Press "Enter" to skip to content

The Financial Impact of Becoming an Expat

Over the years I have multiple times considered taking positions internationally.  I have come so close I once found myself applying to a job in Singapore.  But one thing I had not done.   I had not encountered many expats while they are still abroad and discussed the impact of becoming an expat on their lives.

My International Experience is Travel Related

I wrote a post a while back on Purchasing Power Parity that talked about retiring abroad.  In that post I talked about the financial aspects of international travel and I gave some thoughts on the cultural aspects of being an expat.  My frame of reference in that case was as a heavy international traveler, sometimes months at a time, and from talking to former expats that have returned to the states.  On my latest trip to Barcelona however that changed.

A Recent Trip with Expats

Over the course of our 2 weeks in Barcelona I had dinner with a younger couple from the western US that was living in Barcelona, hung out with a lady with grown kids who came from the UK, went drinking with someone who immigrated from Italy a few years ago, and worked with another couple from Germany.   In each case the topic of them being an expat came up gradually and it was quite eye opening.  The folks I have spoken to that were former expats have the benefit of nostaligia.  Talking to someone currently living it gives a different perspective.

The Extreme End of Expat

Now before I really get into my learnings I also must give one more shout out.  The most interesting person in the discussion was the Turkish bartender. I met him while out on the town with many of those who provided the thoughts in this post.  This gentleman was born in Germany and had lived in half a dozen countries.  He could jump between every language at our table almost seamlessly, which was impressive given we had 5 different nationalities in tow.    My experience with him really inspired this post, and demonstrated the true benefit of becoming an expat.

Benefit of Being an Expat

The obvious benefit of becoming an expat is experiencing the local culture.  Barcelona had it in spades, from great places to eat and go out at night on the one hand to historical buildings and museums on the other.  Not to mention the wonderful and friendly people.   As a visitor for 2 weeks I only scratched the surface of this wonderful city, something someone living here full time would experience.

The individuals I met did not discuss an appreciable amount of culture shock.   Perhaps they had some, but that was not a topic of conversation.  I did note that the younger Americans took us to an Expat Brewery and commented that most of their friends were expats.    So, it could be that they are experiencing some culture shock and just didn’t recognize it or want to discuss it.  In any case I’d imagine hanging out with those from your country that relocated can help mitigate some of those issues.

Family and Money as an Expat

The bigger issues that came up were around family and money ironically.  First on the family side multiple expats referenced missing the family and friends they left behind.  Of this group the couple having lived in Barcelona the least has been there for 4 years.   This really indicates that feeling never goes away.  In fact, I got the impression at least one of my coworkers has decided to go back to their home country in the next few years for this very reason.  The pull of family and friends does not fade over time, it appears to be a significant hurdle to successfully becoming an expat.

Money as an Expat

I mentioned money being a big issue.  Let me first preface this with an assurance to you the audience, my coworkers in this setting have no idea I run a financial blog.  I didn’t talk about my financial views or position.  But the subject of money did come up and it really led me back to some posts here frequently.

Barcelona is Expensive

First off, I found out that the city of Barcelona is not much cheaper than cities near me.  Sure, you can cut out some expenses like needing a car, but food and beer were not any cheaper than home.  My visitors confirmed housing was not that cheap as well, averaging about 1000 Euro a month to rent a small flat, which is not far off a second-tier city near me.  So, you wouldn’t move to Barcelona to cut expenses, though perhaps into the non-city areas of Catalonia or Spain (as with anywhere else).  From my experience the only things truly cheap are wine or travel… So, if you’re a big wine drinker you may save money.  You can also visit other countries for cheap via train.

Costs and Price are not Necessarily Correlated

However, back to our post on correlation of expenses and income and how they are not.  Well in the case of Barcelona they certainly are not.  Our immigrated friends denoted an average pay around $20,000 a year.  Even the most ardent FIRE pursuers in the US are not writing about living on 20K a year.  In the US that’s poverty level.  I doubt removing a car from the equation fully makes up for the financial disparity.   It does make me wonder if an excellent way to instill frugal habits is to go live in a low paying foreign city, perhaps there is an opportunity to learn how to control spending here?    

