Setting up your financial accounts before moving abroad.
Expats living abroad can learn very hard lessons if they don’t have their financial accounts set up wisely. In this article I want to pass on the top 3 things I’ve learned to do in my 5 years living abroad. First, realize that if you don’t set things up right, you will get eaten alive by fees and terrible currency exchange rates. Your goal should be to eliminate or minimize fees and achieve the normal retail exchange rate of the day. Since I live in Mexico, I will use it as my example. Some people just show up thinking they will open a bank account in Mexico and then once a month wire money down to Mexico to their new account. None of this is feasible. First, you need some immigration status to open a bank account, meaning becoming at least a temporary resident. Now doing that is achievable but it doesn’t happen overnight. Getting your residency and then getting the account open will take between 4 and 6 months. And wiring money these days is very costly. Depending on the bank fees on both ends, it could cost between $35 and $80 per wire. Add that to about a 5% hit on exchange rate, and if you were to wire 10,000 dollars per year on a monthly basis, you would spend around 1,000 dollars on fees and rates. You can reduce that to less than 50 dollars a year if you set things up correctly.
It’s best if you do these things before you leave the US. Do these while you can still prove your residence address in the US, and can also receive mail in the US. My advice is to have two different bank accounts, both with debit cards. One bank should be one of the huge nationwide banks, and the other ideally with a very solid regional or community bank. It is ideal if you can get to know one of the personal bankers at the community bank. It has been amazing to me how this type of contact can move mountains to make things happen. So why two bank accounts? In 5 years of living abroad, I have had fraud on my debit card 3 times. That means immediately canceling the debit card and waiting for a replacement. And keep in mind that some countries you might be considering don’t have mail delivery to homes. That is true in Belize. You need to pick up your mail at the post office and often go through questioning as to who you are and what’s in the mail. I have found that companies like FedEx, DHL, etc. are quite reliable and do deliver to homes in Mexico. So anyway, with 2 bank accounts, you now still have a card that works, and it is usually possible to transfer money to the surviving account no problem. So now, I live by the creed that when it comes to phones, computers, and bank accounts: always have a backup.
One other point about having two bank accounts: it has made my life a lot easier. I use one account to make certain payments, and the other for direct deposits and to make debit card payments in various places like when I’m traveling in the US.
Next thing to do is to open an account with Transferwise, and set it up to work with both bank accounts. You can get a debit card to use worldwide with Transferwise. There are a number of valuable benefits to using Transferwise. You can move money around instantly, take advantage of great exchange rates, hold money in different currencies, use the debit card to make routine purchases without being penalized with terrible exchange rates and ridiculous fees, and getting local cash out of ATMs. Using Transferwise now saves me between 600 and 1000 USD per year compared to doing it another way. It really helps to get this set up before you leave the US so that you can receive the card in the mail in the US.
The third thing to do is to always hold enough local currency to get you through at least 2 to 4 weeks of living expenses. A small safe at home abroad holding valuable papers, and cash just makes a lot of sense. Granted, if you have 3 debit cards as I’ve instructed above, then you have some backup in case one fails. But what if the banks close or the ATMs don’t work? After the hurricane hit Belize in August of 2016, the ATM machines weren’t producing cash for quite a few days.
So that’s it! Two bank accounts, Transferwise, and keep some cash. If you have questions, you can email me at: email@example.com.
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