The top financial mistakes expats make – and how to avoid them

With a new year upon us, many of us are thinking about our goals and plans for the year ahead. If this is you, you may be setting financial goals, such as saving or investing more, or life goals, such as where you’ll live, work or travel in the year ahead.

Regardless, almost all our goals have one thing in common; there is a financial component to consider. And if you’re an expat, this can involve additional complexities. To support your planning in 2023 and beyond, here is our round-up of the most common expat financial mistakes and tips to avoid them.

#1 Keeping the same financial plan even though life has changed

Reviewing financial plans regularly is recommended practice for everyone. If your life circumstances change and your plans don’t, this disconnect could be a roadblock to achieving personal and financial goals.

For expats who are navigating finances across multiple jurisdictions, it’s a must. What worked for you in one country may not work in your favour once you are a tax resident of another locale. And the ramifications may have a significant impact on your long-term financial position.

If you haven’t revisited your financial plans lately, mark it as a priority for 2023. Talk to your adviser now if any of the following apply since you last adjusted your plans:

• You’ve moved or are planning to move to another country
• You’ve changed your mind about whether to move home in the future
• Your job or income has changed
• You’ve gotten married or separated/divorced
• You’ve made any significant life decisions.

This list is not exhaustive, so a good rule of thumb is to talk to your planner if/when anything changes.

#2 Moving money at the last minute

One of the most common mistakes we see when people are relocating overseas is moving money at the last minute. When moving assets between your current and home country, currency exchange plays an important role, but the market is challenging to predict.

Instead of trying to time the market, consider your moves from a risk management perspective. Plan to move smaller amounts over time rather than making lump sum transactions at the last minute so that your rate will likely average out.

When making exchanges, shop for a reputable provider offering a competitive rate. The difference can be as much as 3 to 4%, so it’s worth investing a little time in doing your research.

#3 Not staying up to date with tax rules and legislation in your home country

Keeping up to date with proposed changes in your home country’s tax system will enable you to adjust your financial plans to take advantage of them and/or avoid losing out.

For example, when the Australian Government changed primary residence exemption rules in 2020, expats who were aware of the impending change could make informed decisions about whether to retain or dispose of the property before the cut-off date. Those who didn’t keep abreast of local changes and needed to sell ended up with a significant and possibly unexpected capital gains tax obligation.

#4 Failing to understand tax obligations across multiple jurisdictions

Whether you remain a resident in your home country for tax purposes or not, it’s essential to understand the landscape in both jurisdictions. If you don’t have this understanding, you may make financial decisions that aren’t in your favour.

One common tax trap is when Australians living in the US make investments that are classed as Passive Foreign Investment Companies (PFICs) for US tax purposes. These investments can carry harsh US tax obligations and onerous reporting requirements.

#5 Forgetting to check with financial product providers before moving overseas

Whether you are moving back home or to another country, checking with your financial product providers is critical. Some providers won’t allow you to keep your account while you’re overseas, and some insurances will not cover you, meaning you could run into significant complications. It’s much easier to untangle any issues while you’re still in the country, so make sure you understand the rules and take action before you leave.

#6 Focusing on the short-term

For an expat, taking a long-term view is not just best practice; it’s a must. Some of the critical long-term areas to consider include:

• Whether you intend to move home and when
• Where you intend to retire (because this is where you should be building your retirement assets)
• The potential financial impacts of relationship changes, from divorce/separation while overseas to returning home with a non-citizen partner.

The decisions you make today can have long-term financial impacts, from tax obligations to currency exchange risk, so it’s best to make them with your long-term plans. And if these change, it’s essential to revisit your financial plans accordingly (see mistake number one!).

#7 Not making the most of your opportunity

It’s not uncommon for expats to earn high remuneration while overseas; it may even be one of the reasons you moved. So it’s essential to make the most of the opportunity. Yet it’s common for expats to leave money in cash, often putting finances in the ‘too-hard basket’.

And that goes for experiences too. You move overseas for the lifestyle, so make the most of it by setting lifestyle goals or creating a ‘bucket list’ of expat experiences to tick off. Your financial planner can help you plan for these and ensure you have the funds available to live your best life, wherever it takes you.

#8 Doing it on your own

Managing finances as an expat can be incredibly complex and nuanced, so trying to do it alone can be, and often is, a recipe for disaster. Therefore, it’s important to work with experts who understand both jurisdictions, including tax experts, legal representatives, and, of course, your financial adviser.

General Advice warning

The information provided in this blog does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.