The Grown-Up's Guide to Running Away from Home, Second Edition: Making a New Life Abroad (27 page)

When we simplified, we reviewed our finances with our friend, the broker, and ditched a few investments that were too dicey to allow for sound sleep in France. Because we were giving up work, we also reviewed our balance of investments and selected a safer course rather than the more aggressive one.

Arrange to keep funds available in an account that you can access wherever you’ll be for cash. For U.S. bills, you can pay them yourself from overseas or have your banker or broker set up a program of automatic payments for bills such as a U.S. mortgage or insurance to ensure that those bills are paid on time. The advantage of automatic payment is that they’re paid no matter how long it takes for you and your mail to connect. When bills are forwarded,
they can be overdue even before you receive them. Don’t take a chance on losing your health insurance because you missed a payment.

You can’t automate all bills, but online bill payment and fund transfer services allow you to control payments from wherever your computer may be. It’s handier and safer than trying to mail checks through some overseas postal services. Many banks now offer internet bill-paying capabilities; you can also sign up for specialized services such as
www.paymybill.com
or
www.paypal.com
.

If you choose to mail checks, mark the due dates for the recurring bills such as mortgage, insurance, credit card, and other creditors on a small pocket calendar. Even if you haven’t received the actual bill yet, you can still make a payment. Allow plenty of extra time for slow mail service and remember to write your account number on the check—a good habit in any case.

For deposits, take a supply of envelopes and deposit slips from your bank. If you receive any checks for deposit, you can simply mail them in. The bank will mail you a receipt.

If you’re traveling, sailing, or otherwise unable to write the checks and lick the stamps yourself, here are some additional ways to handle financial details from overseas.

Do you have a relative or close friend who is willing, able, and trustworthy enough to pay bills while you’re gone? In an ideal world, you will. But this isn’t an ideal world, and not many of us would want to take the responsibility for another’s hard-earned nest egg. (Well, some people would, but those are the ones who plan to run away too—with your money!) The amount of time you’ll be away makes a difference. Your brother may not mind handling your bills for three months, but two years may be pushing it.

Whomever you choose, fund a separate checking account with just enough money to pay expenses while you’re gone, then provide authorization for the person to write checks on that account only. Your representative will have the ability to pay bills, but if that person suddenly loses at the track he won’t be tempted to go through your entire life’s savings.

Before you go, discuss how the person should handle emergencies independently and when the person should contact you.

If your portfolio is large (oh, to be so fortunate) or extremely complicated, you may need to hire professionals to manage your financial affairs while you’re gone. Your accountant or lawyer may be willing to handle everyday tasks, being already familiar with your finances. One or the other may agree to have his or her office accept bills, pay them, and manage financial situations as they occur. As with friends or relatives, you can arrange the checking account so your accountant or lawyer can write checks for you.

Decide in advance when your administrators should use their own judgment about expenses, when they should contact you, and what they should do if you can’t be reached.

If you choose a friend, relative, or professional to administrate your funds, supply them with power of attorney. The limited power of attorney gives your representative specific control over certain of your financial affairs: for example, paying your bills. A general power of attorney would give the person complete control. Your attorney can arrange either type, but be sure you know which rights you are transferring before you sign anything. Be sure you trust that person to whatever extent you provide the power. Unless she’s a trusted cousin, it might not be the smartest idea to provide power to buy and sell stocks to a broker who gets a commission every time she does so.

Obtain a small amount of your destination’s currency at an exchange desk at the international airport when you depart. Have enough to handle the immediate arrival expenses of taxis, subways, or a quick lunch. When you need to change more money, use your bank card at an automatic teller machine if possible; if not, find a large bank for the exchange. Either one of these options will offer a better rate of exchange than the streetside currency exchange services found in tourist areas.

Automatic teller machines are the fastest, easiest, and most affordable way to access your money in the form of the local currency.

You should have no problems as long as you remember two things: First, to avoid fees, use your ATM card at a bank affiliated with your card network. You may still pay a fee for the international withdrawal, so check with your bank to find out cost per transaction overseas. It may be preferable to withdraw a larger amount fewer times than taking small amounts and incurring a separate fee each time. Ask your bank for a list of locations overseas where your card will be accepted. MasterCard/Cirrus ATM locations number over
a million throughout the world. Find locations at your destination by calling (800) 424-7787 while you’re still in the States, or check online anytime and anywhere at
www.mastercard.com/cardholderservices/atm
.

Second, check that your PIN is acceptable for use overseas. It must have only four digits. If yours has five, change it before you leave; then test it at an ATM before taking it overseas. If you’re part of a couple, you should each take a card. You’ll be able to access cash individually (but keep track of withdrawals!), and you’ll have a backup in case one card becomes damaged. If you’re traveling alone, you can also take two cards, in case one becomes damaged. Ask your bank for an extra. Even better, take an extra card tied to a different account. That way you can access funds from either one. It would also be essential in case you ever need cash that exceeds the maximum daily withdrawal on that account.

You shouldn’t have problems understanding foreign ATM machines. They offer a choice of languages, and English is virtually always one of them. Like most Americans overseas, we withdrew money regularly from our U.S. checking account for living expenses near our European base and when traveling.

