the area filled with military and police. Their presence was to protect foreigners but all it made me want to do was go back to my hotel. A recent trip across the border in Mexico had a similar effect. Cuba limits freedom as does Venezuela. I will admit I felt threatened by the presence of armed military while in Caracas. Is democracy alive and well where you are heading or is it teetering on the brink of change? Through elections or coups, countries do change their political leanings sometimes for the good and sometimes for the bad.
- Cost of Living, Currency and Banking – Most of us are moving to a foreign country to take advantage of a lower cost of living. An important part of your long term analysis should include a look at the currency your income, pension or savings is in and the currency you will be using abroad. Some countries use the same currency, most of Europe is on the Euro and some Latin American countries are on the dollar. It is important to watch the value of the currency you are holding your savings in, for example if the dollar continues to lose value as we continue to print more dollars, our buying power in other countries diminishes.
Currency fluctuations can create serious problems for an expat abroad. If the currency you savings is in should lose exchange rate value against the currency you've moved to, you could suffer a considerable economic loss, in effect losing value of your savings. I was in Mexico back in the 1980's when the Mexican Peso lost nearly half its value in an overnight devaluation. The change was great for me since I had dollars but bad for Mexicans who now had to pay nearly twice the previous price to purchase goods from or travel abroad. Keep this in mind when deciding where to keep your money and in what currency.
How is the inflation in the country you are considering. Is rapid inflation causing large price increases in products you use daily? Fixed income earners need to be wary of high inflation and the effect it has on buying power. While the US had an inflation rate of 3% in 2011, Vietnam's inflation rate was over 18%. If you'd moved to Vietnam, your purchasing power was reduced considerably. Typically fast growing economies experience higher inflation. Fixed income residents should be aware of the effect inflation can have on purchasing power. Property taxes and other indirect taxes need also be considered. Is there tax on income received from outside the country? What is the tax climate if you are working while abroad or own a business in a foreign country.
Banking is another consideration. With the passage of the Foreign Bank Account Reporting Act (FBAR) and the Foreign Account Tax Compliance Act (FATCA) it may be harder to open a bank account in a foreign country for Americans. Many foreign banks are now faced with cumbersome reporting requirements on US depositors. Fines and penalties are being levied on financial institutions found to be none compliant, not just at the depositor. Be sure you can have easy access to your money abroad and know the reporting requirements of foreign owned assets. Also be aware of the risk of exchange rate fluctuations
- Housing and Real Estate – Of course it's important to look at the housing market in the country you are considering, both the cost of homes, rental rates and vacancies. Real estate prices are cyclical and rental yields depend on occupancy. A good site for determining global pricing is www.globalpropertyguide.com. Buy low and sell high but don't always trust what you see happening in a market. You don't want to buy into a saturated market when prices are high or a distressed market unless paying distressed prices. Verify the rental market price and activity using tools like Vacation Rental By Owner www.VRBO.com to see rental rates and occupancy. When buying, look at changes in price, inventory, days on the market and sales to judge the current market conditions. Is demand growing in the area, stable or shrinking? Lastly check for a clear title, check the survey and insure any permits were in order on the property. Consult an attorney and consider title insurance as well. If you plan to rent, look for both good income yields (after taxes and expenses) and appreciation.
- Education – I personally like college towns, there's cultural things to do and a level of energy not found elsewhere. What is the educational outlook in the country and area you are considering? Is education affordable and accessible? Are classes available for you as well and in what language? Education levels will influence your quality of life abroad. If the majority of residents around you are poorly educated, expect more crime. Education and poverty are inversely related and poverty and crime are directly correlated. Crime undermines growth, impedes human welfare and social development. Literacy levels and life skills increase with education and are directly correlated with lower levels of poverty and crime. Choose an area where crime will not be a burden to your health and welfare. Haiti is inexpensive but might not be the first choice for would be expats.
- Health Risks, Health Care Quality and Availability – What is the healthcare situation where you are looking? How is the cost, availability and accessibility of services. How far away from needed services are you willing to locate. The World Health Organization's ranking of the world's health systems was last produced in 2000, and the WHO no longer produces such a ranking table, because of the complexity of the task. Figures at that time ranked France as number 1, Costa Rica at 36, The US at 37, Mexico at 61, Nicaragua at 71, Panama at 95 and Ecuador at 111. Are there infectious diseases to be concerned about? A good source of information is the Center for Disease Control CDC.
- Communications - Cell Phones and Internet Access – Move around the world and stay connected, hopefully. There are many places where high speed internet is hard to find and even then offers frequent downtime. If you need daily access to reliable internet be sure it is available before your move. We once thought we'd be able to run our recruiting firm from a third world country only to discover that challenges in both internet and dial tone proved the task impossible. Fortunately communications improvements are happening worldwide but there are still quite a few places leaving less than desirable performance. Technology has made the world smaller. You can now operate from nearly anywhere in the world as though you were in Kansas. With Voice over internet protocol (VOIP) it's now possible to make calls to anywhere in the world as cheap as a local phone call. Using services like Skype, Magic Jack, Vonage and hybrid phone cards international calls are now as cheap as a piece of bubblegum.
- Taxes on Imports, Shipping costs and duty Household Goods – How easy will it be to move your things abroad, what to take with you and what to leave behind? This one varies considerably from country to country. Some countries allow expats to bring nearly all of their personal possessions tax free, even including a vehicle. Others limit what you can bring by taxing imports and restricting certain items as well. Panama's pensionado program is generous with allowances while Costa Rica taxes vehicles pretty aggressively. Another consideration is the location of the country versus the location of your goods. Where will they arrive and how will you get them to your new home? If the closest port is on the east coast of the country you are moving to and you are on the west side, expect a transport fee to move your container. Check duty rates before shipping and be sure to have a complete and accurate bill of lading as well as a customs broker/freight forwarder. See this tax guide for more information.
- Getting Around, Transportation, Cost of Gasoline, Taxis – Where you locate will determine your needs for transportation. If you are headed for an urban area like Quito Ecuador you may not need a car at all. The cost of gasoline in Ecuador is cheaper than most other places on the planet due to government subsidies and local supplies. The Dominican Republic lacks taxis in many suburban locations. Be aware that public transport in some areas may be limited. Collectivos are taxis or vans that involve sharing a ride with others. Some rural areas have little or no taxi service and spotty local bus service. If you do need a car will you need a 4 wheel drive vehicle? Many expats living in Costa Rica recommend a 4 wheel drive to tackle the mountainous terrain, rural roads and rainy season challenges. Be sure to buy a car that has available parts and service.
Conclusion: There's a great world of opportunities for expats but a need to prepare, research and make good choices in your planning. A well thought out destination will help to realize personal satisfaction, health and happiness. Adjustments will need to be made wherever you end up but with good advanced planning, you'll be expecting most of the challenges. Remember that you can always go somewhere else or return to where you came from…
Written by Steve Linder – Pacific Lots of Costa Rica www.PacificLots.com