We can establish if you attempt to live as in the US the income and costs of Barcelona mean your financial quality of life will degrade.  Yet, the people here appear to be happy, so perhaps how much you spend is not a major driver of happiness after all?  It certainly leads credence that life is all about choices and finances are but one in a journey where you should maximize being happy.

Saving for the Future as an Expat

But what about savings for the future?  Well I did not have the opportunity to talk much with the locals about the retirement system in Barcelona.  But I did have an interesting conversation on the topic with my visiting Netherlands counterpart (yes this really was an international effort).  In Amsterdam the taxation system appears to be more based on wealth than income.    Instead of the concept in the US where you pay taxes on interest on investments, there you also pay taxes as a percent of your total wealth over $50-100K. 

A Disconnect between Saving and the Individual

This all leads to an interesting situation.  If your money were sitting in a savings or brokerage account in country you would pay more in taxes than your money would grow.      As a result, the wealthy leave the country.  Meanwhile the retirees often use a mix of selling their home and pensions/government social security to retire.    In a way they are discouraged from savings.  On the other hand like the elderly pensioners in the US of yesteryear their retirement savings is done automatically without their input.

Different Countries Encourage Different Financial Behavior

Even their welfare system for the poor and indigent appears to be setup with this concept of non-individual influenced savings.  From what was described government assistance in the Netherlands requires you to do things like Mortgage your house before receiving assistance and then living off the proceeds.  It certainly would reduce those who would milk the system, but it also would encourage different behavior and requirements around salary and expenses.

Necessary Expenses Differ By Country

In fact, this was not the only place where I saw the difference in behavior.  During our visit a frequent topic of conversation was What’s App.  For those that do not know, what’s app is an application they use for text messaging and calls in Europe.  It’s very similar to the Chinese We Chat.  We don’t really have an analogous in the US.  They were incredulous that I do not have the app on our phone.  But you know why?  It comes down to the cost structure of phone service in different countries.

The Structure of Data Charges

What we learned is in Europe the data side of the cell coverage is cheap.  My Netherlands counterpart paid 12 Euros a month for unlimited data.  But historically unlimited voice calls and text messages by your carrier was either not available or prohibitively expensive.  Meanwhile our American plans have historically charged a lot for data but unlimited voice and text has been the way for decades.  As such we don’t use an app.  It’s interesting to see how the different costs influence different behaviors.  This lead me to the big conclusion of this post and even of becoming an expat.

Living in Barcelona is Not Comparable to the US

The conclusion is, the scenarios are not analogous because of the cultural and pricing differences.  It may be as expensive to live in Barcelona as a second-tier US city.  It might also pay way less.  But it is not an apple to apples comparison.  The financial impact of becoming an expat, if truly adapted to the local culture, means a scenario which cannot be directly compared because while prices and pay are different, so are what you choose to expense.    So long as you don’t spend all your time trying to replicate your life in America to your life in Barcelona you’d probably do just fine here.  I have always understood this to be true culturally, but to understand it financially was a new learning.

My Coworkers Realization

My local contact from the US finally confirmed this concept. They look to return to the US and expressed concerns with the move.  Particularly they were worried about not being prepared to live in the US given the differences.  Her experiences without a car, US phone service, etc mean she was not prepared to live in the US.  She realized this on her own.  Life in different cultures can be significantly different.

Have you lived internationally?  Have you noticed differences in costs/prices/taxation leading to a completely different financial consequence?  



  1. Crispy Doc
    Crispy Doc September 17, 2018

    Thoughtful and nuanced reality check, FTF! It contrasts with most rah-rah geographic arbitrage posts that overlook a lot of the subtleties. While I enjoy reading about nomads like Go Curry Cracker, I think a balance would be 6-9months a year in a home base in the U.S. near family and friends, and 3-6 months traveling once the empty nest years hit. As someone tethered to a HCOL area to begin with, it’s being absent for the milestone moments that keeps me in pricey SoCal.



