Managing your money while living abroad
By Lucy Lazarony • Bankrate.com

It's an adventure, a dream, a challenge, a change, a new beginning.

"Living overseas, even for a short time, is like reinventing yourself," says Rosanne Knorr, author of The Grown-Up's Guide to Running Away from Home. "It's a new start."

Imagine living, eating, working and playing in a faraway land. It could be Europe or Asia or Africa or South America, whatever part of the world you have to experience for yourself.

Knorr lives in France's Loire Valley.

"The joy of living where we live, we're within six hours of six countries," Knorr says. "The cultures in Europe are so old and rich and diverse and we get to participate in all of that. It's addictive."

Barbara Frew, author of Personal Finances for Overseas Americans, has lived in Finland, Austria and Russia.

"Basically you're being challenged in ways you've never experienced," Frew says.

"You gain knowledge about other cultures. You gain knowledge about your own culture. Over time you gain knowledge about yourself."

Pack your bags and plot your finances
Once you make the leap overseas, it's clear you're in for quite an adventure. But there are also a lot of money matters you'll need to square away. It's going to take some cash, some planning and some savvy financial maneuvering to make an international move a success.

First off, you'll want to hang on to your American bank accounts. Chances are you'll still have some bills -- mortgage payments, utility bills and credit card bills -- to pay here in the States.

Setting up automatic bill payments for your U.S. bills can save you a lot of headaches. That way a mortgage payment on your American home could be debited from your U.S. bank account as you sip a cappuccino in Venice.

If you plan to mail payments for U.S. bills from an overseas address, be sure to post them well in advance of due dates.

"You don't want to ruin your credit by having your bills paid late all the time," Knorr says.

Be sure to bring an ATM/debit card from your U.S. bank when you go abroad. These cards, such as the Visa Check Card and MasterCard Money, are linked to a cardholder's checking account and can be used for purchases and to withdraw money from overseas ATMs.

"If you need to make a withdrawal in a foreign country from a U.S. bank account, that's the easiest way to do it," says Cali Garcia-Velez, president of Citibank Florida.

For example, Garcia-Velez knows a U.S. retiree in Guatemala that has her Social Security check deposited in a U.S. bank account. She then withdraws her check in quetzales from an ATM in Guatemala.

"She withdraws whatever she needs so that makes it very easy," Garcia-Velez says.

She also gets a nice exchange rate on the transaction.

Foreign exchange and fees
The reason?

The exchange rates secured by Visa and MasterCard for debit card and credit card customers are based on wholesale rates offered to large banks and corporations rather than the retail rate offered to consumers. So it makes a lot of sense to pay with plastic when living overseas.

The Web sites of Visa, MasterCard and American Express list ATM locations in countries around the world.

Be sure to test debit cards before leaving the country, and make sure you have a four-digit, numeric personal identification number for your card. Many ATMs outside North America do not have letters on the keyboard or the letters appear in a different order.

Find out what kind of fees your U.S. bank charges for using another bank's ATM. The fees typically range from $2 to $5.

Also, some major U.S. credit card issuers charge a 2 percent to 4 percent fee each time a customer pays with credit cards in another country.

These new fees come on top of the 1 percent currency exchange fees long levied by Visa and MasterCard on transactions made abroad. Card associations bill issuers, and many issuers, in turn, bill customers.

You'll want to take note of fees as you track overseas spending.

Every time Knorr uses her American ATM card to withdraw francs she writes down an estimated cost in U.S. dollars and the date of the transaction in her check register. She then leaves room to reconcile her estimates with the actual amounts listed in her bank statement.

"Once you get used to doing it, it's not so bad," Knorr says. "You have to be able to have an idea of how much you have left in your checking account."

Many banks and credit card issuers offer online account access. These types of accounts can help you track just how much your overseas spending is costing you in U.S. dollars.

Protecting your wallet
It's also a good idea to have overdraft protection on your American checking account in case you underestimate your spending or unexpected expenses pop up.

