Visa-vis Part 4: Planning your finances
Living abroad isn’t cheap so how can you make it work?
This is part of our Visa-vis collection where we
talk about applying for our long-term visitor visas for France.
by Vincent
Just for a bit of context—Céleste and I are not retirees nor do we dive into our personal vault of coins each day like Scrooge McDuck. We’re not too far out of college and we don’t have kids yet—we’re laden with student debt, we don’t have a house, and my career in years can be counted on one hand. We wanted to live somewhere else, somewhere more than just down the street or a different state, we wanted a new experience before we started a family. That’s why we chose France. We’re just two kids with a big dream.
With that in mind, all I can offer is some practical tips and tell you how I went about planning finances for our trip.
Work, if you can
When we had initially planned on living in France, it was with the intention to stay there 11 months. The only way we could afford to do this was if I worked. I let my employer know my intentions and things were looking good for a long time—until it didn’t end up working out and we had to make drastic changes to our timeline.
If you’re able to, try to work out something so you can work while you’re abroad. This is not an easy thing to do, if our experience has anything to say. There was nothing wrong with telecommuting from an immigration perspective. The visa office didn’t have any issues with me working for my US employer. The complication was with the tax laws. If I work in France, even for a US employer and even telecommuting, I am considered a French tax resident. Normally this isn’t an issue—the US has a tax treaty to prevent double taxation and we have a Social Security Totalization Agreement which says my US employer only has to pay social security tax in the US. However, the issue is because we were going on a visitor’s visa, I wasn’t working in an “official” capacity for my employer and thus was not covered under the totalization agreement—causing issues with taxes for my employer. If my employer decided to “transfer” me to the French office, I may have a chance to work and it would be official but I would need a work visa—this is something that may still happen while we’re here but I’m not expecting a miracle. Instead, we’re planning on a six month sabbatical which is where financial planning really comes into play.
Save up enough to cover most of your stay
Even with the assumption I was going to work, we had been saving up for this trip for two years—we knew we wanted to live somewhere and we figured it would be abroad so we kept putting some of our paychecks into our savings account. Both Céleste and I were working and I set up a percentage of each paycheck (for both of us) to be deposited into our savings account. I highly recommend doing this in general—it’s just a good practice and provides a constant investment in your long-term savings for emergencies—or long extended vacations.
Pay down your debt
We were students not long ago and we have the joy of paying off those loans. When we found out I couldn’t work, I had to take some action on our loans because they made up almost half of our monthly expenses (and it’s a lot). What you can do is put your loans on forbearance. This is different than deferment but I’m not sure how—they both postpone loan payments but you need a qualifying event to be eligible for deferment whereas forbearance you can request anytime. I requested forbearance on our student loans to delay the inevitable—unfortunately this also means we’ll accumulate interest while the loan is unpaid so we’ll have to double down when we get back.
This was a drastic measure we had to take because we only had two weeks notice that I couldn’t work—if you’re planning in advance you have the luxury of time. I would highly recommend paying down your loans in advance by making payments over your minimum. Once one loan is paid off (car loans, etc.) just redirect the same payment you’ve been making to another loan (this is usually called “snowballing”). You’ll be very tempted not to do this, but this is an effective way to pay your debt down quicker. For example, my car is almost paid off—let’s say it was $250 per month. Once it is paid off, I will just increase the monthly payment I make towards another loan by $250. This will pay that loan off quicker and I will do the same thing once that is paid off—put $250 + that payment towards yet another loan. Effectively I will be maintaining a constant level of payments but they will be applied towards less loans over time as they are paid off. It seems like an impossible task to pay off all that debt but over time this will make a huge difference. The other tip I have is to make principal payments, that is payments that are paying off the principal not the interest. If you reduce your overall principal, you will accumulate less interest over time. Most payment providers let you do this manually.
Rent a storage unit and stop your apartment lease
This only applies to renters like ourselves. In the US we had an apartment and since we knew we’d be moving sometime within 2014, when we renewed our lease last year we switched to a month-to-month lease. This let us put in two months notice and let us line up stopping our US lease when our French lease went into effect. We were able to get it so we only paid rent for both apartments once (the month we left). If you’re really good, you could line up your departure dates in such a way the leases don’t overlap—with more advance notice we could have done this since we left at the end of the month and if we had waited a bit longer we wouldn’t have needed to rent the French apartment for the month we departed.
In the month before we left, we rented a storage unit (a 7 x 10). This was just enough to fit everything we owned and we had to sell a few big items to ensure we had enough room. Renting a storage unit was much more cost effective than keeping our US apartment.
Eliminate any non-essential services
If you’re really looking to travel on a budget you need to keep your extraneous expenses to a minimum. For us, this meant canceling or suspending a bunch of the services we were using in the US—Audible, GameFly, Spotify, and more. Each subscription service wasn’t a lot by itself but over time it can dig into your budget. We didn’t cancel Netflix since we were going to use it in France but everything else we either didn’t need or didn’t apply while we were abroad.
Plan conservatively
When I planned our budget for the 6 months we’d be in France, I planned conservatively with higher estimates than I actually expected. For example, if in the US we usually spent $1500 per month on discretionary expenses, I planned on $2000 while in France. In reality, it might be less but it made sure we planned for a higher budget just in case. For any expected income (like a tax return) I estimated low even if past income was higher.
I also set up the spreadsheet to have calculated monthly ending balances to project for the future. I included previous months’ balances as well as projected future balances up to the time we return to the States. I plan to update the balances with the true ending balances each month to keep the estimates up-to-date.
Take on more debt
I really wouldn’t recommend this as a good thing to do but sometimes you may not have much choice. You do have the option to take a personal loan to help cover expected expenses. For example, if you know you will be paying 4 months of rent on your French apartment, you can take out a personal loan that covers that rent in total. Just try to make sure that once you get back you pay that loan off as fast as possible as usually personal loans (especially unsecured) have high interest rates. A secured personal loan will have a lower rate but the limit you can take out might be dependent on what you use as collateral (like a car or home). Another option to look into is taking out a loan from your 401K. This should be a last resort since this will affect your ending retirement balance so if you do go this route, make sure to keep that in mind and weigh the risks.
The other practical advice I can give you about this option is that everyone has debt—if you wait until you don’t have any, you’ll be waiting a long time. If this is a once-in-a-lifetime experience maybe it’s worth the extra burden—what use is making money and saving up if you’re not going to live life a little, right? Most people stay in one place their entire life, now is your chance to have a brand new experience you’ll never forget.
There you have it
Those are the practical tips I can give—really the important thing is having enough money to cover your trip and return (i.e. finding an apartment or place to live when you get back, resuming payments, etc.). However you do that is up to you but I hope this helps.