When you’re traveling or first arrive overseas, traveler’s checks provide safety and peace of mind. They can be cashed in any large bank, exchange offices, large shops, hotels, or restaurants. Don’t count on them, however, for small restaurants or shops or rural locations. Many places don’t accept them, so keep some cash available.

Traveler’s checks are available in U.S. dollars or foreign currency. Check the exchange rate before you leave to see which would offer a better value.

One expat discovered that his American Express traveler’s checks were treated as cash, making transaction fees lower than wiring money, so he used them to convert money from dollars to foreign currency and vice versa. Since he works overseas and is paid in foreign currency, he used this technique to send money back to his U.S. accounts; the technique works in reverse as well.

You can get cash advances on your major credit card through most banks that handle the cards, but this is an expensive way to finance your trip. Credit card cash advances incur a higher interest rate. If you take an advance on your card and don’t pay it immediately, which is likely when you’re traveling, the interest charges start to accrue immediately.

The only way to avoid this is to “prepay” the card so you have cash built up to cover the advance or, the minute you take an advance, send a check to cover it. But if you had the money in the first place, why use the cash advance? Simply use the ATM or other sources for normal travel cash. Save the advances on your credit card for a serious emergency.

You’re in Bangkok and home is Boston. You’re totally out of funds, and one ATM card has cracked in half. The extra card just became dinner for the ATM machine. You’re desperate. How to get funds?

MoneyGram
. Depending on the country overseas, you can receive up to $20,000 in a day via computerized money transfer. The service works in minutes, so it accommodates a travel schedule as long as you can get to one of their overseas offices to pick up the check. The fee is about $150 for $5,000 sent, but it varies depending on the country and the dollar amount requested. The person sending the funds from the United States can call MoneyGram toll-free for information and restrictions at (800) 926-9400.

Bank Wire Transfers
. These electronic transfers enable your bank to transfer funds from your bank or stockbroker in the States to a bank account overseas, using the Federal Reserve as the intermediary. You’ll need a string of information and numbers for routing, which your overseas bank will give you. You can then provide this data to the Stateside financial institution doing the transfer. The wire transfer itself can be done quickly, but allow a day or two for administration and time zone differences. You’ll pay a fee for the service.

Automated Clearinghouse (ACH) Transfers
. These electronic transfers move funds between bank accounts held at different financial institutions in the U.S. and are usually free. The transactions take longer than wire transfers, typically one to two days. Transfers between countries may be possible, depending on the banks involved, but you’ll need to check with your bank; there will be a charge for transfers across borders/currencies. You’ll need to provide the numbers of the account to be debited and the one for the account to which the funds are being sent, plus the routing numbers for that bank (the nine digits found on the lower left side of a check).

Consulate
. In a real emergency, U.S. citizens can contact the U.S. consulate and arrange for funds to be sent by a bank or relatives via the Department of State’s Overseas Citizen’s Services. The money can then be picked up at the consulate overseas.

For safety, have your Social Security check deposited directly into your U.S. bank account. Then you can use an ATM card to access cash wherever you travel in any currency and at very favorable bank exchange rates. You can do the same with your pension or other income checks.

A relatively recent option is to have your Social Security check direct-deposited into your account overseas. The program is supported by the Social Security Administration, the U.S. Federal Reserve Bank of New York, and
several central banks around the world. Participating countries include Canada, France, Ireland, Italy, Spain, Portugal, the United Kingdom, and several others. Check with the Social Security Administration for more information.

April 15 occurs inside and outside the United States, so you’ll still have to file a tax return. However, if you’re living outside the country on April 15 (or traveling for fourteen continuous days, including April 15) you’re allowed an automatic two-month extension for filing. You’ll need to attach a statement to this effect to your return. The catch is that if you owe taxes and they’re not paid as of April 15, you’ll incur interest charges.

For federal tax forms abroad, contact the U.S. embassy. The embassy does not supply state forms. You can have your accountant handle this, ask someone in that state to send the correct forms to you, or go to
www.taxadmin.org/fta/link/forms.html
to find and print out forms from your state.

For more information on extensions and other tax regulations for people living abroad, order the related publications by calling (800) TAX FORM (829-3676). Some publications of particular interest include #54, Tax Guide for U.S. Citizens and Resident Aliens Abroad; #776, Overseas Filers of Form 1040; #901, U.S. Tax Treaties; and #593, Highlights for U.S. Citizens and Resident Aliens Abroad. These are just a few of the topics that pertain directly to overseas residents. An information booklet lists all the publications currently available, or you can check for PDFs of many documents at
www.IRS.gov
. If you have questions abroad, embassies can direct you to an IRS representative. The larger embassies even have IRS representatives assigned to them.

If you live and work overseas and meet specific guidelines, you may choose to take the amount of qualified foreign taxes as a foreign tax credit or as an itemized deduction. For more information, order the current IRS publication #514, Foreign Tax Credit for Individuals.

Because IRS regulations are complex, talk to your tax advisor on how this will affect your finances. Jane Bruno, a tax consultant who lived and worked in Germany, South Africa, and the United States, advises that