Following the previous article, Vanessa shares her expat saving and job searching tips in a new country. She also discovers challenges for money management as an expat. Pinkfolio offers basic money advice for Canadian expats.
A Goal-oriented Saver and Saving Tips
Julie: Any other advice regarding personal finances based on your own experience?
Vanessa: I think I could have been more organized about my spending goals and had actual savings targets when I was younger. A few years ago, I started tracking my daily, weekly and monthly expenditures and realized that I could be saving a lot more each month if I cut back on unnecessary expenses. And so my first saving goal was very ambitious: 30% take-home income.
After I realized it was very do-able, I increased the saving target a bit. Every year, I write everything down: my monthly take-home income, then critical expenses (rent, utilities, cell phone, groceries, household essentials). From there, I classified the rest as non-essential expenses. If I overspend one month, I try to save a bit more the following month to balance it out.
- Setting a specific goal can motivate you to save more: Example: general goal “Save more” VS specific goal “save $4000 for a new car by putting $250 from each monthly paycheck into my savings account for 18 months.
- Saving does not mean that you cannot have a social life. Budget for your social and entertainment expenses wisely while cutting back meaningless spending.
Expat life: Full of excitement & challenges
Julie: 8 months ago you moved to Europe and got a cool job in an international startup. Any advice for those who want to try something similar?
Vanessa: I decided to take a break from my job and move with my boyfriend to the Netherlands where he was finishing up his degree. I spent first 6 months traveling, working on part-time projects, and mentoring European startups, which cost me 9 months worth of previous savings. The reality is you can’t really enjoy yourself without savings. I would advise you to first sit down and calculate all costs assuming you have no income for the first few months unless you have a job offer.
In terms of looking for a job, be fearless about putting yourself out there. Don’t be shy about what you are interested in and make yourself available for any opportunity. Ask everyone you know for potential contacts. Back in Toronto, I was more cautious about asking people for a favour, but now my perspective has totally changed. The worst thing that could happen is simply hearing “no”.
Once I got a job, things got easier, but we kept facing challenges. We had to pay a 3 month deposit for a new place but one of us had a visa issue and couldn’t get paid for 2 weeks. In Canada, we have a good credit history, and could have easily got a line of credit, but we are not too familiar with the local banking system in the Netherlands yet.
- Don’t forget to budget for your travel expenses and health insurance.
- Double check your credit cards’ conversion rate. It can be higher than you think.
Julie: What about your ongoing financial goals? Has your plan for long-term investment changed?
Vanessa: Moving to Amsterdam has definitely changed how I invest. After the significant spending in the first 6 months, I finally had a salary but how to invest? I couldn’t deposit my abroad earnings into a Canadian savings account (including TFSA) without being taxed.
In the Netherlands, most residents don’t save because they pay for pension, and the pension fund does investment for them. My company has many expats, but since we are all from different countries, it is hard to receive suitable advice for me specifically. Now I have to do some research to figure out what I should do next.
- Tax fundamentals for Canadian expats: The place where you make your income has the first right to tax but Canada can give you credit for the tax you have paid. If the tax rate is higher in the foreign country than in Canada, you won’t pay anything to Canada on that income. However, you still have to file taxes in both countries.
- Canadian expats can keep their TFSA and RRSP accounts open while residing overseas but they can’t contribute to them with foreign income. Their RRSP contribution limits apply only to income earned in Canada based on previous-year earnings.
- Expats have the option of investing in foreign financial products and then transferring your savings and investment portfolio back home. On the other hand, you can invest in Canadian securities by converting foreign income into Canadian dollars. Here is a worthwhile reading article.