“Don’t tell me what you value, show me your budget, and I’ll tell you what you value.” –Joe Biden
One of our biggest challenges in planning for retirement abroad was creating a realistic budget before we jumped into a new life. After our ‘pretirement’ experiment in Nicaragua in 2004-05, we set a goal to become financially independent. Many articles have been written about adjusting and assimilating into a different culture, but few articles stress the importance of financial planning before making the big jump.
- Do you want cheap or comfortable?
I’m telling you now, stop reading those International Living articles on how to retire abroad cheaply. They entice you with cheap locales around the world for their own vested interests…mainly for real-estate development and high-priced seminars.
Instead, go to the source… talk to experienced expats, follow expat blogs, and avoid the articles on the internet that want to sell you paradise. Paradise does NOT exist anywhere in the world. In Nicaragua, to live a lifestyle in which you are accustomed, it may take more than your monthly pension or Social Security provides. For example, if you are accustomed to living with air conditioning, a dishwasher, hot water, fast internet, and all the amenities of a comfortable lifestyle…expect to pay more.
The bottom line in Nicaragua for comfortable living in which you are accustomed and prefer is more than $1,000 a month. Of course, you can live a cheaper life without all the fancy amenities, but you have to ask yourself, “Is this the kind of lifestyle I want?” “Will I be happy and challenged or merely existing and struggling on a low monthly income?”
- Save for Unexpected Health Care Expenses
You’ve retired abroad, and are happy living on your monthly pension, then WHAM…you are in an accident or you get very sick with a mysterious tropical disease. Do you have a financial back-up plan?
My next post in the Let’s Get Real Series will cover Health Care in Nicaragua, so I won’t go into much detail here. However, I can’t stress enough, the importance of financial planning for health care emergencies. Before your move abroad, make sure that you have a savings account that you only use for medical emergencies abroad.
Depending on the country in which you retire, the country may or may not have health insurance for retired expats. If you have a serious or life-threatening health emergency, you will always need a way to get access to cash quickly…for a deductible, for procedures not covered under your health insurance plan, or for miscellaneous procedures where it is cheaper to pay out-of-pocket than to file a claim with your healthcare provider.
Do you know what the borrowing limit is on your credit card? If you have an emergency in Nicaragua and need to go to Vivian Pellas Hospital in Managua, then your credit card will be charged before any procedure takes place. What happens if your credit card limit is $2,000 and the operation you need costs $16,000 and you have No other means to pay, no savings, nada?
- Do You Want to be House Poor?
You sold your family house and most of your inexpensive belongings and retired abroad. You bought a darling old colonial house in a quaint cosmopolitan city abroad. Congratulations! You worked hard remodeling and furnishing your darling old home with a container of your precious belongings expensively shipped to your new abode, and now you want to relax and settle into life abroad.
But, wait! The roof leaks like a sieve and needs to be replaced? The new pool leaks? You have to pay property taxes? Your title isn’t legal? You need to hire a lawyer? The geckos are pooping all over your expensive paintings you shipped to your darling home? Your library of expensive books that you shipped has been destroyed by the humidity and rain? The roof cats are eating what?
Your new friends invited you to join them at a restaurant for drinks and dinner or a travel club to explore your adopted country. But wait! You can’t attend any of these fun activities because you have joined the ranks of the house poor expats. All of your expendable money is invested in a giant house with unexpected expenses.
In Nicaragua, it may take years to sell a house. Your options will be limited unless you plan financially before buying a house abroad that turns into a money pit nightmare.
- Are you a Gringo Gourmet?
You packed your Henckels Professional S 8-Inch Chef Knife and are excited about spending your retirement abroad creating tasty treats unknown in your adopted country. You salivate through the grocery store isles, eagerly anticipating your first foreign culinary experience. But wait! Where are all my favorite ingredients? Why are they so damn expensive?
I know, I know. You thought that you would be able to retire abroad and everything would be cheaper than your home country, right? I hate to burst your culinary bubble, but if you want imported ingredients, you will pay dearly for them. Include the cost of imported ingredients in your food budget before moving abroad. Either that, or learn to cook the “Nica way” if you retire to Nicaragua, or learn how to substitute local ingredients for the high-priced imported ones.
- Legal or Perpetual Tourist Status?
You’ve lived abroad for three years! Congratulations. You feel like you have beaten the odds. Most expat retirees have a shelf-life of three years before they decide that this life is for them or isn’t for them. Like in the Wizard of Oz, “People come and go so quickly around here.”
The time has come for you to decide if you want to apply for Pensionado Visa status or continue to cross the border every 90 days to renew your visa. Receiving your 5 year cedula with a Pensionado Visa status in Nicaragua is not cheap or easy. We spent over $2,000 for our Pensionado Visas, not including the price of numerous trips back to the states to get our documents.
There are many excellent articles about the procedures for applying for legal residency status abroad. Only you can decide if this is the right thing for you. Illegal Immigrants and Perpetual Tourists in Nicaragua.
Budget wisely for this expense. Remember, if you choose to remain a perpetual tourist, then there may be hassles at the border if you cross over for years and years to renew your visa. Also, you cannot work legally in most countries abroad on a tourist visa. On a Pensionado Visa in Nicaragua, in most cases you cannot work either.
I am not an expert on financial planning, but we have lived abroad long enough to see some disastrous situations with expats who have not planned ahead or considered what is needed in making a budget for a new life in a foreign country. I am only trying to help. 🙂 Please don’t shoot the messenger.
It is easy to see from our budget and financial planning what we value and what is important to us, namely living in a world without borders and our passions for cultural immersion.
What does your budget show that you value most in your life?