Tuesday, April 17, 2012

What's That? Wednesday: Finances & Taxes

Happy Tax Return day!  I received an email from a college friend a few weeks ago and she had some great questions about how finances and money work while living in a foreign country. This was one of the biggest questions I had before we moved, too.  Since it’s that time of year, I thought it would make an appropriate blog post. I’m using my friend’s questions as a guide for this post.  I hope you learn something, too!

1)  Do you have debit cards tied to your US banks or did you have to open an account in China?  We actually have both.  Our US debit card with our local credit union works here.  The only problem is that every time we use it, there is a fee from our credit union, a fee from the ATM here in China and an exchange fee.  It’s not a lot, but we use Quicken to track our expenses and it very annoying to type in a series of debit fees for under a $1.00.  Because China is primarily cash based anyway, we tend to make one big withdrawal for cash instead of individual debit purchases.  We also have a debit card with China Construction bank...well, actually just Jamie.  At our bank, you cannot open a joint savings account, only a joint credit card account.  For now, we just have the one savings account and use Jamie’s card.  He needed an in-country bank account for the company to deposit reimbursements for travel, etc.

2)  Do you get paid in Yuan or USD?  We are paid in US dollars.  It is deposited into our US savings account just like it was when we were living in Illinois.  Then, we decide how to transfer/withdraw the money.  The company will pay the $35 to wire transfer money to our Chinese bank account one time a month.  The only problem is that the money remains in US dollars until Jamie (since the account is in his name only) can go into our bank in China with his passport and ask to have the US dollars changed into Chinese Yuan.  This is why it would be very helpful to have joint accounts so that I could do that during the week and not wait for a Saturday when Jamie can go in during business hours.  Most recently we have just used our savings account in the US for cash withdrawals and avoided the whole thing all together.  I could also get my own savings account in China, but I just haven’t taken the time to do it.

3)  How do you pay bills - do you have a consolidated bill for your apartment that includes utilities and you just pay one entity or do you have to pay several like we often do here?  To pay for our bills in China our Realty Agency consolidates the rent, utilities, and our telephone and internet into an itemized bill, this is then sent to Jamie’s work where we arrange payment.  For any bills that we owe in the US, we handle it through our credit union.  A very special lady at our credit union and her staff collect all of our mail.  It is sorted and any bills that they receive are scanned and emailed to us and we make a decision as to how and when it needs to be paid and the credit union cuts a check.  Most of our remaining bills and monthly expenses in the US (credit cards, retirement accounts, college funds, etc.) are set up for monthly automatic transfer anyway, so it’s the few random yearly bills (professional liability insurance, etc.) that we are emailed about.  The credit union will also write checks for us that we have requested such as charitable donations, checks for birthdays & weddings, and orders that I have placed.  The credit union will also collect any checks that are mailed to us for birthdays and holidays and deposit them for us.  At Christmas-time, some people will have things they’ve ordered in the US sent to the credit union and pick up everything there when they are back in the US.  The credit union also sends us a mail packet once a month with the bills they’ve paid, our magazine subscriptions, cards and other mail they think we might be interested in.  It’s very exciting to get the mail packet!

4)  I assume you budget - is it harder to budget in China than it was in the US?  We did budget in the US and I faithfully entered in everything into Quicken.  I could have told you my monthly McDonald’s large iced tea expenses if you wanted to know!  Things are a little more relaxed now.  Because we are paying cash for so many things (it’s the Chinese way), I don’t spend nearly as much time entering receipts into Quicken.  At the beginning of the month I do set aside the cash we need to pay our driver for gas and tolls, our Ayi’s monthly salary and EBean’s preschool tuition.  I always want to make sure I have the cash needed to pay our driver and Ayi in a timely manner because it is their livelihood and I take it very seriously.  In China it’s good to have a lot of Chinese RMB on hand, because things just seem to come up and, all of a sudden, someone needs to be paid today for something and they only accept cash or the debit card machine is not working at a store and I end up using cash anyway.  At first it was difficult, but now I know, on average, how much we spend on groceries, eating out, etc. and it has worked out fine to use cash.  I do not miss all the time at the computer entering receipts!

Home sweet Illinois home!
5)  What is going on with your house back in IL?  Does the company take it over until you return or do you rent it out?  Because our assignment is supposed to be on the shorter side (under three years), and we had only lived in our house for two years, we decided not sell it.  We are using a local rental property management company.  I had expected the house to sit unoccupied for a few months, but we were able to find renters before we had even flown out of the country.

Do you think my I.O.U
would be accepted?
Jamie’s company provides tax preparation and filing services for their employees living abroad.  I cannot imagine trying to work my way through all those forms and rules.  I’m very thankful that we are not responsible for that!  Not only is Jamie taxed in the US, but his income is also taxed in China.

My lovely assistant was too busy cleaning
to take a picture, so I had to improvise!


  1. Lots of good info. Think I might need your contact at the credit union ;-) and taxes.... So glad they take care of them. Couldn't even begin to imagine doing them correctly