Get Bills and Banking Under Control Before Going Overseas

Getting transferred to a job in a foreign country can be an adventure, just as long as you get your finances in order before boarding the plane.

Simple tasks like making sure that credit card bills aren’t late, the bank gets your mortgage payment and your paycheck goes where you can get to it can be a nightmare from thousands of miles away, bankers and accountants say.

“It’s kind of like leading a double life,” said Dwight Raiford, who manages a banking program at Citibank for people who work abroad. “And it’s not simple.”

It’s a dilemma facing a growing number of people as manufacturers, service firms and other companies send more employees to foreign lands in search of profits, international transfer consultants say. The latest Internal Revenue Service figures show 257,000 people took a popular expatriate income deduction in 1994, up 16% from 1991.

“In the short term, it can be a pain in the neck,” said Jon Zehner, a 39-year-old J.P. Morgan & Co. investment banker who’s moving to London from New York in August for a second time.

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Bankers, accountants and veterans of foreign transfers offer the following tips for employees making overseas moves.

Be sure your money is in a U.S. bank with cash machines on an international network. This allows you to get funds automatically, in local currency, for a fee of a couple of dollars--an easy, low-cost way to draw from your home account. Make sure your paycheck is deposited directly into your U.S. account so you have access to it instantly.

Arrange to have bills that are the same every month, like a mortgage or insurance payment, deducted automatically from your checking account--a service that’s usually free.

Figure out how long it takes mail to move to and from your new country of residence. If the mail moves at a snail’s pace, your Visa payment, for example, could arrive late, costing late fees of $15 to $20 and eventually tarnishing your credit. One option is having your bills paid for you, but it’s not cheap. Citibank, for example, will pay any bill for $6 a pop.

Most big banks, including Chase Manhattan Corp. and Wells Fargo & Co., offer computer banking services that allow you to pay bills instantly from anywhere. (Don’t forget to change the address on your bills to your new location.)

Then there’s the question of what to do if you own a home. The best option is to rent it out while away because it makes it easier to settle in when you return, said Sydelle Weinberger, a partner in the international assignment group at Price Waterhouse.

If you decide to sell, the IRS gives you up to four years to reinvest the proceeds in another home without getting hit with a capital gains tax if you’re on an international assignment. After four years, you’re stuck with the tax.

Owning a home abroad can be complicated because tax rules on foreign exchange gains from the sale of property and other hidden tax costs can apply.

U.S. citizens working abroad may come out ahead with the tax collector because the IRS exempts the first $70,000 in income, plus housing expenses, from taxes for people who spend the full year abroad. Expatriates are still responsible for paying taxes locally, which can be lower than U.S. rates in some countries.

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Once you get off the plane, its a good idea to open a checking account to pay your rent, utilities and other bills. You can arrange to have a certain amount of money transferred periodically from your home account to cover expenses. At $30 per transaction, such international transfers can be costly.

Spend some time learning the value of the local currency and figuring out how much cash you’ll need to live. Weinberger recommends writing down every dollar--or whatever the currency is called--you spend for two weeks.

“It’s helpful for people to understand what their cash flow will be,” said Weinberger. “When you first come over you won’t really have a flavor for what your living expenses will be.”

Also, make sure you understand the preferred payment methods. Many countries haven’t embraced credit cards and checks like the U.S.

The idiosyncrasies of handling money in a foreign country are enough to stump even the sharpest financier. Zehner, who specializes in structuring complex, multimillion-dollar real estate investments, recalls being turned away from a London department store a few years ago. He and his wife had made the mistake of trying to pay for appliances with a credit card. Like many U.K. businesses, the store only took cash and debit cards, which electronically subtract purchases from a bank account.

Zehner had to scrounge up some cash and return to the store.

Most expatriates get a lot of help from their employers when sent abroad, including one trip home a year with the family, help with school tuition and extra pay to supplement the higher prices to cover goods, services and housing.

“Moving abroad is a very exciting opportunity,” said Ilene L. Dolins, senior vice president at Windham International, a consulting firm that specializes in international transfers. “But people often rank the trauma of an international relocation up with a major life experience.”