4 Steps you need to create your financial transition plan while moving home


When you are relocating locally or internationally there is no shortage of advice on the internet, and the financial aspect of this move is no exception. There are blog posts, checklists, sample budgets and cost of living calculators - all designed to help, but just end up overwhelming. While all these things are actions you could take, should you?


Remember: It’s ok to feel weird and uncomfortable around this subject. We aren’t trained in this topic in school and it isn’t a natural tendency for most, including most country-specific financial advisors. But as you conquer this, you’ll see your relocation as an opportunity to revisit and even improve key areas of your life and wealth.


When you move, many of the publicly available information makes an assumption that you are moving everything -- and that you are on a one way ticket, seemingly never to return. If you’re leaving, they say, you need to shut down everything where you are now and set up its equivalent in the other country, and repeat every time you move.


I followed this advice when I moved abroad 28 years ago as a budding financial planner. As an American I was warned about keeping ties in my home state of Massachusetts, so I shut down my US based credit cards, let my driving license expire, shut down bank accounts and assimilated into my new home base abroad. As time went on though, this advice started to backfire for me.


That kind of thinking is outdated.


All the best ideas for banking, handling credit, which type of investment program to follow and so on, only have a small impact on key life milestones and longer-term goals if they are not part of an overall plan. Likewise, if you have to keep changing the plan each time you move it's unlikely that you are going to achieve the long term goals you want in life, whether that's owning property, having savings for retirement, or saving for your children's education.


What you need instead is a Transition Plan.


Your transition plan is the power tool to use to help keep your financial plans stay on track, both now and in the future. Even if you don’t know where you’re going to be located in the intermediate to long-term!


Today, I want to walk you through 4 steps that go into creating your transition plan so you can take charge of your personal economics and experience less uncertainty as you enter this lifestyle or continue your journey.



Step 1. Mapping Your Milestones


Ask yourself: “What’s the impact of this move on my key life milestones?” Think of milestones as important life events taking place at a certain time or age. For example if you have children, are they going to be facing key life milestones that tie to their development or that tie to education? They most likely will, so you want to literally or mentally drop these on a timeline. For example, at the most simple level, you could add “university” over a 4 or 6 year period; you could mark out when other critical school years begin so that you can map those out as well. When you carry out this exercise, you’ll have a visual representation of key life milestones that you can use to guide your planning. 


When you keep focused on the overall or longer-term vision for your life, even if all you know is what you don’t want to have happen, you are providing context for your shorter-term decisions. Start with all the things you want and don't want you life to look like at each milestone.  The clarity and perspective that comes from this step make the other steps flow easier.


Step 2. Understand Your Unique Tax Filter


Your tax filter helps you determine how much of your total lifestyle expenses need to be allocated to the various taxes you and your assets will face (and any tax relief you may be able to claim). Questions that help you think through this step include:


What countries, regions or municipalities are relevant? For example, during this calendar year in which the relocation takes place, will you be considered a part-year resident of two countries? Will one or more countries claim that you are still fully resident for tax purposes?


How are they relevant? For example, will you be taxed on worldwide income? If you are considered nonresident in a location but retain assets there be subject to tax on income generated, sale, transfer, or on your death? If you have retirement plans in the one country that you are leaving, do different rules now apply to that plan? Does the country to which you are moving see it as a fully taxable investment account? Will you be required to contribute a portion of your income to the social insurance program in each of these countries that you have determined are relevant? If so, will you be able to effectively “transfer” your contributions between countries, get a refund of your amounts contributed, or will you just leave that money behind? 


Understanding the answers to these types of questions will give you so much more clarity, helping you to plan in advance and prevent any nasty surprises.


Step 3. Engage in Cash Design.


When you are engaging in cash design, you are thinking through how you expect your cash to flow to various weekly or monthly expenses like rent, mortgage payments, groceries etc, and how much you need to be set aside for medium term expenses, like home improvements or holidays; and what is going to be invested to meet longer-term expenses.


You know that you are designing your cash when you are being deliberate about telling your money how to support your life. In other words you are using real figures and not creating a spending plan from a cost of living comparison and fooling yourself that you will save more to justify moving to a more expensive city.


If you are maintaining a residence in more than one country, then you need to be thinking through and writing down the various costs you expect to pay, in local currency, to maintain the property, as well as any other lifestyle costs that might be experienced in that location or currency. Once you have your strategy worked out on paper you can create what I call a spending plan, which incorporates expected income, projected tax liabilities from the tax filter step and transfers between currencies. Once we have this built we can look at automating as part of an overall cash management plan.


While this may sound like a lot of work, it is worth the effort. The cost of not doing this is often much higher both financially, and in terms of time lost, added stress and strain on relationships in the long term. As when you are both on the same page and working together on the long term plan and monthly expenses and budget, there are less arguments to be had.


Step 4. Protect the Plan.


In this final step we focus on identifying and managing risk associated with unexpected expenses that cannot be covered by current income. Such as replacing lost income needed to support a household in the case of a serious medical condition or death and ensuring that the costs of medical care, particularly major medical expenses that are hard to cover out of pocket, are adequately covered. It is good practice to have 3 months of basic living expenses in a separate bank account for emergencies such as redundancy.


In this step, you’ll also want to be sure that any current Will and/or healthcare directives are both valid and administratively feasible in your new country based on the new set of facts (tax, legalities etc) arising from this move.


We covered the essentials in these four steps. As you consider where you go from here, remember one thing: These steps are focused on transitioning your life and your overall financial strategy to account for how your facts, your situation and what you want, are constantly changing.


The more you see where you are now as a transition or a pivot point in your planning, the higher chances you have of a successful relocation that truly supports what’s most important and ensures that your finances are solid.


What’s amazing about this approach is that you can make sure your relationships or your health and other key areas of life go the way you want them to go all while doing the same amount of work. Because now your move isn’t just a list of things to do, it’s a key milestone in itself.


So let me ask you a question: What is your biggest fear or challenge when it comes to making sure your finances are in good shape and creating your transition plan?


If you’re willing to be honest, leave a comment below and let me know what your biggest fear or challenge is. I’ll get back to you on how you can overcome it.


Jennifer A Patterson is a mom to two tri-national kids and authority on financial planning for global living. Get her free 3 step ebook to pivot into the lifestyle and financial situation you deserve at crossborderliving.com.


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