Sara Ready CFP®
Certified Financial Planner® professional
Sara joined us in August, 2016. Previously, she spent two years as a credit counsellor at InCharge Canada, and four years at Tangerine Bank as a mutual fund representative where she received the annual Good Guy award (it should have been renamed the “Good Gal” award)!
Receiving an offer for a job in another country is an exciting event. Think of all the travel / skiing / surfing / whatever you’ll do! The adventures you’ll have! The unexpected list of friends who will be suddenly keen to visit you!
But before you sign on that dotted line, here’s a list of factors to consider and actions to take.
Cost of living
In the new country, will your living expenses vary substantially? Will publicly-funded medical care or education for minor children be sufficient, or will these expenses needed to be funded out of pocket, or through private insurance?
Here’s a link to a worldwide cost of living comparison relative to the US. Canada shows up with a slightly lower cost of living overall; however, there may be significant regional differences in your new country just as there are across Canada.
If you want to purchase a home/condo when you move, make sure you research real estate prices and mortgage interest rates.
Action: Factor any significant differences in cost of living, real estate, and mortgage interest rates into your desired level of compensation.
Moving costs
Between flights and shipping costs, the cost of the move can be substantial. You may also need to set aside funds for decorating, or replacing furniture that isn’t cost-effective to ship.
If you will be selling real estate in Canada as part of your relocation, you may face prepayment penalties on your mortgage. You will also face closing costs on the sale of your property.
Action: Consider asking your new employer to fund some or all of these moving expenses as part of your contract. CRA may consider your moving expenses tax deductible – here are the rules around that.
Family considerations
If this move involves bringing along your family, it’s important to consider if your partner is likely to find equivalent compensation soon after relocating. If this is not the case, your new income may need to be high enough to replace your existing household income for the foreseeable future, or you may need to make spending reductions.
The quality of public-school systems varies internationally. Private school for children may be desirable, a high and recurring cost that needs to be incorporated in your planning.
And for family you’ll be leaving behind, will you need to budget for increased travel costs to return to Canada, or to bring them to visit you?
Action: Schedule a discussion with your partner about their job plans, and, if applicable, schooling choices for your children. This is a biggie; you may want to do this away from home and distractions, in a spot where you can focus without interruption.
Taxes and benefits
What is the income tax rate on employment income in your target country as compared to your current province? Since you’ll be living on after-tax income, this factor will have a major impact on your day to day finances.
What workplace benefits are being offered? Does your current role provide any benefits such as workplace savings, health insurance, group life insurance or disability insurance? How does this compare to the position you’re considering?
What government benefits are available to retirees in your new country? Upon your departure from Canada, will the loss of future Old Age Security and Canada Pension Plan benefits accrual negatively impact you or will you have access to similar programs in your new country?
Action: Do the homework! Then factor relevant figures into your desired level of compensation.
Currency risk
Currency risk arises from the fluctuating exchange rates between two currencies.
If you leave your existing assets in Canadian currency upon your move, the future purchasing power of these assets in your new country will vary depending on future exchange rates, making it difficult for you to project what their purchasing power will be in the local currency.
Once you start earning an income in this new country, for any assets that you accumulate in that local currency, future currency fluctuations will impact the purchasing power of these assets when you return to Canada.
For any future pension entitlement, pensions will be paid in the same currency as where the pensions are located. As such, the purchasing power of pensions in another currency will vary month to month.
Action: This is a tough one to act on! Still, it doesn’t hurt to take a look at the past performance of the new currency you’ll be paid in; forewarned is forearmed.
Conclusion
Congratulations on your offer! Now, go into that negotiation stage well-informed, with realistic expectations and hard numbers to work with. Best of luck!
Rona Birenbaum is a certified Financial Planner and is licensed to do financial planning. Rona is registered through separate organizations for each purpose and as such, you may be dealing with more than one entity depending on the products purchased. Rona is registered through Caring-for-Clients for financial planning services. This website is not meant as a solicitation for financial advisory services. Financial advisory services are available through the facilities of Queensbury Strategies Inc. Financial Planning is not the business of or under the supervision of Queensbury Strategies Inc. and Queensbury will not be liable or responsible for such activities.
