Not too many Americans have the chance to spend time working abroad. Such opportunities usually come with working for large multinationals who have commercial operations all around the world. Indeed, some companies have been known to offer very handsome compensation packages for employees willing to relocate for a few years to help with operations.
It is always more beneficial to have someone on the ground in foreign countries who has firsthand experience with the inner workings of the company and therefore knows what the company would be looking for. Having people from the heart of the company’s operations journey to the periphery to make sure the business model is appropriately replicated, and at the same time suits the local environment is seen as an ideal way of going about expansion plans abroad.
Being stationed abroad, while potentially very lucrative, can be a challenge for those involved. Not only must you deal with the culture shock of living in an entirely new part of the world, but you also need to make sure your finances are kept afloat.
It is crucial to make sure the financial plans you put in place during your time at home can be continued when you are half a world away. Because retirement plans are not invulnerable, it is wise to actively research the best retirement plans to avoid making mistakes.
Signing Up with a Local Mutual Fund
On the surface, this seems to be a harmless investment choice. Why would you not put money into something local, especially since support services are available nearby, and you are on the ground to make better-informed decisions? It seems like a no-brainer to anyone.
Unfortunately, being an American citizen means that this is anything but harmless. One thing that many expatriates space out on is the fact that America is the only major country that requires her citizens to pay American taxes on any income made anywhere on the planet. When coupled with increasingly complicated tax code, this can spell trouble for American expatriates when tax season comes around.
And this is assuming you are even able to sign up for one. This is because American citizens are subject to a much higher standard of scrutiny as a result of the increasing security standards set by foreign policy arms of the American government. International financial institutions that are obligated to expend more significant resources to monitor the activities of their American clientele very often refuse to take on any American customers for this sole reason.
Sitting on Your Couch
One of the worst possible things you could be doing is absolutely nothing. Doing nothing is an understandable reflex many American expatriates succumb to after they find out how difficult and expensive it is to make and invest money abroad.
This, however, should not be reason enough to put off your financial goals for as long as you stay outside the country. Your finances might have stalled, but you are never getting any younger. You only have a finite number of productive years to use, and they should be used wisely.
If you are the type that gets caught up with worry very easily, it is recommended that you hatch out a financial plan before you move abroad. That way, even as you earn money outside the country, you can still have an automated investment plan be carried out, and part of your paycheck will still get put away every month so you can enjoy the good life even after you have stopped working.
Not Giving Uncle Sam His Due
One of the biggest mistakes you could make is to undercount the amount of American taxes you owe. This can get you into serious trouble with the American authorities, who can come in and wreak havoc on your life, especially if you do not live in one of the few places without an extradition treaty.
Getting your taxes right usually follows three big steps: filing your local jurisdiction’s taxes, figuring out your federal taxes, and figuring out your state and local taxes. When it comes to filing taxes in your local jurisdiction, it is essential to know all the taxes that you are responsible for paying. In many foreign jurisdictions, foreigners face completely different tax structures than natives. This is especially true in the Gulf States.
Once you have that first step sorted, you can then proceed to file your federal returns. How this typically works is that you will first calculate how much in federal taxes you would owe as if you made all your money in the United States. Then, subtract this amount with the amount in local taxes you paid, and you will then have the rough amount you owe in federal taxes. If you have a more complex financial year than normal, it might be better to consult a qualified tax service to make sure you don’t make any underestimations.
Lastly, you will also need to file state income taxes. You must be aware of your official state of residence before going abroad, so you know which state’s tax brackets you need to calculate for. You might also still be liable for local government taxes, especially property taxes, if you still have a property in the United States that has not yet been sold. When dealing with such matters, you really cannot be too careful.
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