One of the most difficult aspects of relocating overseas may be making the financial transition. It could take weeks to settle into a budget that supports your way of life, especially if babbling on a mobile phone and frequenting pricey restaurants is your thing.
Adapting to different spending patterns overseas is a personal process, just one component of acculturation. But with preplanning and research, you should have fewer surprises. Quantitative information like the US State Department's per diem rates and cost of living indexes can help you anticipate the fiscal logistics of relocation, but not without some reading between the lines.
Make the Figures Work for You
Cost of living figures provide a base idea of the salary you would need to maintain the lifestyle you are accustomed to. The figures indicate the price of a fixed basket of goods and services in locations throughout the world. And what goes into that basket? "Housing, of course, is a big one," explains Terry Stockham, an international consultant at Runzheimer International. "The other big ones are goods and services, which include food, furniture, clothing, alcohol, tobacco and entertainment. Transportation is another one."
These figures can be a precise indication of the differences in costs in places where the goods and services would be the same. But complex research is often required when you are evaluating the cost of relocating to a country with an entirely different culture, and therefore a very different basket of goods.
For example, when assessing the cost of long-term relocation to Singapore, Runzheimer International includes the expense of a live-in housekeeper. While having a housekeeper is generally considered an unnecessary luxury in the United States, it is a staple of bourgeois life in Singapore.
Know the Culture, Know Yourself
You may already notice that the figures, while helpful, may require some personal tailoring. Not everyone is going to consider alcohol and tobacco or even a maid as necessities. And one person's definition of entertainment could include several cost-free walks through the park.
Before you plan a budget, jot down what you typically spend your money on at home and try to determine how your spending habits might change when you move overseas. Having a firm sense of your spending priorities and the cultural standards of where you are moving to should help you gauge how to adjust the cost of living index and apply it to yourself.
There are still other considerations when examining these statistics. First of all, most cost of living figures do not include taxes; instead the estimates reflect spendable income, or the income after taxes. For this reason, it is imperative you familiarize yourself with the tax rates before assessing your budget's feasibility.
Cost of living figures can also be misleading, because the data generally hinges on the assumption that you have progressed beyond the level of tourist and can make well-informed choices about your consumption. This is not often the case for expatriates. "Expatriates tend to live in certain areas," says Stockham. "They stick together in communities and usually shop at similar places for their goods and services."
How Much Would You Pay for a Big Bowl of Borscht? Some cities are notoriously expensive. "Tokyo consistently ranks up there. Of course, New York, London, Paris and Moscow are also quite expensive," says Stockham. "I think it's just a matter of the real estate itself. Housing is one of the main costs. [Those] cities are very international, so you have a lot of major corporations competing for real estate."
According to Runzheimer International, an expatriate couple with one child living and working in Seoul, South Korea, would require more than three times the income of an identical family in Johannesburg, South Africa.
Runzheimer's research shows the amount that a United States family of three earning $100,000 a year would have required in various cities around the world in 2000.
The most expensive cities are:
* Seoul ($190,158).
* Tokyo ($185,181).
* London ($122,168).
* Moscow ($118,548).
* Buenos Aires ($105,551).
The least expensive are:
* Turin ($63,064).
* Toronto ($65,958).
* Brussels ($69,568).
* Bombay ($70,907).
US State Department Per Diem Rates
The US State Department updates its per diem rates monthly. These figures indicate the maximum supplementary stipends allotted to service people and their families in countries throughout the world and can give you a sense of the comparative costs of living.
Estimate the salary you might need in your expat city by first seeing what income is considered necessary to stay whole at home. Visit The Salary Wizard and research US cities. Try a move to notoriously expensive cities like New York or San Francisco, for example, if London or Paris are your possible destinations.
When calculating cost-of-living allowances, Runzheimer International usually assumes the company will want to keep the employee whole, meaning they will preserve the employee's lifestyle with respect to housing, goods and services, and transportation. "It's the most practical way to assess expenses," says Stockham. "An international assignment shouldn't be a windfall for an employee, but it shouldn't be an expense either."
When you relocate overseas, it's difficult to think in the right currency while trying to work out a viable budget. Often, individuals and corporations planning international relocation don't overlook details like the particular expenses they will incur, but rather they neglect the larger picture. "The thing that corporations overlook is the differences in costs overseas itself," says Stockham. With research, you can avoid this common mistake and stay whole.