"You could get stranded, and you don't want to incur overdraft fees while you're gone," says Tammy Trotter, assistant vice president of private financial services for U.S. Bank in Minneapolis.

People who are planning an extended holiday overseas, say six months, may be able to pay for much of their stay with U.S. credit cards and debit cards. Folks planning on living abroad for a few years will probably need to open a foreign bank account. You'll need it to pay local phone bills and utility bills as well as rent.

"In many countries bills are directly debited from a bank account. So you will want to have a bank account overseas, most likely for paying the rent," Frew says.

It's a good idea to bring reference letters from your American bank and other financial institutions such as brokerage houses and credit card companies with you overseas. You may need a reference letter to open a foreign bank account and even to rent an apartment.

"A landlord may be unwilling to rent to someone new to the country. That's where bank references and things like that come in handy," Garcia-Velez says.

Maneuvering your money
If you're working abroad you may want to choose the bank used by your employer. Or, you may want to ask your American bank to recommend a bank in the country where you'll be living. Banking with a foreign bank that your U.S. bank does business with can help simplify money transfer procedures. This will come in handy if you need to wire money between your American and foreign bank accounts.

Much of the paperwork needed for international wire transfers can be taken care of before you leave America. Once overseas, you'll just have to phone or fax a wire transfer request. Wire transfers are a great way to move large sums of money, say thousands of dollars, between foreign and domestic bank accounts. Be sure to ask your bank about fees.

Transferring a smaller sum of money, say a couple hundred dollars, is a snap. Take your ATM/debit card from a U.S. bank, make a withdrawal at an overseas ATM and then deposit the money into your foreign checking account.

"I go to an ATM, then I walk around the corner to the bank and I deposit $300 of French francs into my French checking account," Knorr says.

Most banks limit ATM withdrawals to $200 or $300. You may want to ask your bank to raise this limit before you head abroad. Some banks may raise the withdrawal limit to $1,000 or more.

Consult your friends -- and financial institutions
Be sure to visit your bank and discuss your overseas move. Discuss wire transfer procedures and fees. Ask about fees for using ATM cards and credit cards overseas. Look into online account access for bank statements. Ask about getting a reference letter and tips for selecting a bank in the country where you're headed.

"It takes some prep work, but the prep work does pay off," says Trotter, who has helped private banking clients with moves to London, Paris, Prague and Hong Kong.

Ask about specific banking products tailored to Americans living abroad. Citibank has a number of products geared toward overseas business people and retirees.

Contact your credit card companies and let them know that you'll be heading abroad. That way when dinners in Tokyo start popping up on your bills, they won't think your card's been stolen.

Try to minimize your debt before heading overseas. That means paying off credit card balances.

Frew recommends building up a financial cushion, equivalent to six months living expenses, to help cover moving costs.

"Ideally, have it in place before you go," Frew says.

You may want to hop online and chat with expatriate Americans living in the country where you're moving. They can give you the low-down on costs and all kinds of other advice. Check out Web sites such as expatexchange.com and Overseas Digest.

Save some for later
You'll also need to set aside some money for re-establishing yourself in America when your overseas adventure ends.

"There needs to be a set amount you won't go below in your savings," Knorr says.

Once overseas, it's important to keep track of your spending.

"The first time you go overseas you can be overwhelmed," Frew says. "You need to be aware of the money going out."

Once you settle into your new life, you can fine-tune your budget. In Europe, for example, utility bills and gasoline prices are much higher than in America.

"In the beginning I re-did the budget every week," Knorr says.

Once you take care of these practical matters you can get down to enjoying your new home away from home. It's one thing to be dazzled by a foreign destination, it's another thing to feel part of it.

"You're part of the lifestyle," Knorr says. "You shop in local markets. You eat local foods. You meet people who show you how to prepare those foods."

-- Posted: Jan. 22, 2001