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Tag: london

How Moving to Another Country Changed Got Me on the Path to FI

I’ve been thinking about how I got into Financial Independence and why I decided to pursue it. I think part of it was actually moving to London for a short time. Why was that? Well I wanted to write about that how I became more into FI.

Less Stuff

When I moved, I didn’t bring a lot of things I had accumulated like my books, my electronics, and a few other things I couldn’t take across the ocean. By doing this, I realized I didn’t need nearly as many of the things I had accumulated over the years to live a good life. Granted I did miss a few things I grown accustomed to, but I also learned ways I could get around it.

Started Watching Less TV

Britain requires a TV license to watch live TV, which is essentially a tax I didn’t want to pay. So no TV meant, I had to rely on other things for entertainment. Good thing was London has a bunch of free things to check out like museums, but also there’s plenty of good stuff on podcasts, YouTube, and the Library. Not having a TV meant I ended up reading more as well, and some how I stumbled onto FI with the reading.

Travel Rewards 101: British Edition

Travel Hacking Tool Kit

I covered travel rewards a few weeks ago and commenter Mr. Robot asked:

This sounds pretty awesome but I’m guessing this only applies to US residents and not European?

The answer is yes, though with some caveats:

  • Two of the major flexible rewards providers, Chase and Citi, do not offer credit cards outside the US.
  • The sign-up bonuses are not nearly as good as the American cards.

However, it’s totally possible to travel hack a free trip with cards. I thought I’d take the opportunity to demonstrate one with the same tools I used before in my previous post, though with different cards. This time, we’ll take a trip from London, England to Prague, Czech Republic.

Taxes and Investing as an American in the UK

As I mention in my last post, I currently live in London, England. However, as an American citizen living abroad, reaching financial independence becomes more difficult as I describe below. So what does that mean for folks who want to be financially independent? I’m going to run down the steps I’ve gathered from information sources around the net and speaking to several advisors. Hopefully this helps you with your investments like it did for me.

(Disclaimer: Please note the standard disclaimer here applies. I am presenting my own experiences that have been presented to me by others who have researched this topic. I have done my best to distill it down as a simple action plan. However, as I illustrate below, there are a surprisingly large amount of people willing to trade their time to help you. Please do consult a professional with your situation.)

The Main Problem – Taxes

If you could boil it down to one problem, though, it would have to be taxes. Unlike most countries in the world besides Eritrea, the United States government taxes its citizens and residency card holders even when they are not living in the US. So Americans working and living abroad have to worry about taxes in two different tax jurisdictions. One break you do get from the US government though is the foreign earned income exclusion, meaning you won’t be taxed on any of your income if you make less than $103,900 in 2018, but you’ll still have to file taxes every year.

Because of the tax reporting requirements of American citizens living abroad, most investment companies (even American ones like Vanguard) don’t want to deal with Americans living abroad. They won’t just shut down your accounts of course, so if you’ve been investing you will be ok. But for the beginners, without a US address (or for those of you who attempt to have your mail sent to your new address), you won’t be able to open a new account.

There are also all sorts of tax rules involving investing in index funds in other countries. Those tax rules can negate the gains greatly. I don’t want to go into it here, because I don’t really understand it well, but look up Passive Foreign Investment Company or PFIC when you get the chance. Please note this doesn’t apply to individual stocks though, but we all know how hard it is to pick individual stock

The FI community starts with a do it yourself attitude, and while admirable, this is probably not the place for it (at least not at first). Your UK taxes will be easy as the government does your taxes for you. However, you are going to want help filing your tax returns in the US from one of the US expat tax firms out there (there are a few of them out there).

Update: I found a pretty good guide on taxes for US citizens living in the UK.