More and more Germans are choosing to move abroad to pursue new career opportunities, gain cultural experience, and develop personally. Living in a foreign country undoubtedly promises adventure and freedom. But alongside all the exciting opportunities, this move also presents a number of challenges, particularly in the area of financial management.
Managing personal finances effectively while abroad can be complex. Wise, a leading provider of multi-currency accounts, offers valuable advice to help expats and migrants adjust financially and identify savings opportunities.
Cost of living in the destination country: A detailed analysis is essential
Before you travel abroad, you should do a thorough research on the Cost of living in the destination country This primarily includes the prices of rent, food, transportation, and leisure activities. The cost structure can vary considerably from country to country and even within a country. For example, rents are comparatively affordable in some countries such as Turkey, Egypt, or Greece, while food prices can be very high there. This requires a detailed analysis and individual budget planning that goes beyond general averages.
It's also important to note that the cost of living often depends heavily on the region within a country. Smaller cities or rural areas are generally significantly cheaper than capital cities or tourist centers. A classic example of this are Western European metropolises like London, Paris, or Zurich, which are among the most expensive cities in the world, while life in smaller communities within the same country can be significantly cheaper.
To save money on food, Wise Expats advises adapting their eating habits to the local culture and the products available there. Local products are often much cheaper than imported food, as they eliminate transportation and customs costs. Shopping at local markets, so-called "farmer's markets" or "wet markets," often offers not only inexpensive goods but also an authentic cultural experience. Modern technology can also be used: Food rescue apps such as OLIO or Too Good To Go, available in many countries, allow you to purchase food that is nearing its expiration date or can no longer be sold regularly for other reasons, at significantly reduced prices.
Find the right bank account: Local IBAN as a door opener
A local bank account is an indispensable "door opener" in many countries and makes daily life much easier. The main advantage of such an account is the local IBAN (International Bank Account Number), which provides access to important financial services and ensures smooth payment processing. Without a national IBAN, it can be difficult to fulfill basic financial obligations such as paying rent, receiving salary, or settling bills. Many companies, landlords, or government agencies only accept national IBANs for convenience or due to internal policies. Transfers from foreign accounts may be delayed, declined, or subject to additional fees.
This problem, known as IBAN discrimination, despite a clear EU regulation prohibiting it, continues to occur in many EU countries. Regulation (EU) No. 260/2012 stipulates that companies and public authorities must accept SEPA-compliant IBANs from every SEPA country. However, the reality shows that enforcement of this regulation is not always smooth, which can pose practical problems for expats.
To find a suitable local bank account, Wise recommends talking to locals, as they can often provide valuable advice on the best local banks and terms. It's also advisable to use online financial comparison sites to compare different banks' fees, services, and terms. Many countries have online portals that provide an overview of bank terms and conditions.
Using multi-currency accounts: Flexibility and cost savings
For expats who work internationally, travel regularly or receive and make payments in different currencies, Multi-currency accounts An extremely advantageous solution. Such an account allows you to hold multiple currencies in a single account without incurring high currency conversion fees for each transaction. Instead of relying on the often unfavorable exchange rates of traditional banks, payments can be received and sent in the respective local currency.
Providers like Wise (formerly TransferWise), Revolut, and N26 specialize in this type of financial service. They often offer better exchange rates than traditional banks and reduce or eliminate fees for international transfers and currency conversions. This not only helps save significant costs but also allows for better control over your finances, as you always have an overview of your holdings in different currencies. The flexibility of holding funds in different currencies is especially useful for digital nomads who frequently change locations or for people who conduct cross-border business.
Tax aspects: Keep an eye on benefits and agreements
An often underestimated aspect of living abroad is the tax regulationsMany countries offer expats or digital nomads tax incentives or special regulations that can significantly reduce their tax burden. It is therefore essential to obtain comprehensive information about the tax regulations in the destination country in advance and, if necessary, seek professional tax advice.
A key instrument for avoiding double taxation is double taxation agreement (DTA)These international treaties regulate which country has the right to tax certain types of income, thus preventing income from being fully taxed in both the home country and the host country. Germany has concluded double taxation agreements with numerous countries worldwide, which are of great relevance to German expats.
Some countries also offer targeted tax benefits to expats during the first years of their stay to attract international talent and investment. A prominent example is Portugal with its Non-Habitual Resident (NHR) schemeThis scheme, which has existed since 2009 and is enjoying great popularity, offers significant tax relief for new tax residents in Portugal on certain types of income, often for a period of ten years. Similar programs exist in other countries, such as Italy (flat tax for new residents), Greece (non-domicile status), and Cyprus (non-domicile status). Knowledge of and use of such schemes can significantly improve an expat's financial situation.
Using local networks and services: Integration and savings potential
In order to successfully save money as an expat abroad and to settle in quickly, the construction and use of local networks and online communities of great importance. Exchanging ideas with other expats who have already gained experience in the host country, as well as with locals, often provides invaluable tips. Platforms like Meetup.com allow you to quickly meet new people with similar interests and get involved in local groups. Facebook groups specifically created for expats in a particular city or region are also an excellent source of information and recommendations.
Through this exchange, expats can receive recommendations for affordable services, such as tradespeople, doctors, or language schools. They are made aware of local events, offers, or special promotions that are often hidden from tourists or newcomers. Platforms like Facebook Marketplace or local classifieds portals are useful tools for finding used goods at reasonable prices, whether it's furniture, household appliances, or clothing. Buying used items is not only cost-effective but also promotes the circular economy and helps conserve resources.
Building a local network not only promotes financial efficiency but also social integration, which is of great importance for an expat's overall well-being.
Successful expat life through forward-looking financial planning
Moving abroad for your career undoubtedly offers numerous advantages and freedoms, but it also requires careful and forward-looking financial planning. A precise analysis of living costs, choosing the right bank account with a local IBAN, utilizing multi-currency accounts for efficient payments, and understanding tax advantages are crucial pillars for successful financial management abroad. Furthermore, building local networks and taking advantage of regional services not only facilitates integration but also offers additional savings potential. Those who consider these aspects can overcome the financial challenges and fully focus on the professional and personal opportunities that life in a foreign country offers.