The Western Union Business Solutions Learning Center is a blog provided for general informational purposes only and should not be construed as legal, financial, tax or accounting advice. Consult your own independent advisors regarding your particular needs and circumstances.
It’s easy to get caught up in the beauty and culture of another country when considering it as a new home base. Yet, the excitement of living abroad can quickly be extinguished if an individual has underestimated the cost of maintaining a certain lifestyle there.
One of the best ways to balance individuals’ needs with their pocketbooks — and avoid underestimating the true cost of going abroad — is to determine the cost of living in the new country.
“It’s imperative to research everything from exchange rate forecasts to apartment and housing costs to everyday items like gym memberships and grocery bills,” says Pete Meyers, vice president of New York-based EuroCheapo, a website that offers expert reviews of Europe’s budget hotels. “It’s an easy trap to only factor in the big ticket items and forget the smaller ones that really pack a bigger fiscal punch.”
— Pete Meyers, vice president of EuroCheapo
While relocation services can take care of the weightier decisions, dedicating extra time to the following international expenses will help individuals maintain a budget that fits their finances once they’ve arrived.
Whether an individual is traveling for two months or two years, renting or purchasing a home abroad is a major cost to consider. Individuals should look at how rent works — from billing frequency to how local real estate agencies operate and structure their agency fees.
Local real estate agents can help individuals learn about the average cost of rent and property purchases in the area. Plus, they can help “walk you through all the idiosyncrasies of your new city,” Meyers says.
Utilities can be complicated — especially if they aren’t included in the rent — so individuals should know what to expect in terms of monthly averages.
Derek Capo, CEO of Next Step China, a relocation service company with a focus on studying, teaching and interning in China with offices in Beijing and Shanghai, says individuals can hire a relocation service or search “utility of” plus “country name” to find a list of local utility companies. Then, search on the companies’ websites to find information about rate structures.
To budget for groceries, survey local stores to see the kinds of products they offer and their price ranges. In China, for example, there are high-end chains and chains controlled by the government. Given that they cater to locals and need to be affordable, the local convenience stores may keep individuals under budget, but they won’t have foreign products and could have lower-quality items, Capo says. To obtain a realistic understanding of costs, individuals should research prices at the stores they are most likely to frequent.
Websites like Xpatulator and Expatistan can also help individuals gauge international expenses, says Suzanne Garber, chief networking officer at International SOS based in Singapore, which helps organizations manage health and security risks for individuals who travel and live abroad. Expatistan.com, for example, is a website that shows a side-by-side comparison of cities. Simply type in the name of two cities, and it immediately generates a list of common categories like food, clothing and rent with a percent signifying how much more or less expensive that city is for that item.
Foreign exchange rates are one of the most crucial details that individuals should pay attention to and factor into their decision-making process. If a domestic currency is significantly weaker than a foreign currency, individuals will have far less purchasing power abroad. On the other hand, if the domestic currency is stronger than the foreign currency, individuals’ dollars will go further.
Regardless of a currency’s standing today, it’s important to realize that the dynamics of any currency pairing may change at any time. For example, as the U.S. attempted to negotiate a high-stakes budget deal in the winter of 2012, the U.S. dollar’s value decreased against the euro primarily due to uncertainty over potential U.S. budget cuts and tax hikes. At the same time, the Canadian dollar declined in value compared to most other major currencies on fear that its biggest trade partner, the U.S., could slide back into recession.
Individuals should also put some forethought into how they’ll exchange currencies in another country. There may be a variety of currency exchange locations, but Capo says individuals should avoid making transactions at airports or currency exchange offices. “The fees are exorbitant, ranging from 10 to 15 percent,” he says.
Individuals can avoid paying higher prices for last-minute conversions by capturing optimal exchange rates using an online foreign exchange service. These services typically cost less than banks’ currency exchange services, and funds can be sent quickly and directly to individuals and their foreign bank accounts.
Among the numerous considerations before traveling abroad, determining the cost of living in another country will make it easier to maintain a budget — and minimize surprises upon arrival.
Example: 1USD = xx INR
Have an ideal rate in mind? Set up a Market Alert, and we’ll email you if your rate becomes available.Set Rate Alert