    • FullTimeFinance
      FullTimeFinance September 18, 2018

      We have something similar planned for after work. I can’t see removing our ties to the US completely. That being said I’m at least anchored to a moderately priced location.

  2. Matt
    Matt September 19, 2018

    I am beginning month 4 in Ireland as a US expat, and can confirm much of what you say. The taxation here is quite onerous, and comes with a bevy of government “services,” many of which have extensive waiting / forms / red tape / appointments. It changes your lifestyle immensely, particularly for couples. My work visa requires that my wife not work; originally, we found this mildly offensive. But given the many tasks she has to do, it probably was just good advice! In the end, I knew my salary was on the high end here, so if this many people can make things work, we could do. But really, it has been much more learning than any kind of burden.

    I have also found speaking to my European colleagues that the concept of a defined benefit pension (in the style of a 401k plan) is a 21st century phenomenon in Europe. So, not only does the tax structure not support it well, as you mention, but also there is not a lot of information on it. And, there are very few pure brokerages here–they are generally administered by insurance companies, which means high management costs and very conservative investing profiles for their target-date funds. (like, .77% for a basic international index, and 0% equities 8 years from retirement!) For their part, they are fascinated to get our reactions to this, and exercising our well-tuned 401k muscles to see what’s what.

    I would liken FIRE to swimming upstream in any case–it’s contrarian thinking; but in Europe the current is faster, so the swimming is harder. Many, many government policies not just assume but direct you to work until 65.

    I love Ireland, and I love Europe. But I won’t be retiring here. We pre-planned our US return when we left; our strategy was to be flexible, and not feel “stuck” when we made such a big move. But while we are in no hurry to come back now, we are glad we did that, and our target window of 3-5 years feels more sure now that before we left.

    • FullTimeFinance
      FullTimeFinance September 20, 2018

      Thanks for the comment Matt. I appreciate the take of someone currently abroad, especially when its from a country I have yet to have the opportunity to visit.

  3. Zach
    Zach September 22, 2018

    Hi! I’ve been living in 4 other countries as an American expat for the last 13 years. I’ve lived in China, Thailand, Bahrain, and now the UAE (Dubai). One thing to think about is that Western Europe is a tough place to be an expat, financially. There are MANY other places where it’s a lot easier (like every place I’ve listed above). It’s often down to supply and demand, in order to attract properly certified expats to do the required jobs, they often have to pay enough to make it attractive. Western Europe is already attractive for most people, so they don’t have to sweeten the pot. This is especially exacerbated in touristy cities like Barcelona. I like your blog! If you want more about teaching internationally, mine is The Happiest Teacher

    • FullTimeFinance
      FullTimeFinance September 22, 2018

      Thats quite the collection of countries. I’ll have to check out your blog.

  4. Dr FIRE
    Dr FIRE September 24, 2018

    Interesting to read about the differences in savings across different countries. As a UK resident, the Netherlands way of doing things is very different. Here, we pay a lot of tax on earnings (for example, effectively 42% on anything over £46,351) but then have saving/investing products (called ISAs) that help shield wealth from tax. Good read! Will have to check out the rest of your blog.

    • FullTimeFinance
      FullTimeFinance September 24, 2018

      It really is fascinating hearing about other countries financial systems. Thanks for sharing a bit about the UK.

  5. Mindy
    Mindy September 24, 2018

    I’m from the UK and have been living in South East Asia (mostly Thailand) for 8 years. With my most recent job in Bangkok, I’ve been earning less than I would have if I was working back in London, but saving at least double. But this has been a conscious effort to save. Bangkok can be an expensive place if you want it to be, and I could have spent all of my salary each month without much difficulty. The thing about family and friends is so true. Parents get older and you miss out on seeing your nieces, nephews and friends’ children grow up. For that reason I’m heading back to Europe at the end of this year.

    • FullTimeFinance
      FullTimeFinance September 25, 2018

      Thanks for giving us the perspective of someone living abroad in Asia.

Leave a Reply

Your email address will not be published. Required fields are marked *