Friday, April 06, 2007

Expat Frugality

One contributor to our retirement savings was the 3-1/2 years we spent as an expat. Expat is short for expatriate, which is an employee doing an assignment in a foreign country. During the time as an expat, I was paid base salary plus "cost of living" adjustments to work in a foreign country. In that 3 1/2 years, we were able to save about the equivalent my home country salary every year. We achieved this savings increase primarily by being Frugal Expats, which by the way is an oxymoron:-). Here's how we did it:

Our company provided the following adjustments:

  • Pay increase for hardship. The hardship was for relocation, transition challenges, and living in a different culture.

  • Cost of living adjustment. This was provided to pay the premium for buying home country goods and food. In our case it was about 50% of after tax income.

  • Housing and utility allowances. Again this was provided to enable the same lifestyle as our home country. By the way, our housing allowance was 9 times what we were paying in our home country. However, this was paid directly to the landlord and we never handled the money.

  • Home leave allowance. This was the cost of a full fare ticket home for each member of the family.

  • Private education costs. Each child's private education through 12th grade was covered completely.

  • Net, expats from our company were receiving about up to 70% above the home country base salary every month in cash.
    For most of my colleagues, the expat windfall was a bonus to be spent. Most people spent every cent of the expat allowance. People could live at two times their normal lifestyle. One colleague shared that taking a major vacation several times a year was a breeze, because the expat allowance essentially covered the costs.
    Our approach was to continue living close to the lifestyle we had in our home country. We realized our time as Expats was short and not the norm. Here's what we did:

  • Lived in the local community. We had a choice of living in the expat community or in the local community. We chose the local community for several reasons. First, we wanted to experience the country in which we were living. The expat community was almost like living in at home. For example, one could avoid learning the local language. Second, the costs of housing in the Expat community was about 20% higher. (We received a rebate from the company for 10% of the savings in our housing costs.:-) Third, we thought it would be more fun.

  • Lived like the locals. We learned to shop, eat, travel and entertain ourselves like the locals. Besides learning more about the local culture, we found we could actually live within our home country budget. Thus, we didn't need to use a significant part of our cost of living allowance

  • Used local discounts. I quickly learned there was a discount mentality and economy in the country. I could pay full fare tickets through the airlines or get 75% off on a discount ticket through local brokers. There were also many seasonal travel discounts that were available, if one learned about local customs. This cut our vacation costs and home leave trip costs significantly and enabled us to stretch our home leave allowance to five to six trips.

  • Used local advantages. For example, most of my colleagues owned a car. We decided we did not need a car. The area in which we lived had excellent public transportation in the form of trains, buses and taxis. It cost far less to use public transportation than to drive. Even people that had cars tended to use public transportation over 50% of the time.

  • Frugal even when extravagant. We did take advantage of being in another country and took more "big" vacations to foreign countries than usual. However, we were able to tie some to my business trips, use discount ticket and frequent flier benefits. In addition, we did the majority of vacations in the country in which were located. While we took vacations to Hawaii, Australia, Hong Kong, South Korea and Thailand, we also did dozens of trips within Japan to Tokyo, Hiroshima, Kyoto, Okinawa, Mount Fuji (which I climbed), Miyajima and other Japanese cities of note.

  • Our transition back to our home country was easier than for some of my colleagues. While overseas, we had not grown used to living on 170% of my normal income. By learning to be frugal like the locals, we only lived on 80% of my home country income and were still able to enjoy being in a foreign country and culture.

    For more on Reaping the Rewards , check back every Friday new segment.
    Photo Credit:, Ida Hansson Brusewitz

    This is not financial advice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC


    Anonymous said...

    Thanks for sharing. I would love to see more details on being an expat & finances -- it looks like I have an upcoming assignment myself later this year.

    frugal zeitgeist said...

    I lived overseas as well, same place (if Kinkakuji represents where you went!). I saved like a madwoman for grad school and it really made a difference. I have a friend who is there now with her husband, who picked up an expat assignment. Unfortunately, they've adjusted (and I don't mean in a good way) to the income differential. I'm afraid that coming back will be a nasty shock for them.

    Super Saver said...

    2 Million,

    Congratulations. An expat assignment can be a great experience. I have at least 2 more posts planned on an expat topic.

    Frugal Zeitgeist,

    Yes, Kinkakuji represents the country of our expat assignment :-)
    We had a great time living in Japan.