Wednesday, December 31, 2014

Foreign Service and Personal Finances

One big thing I look back on at the end of the year is our personal finances. This year I'm sharing something about that since it was a big transition year. One thing my wife and I debated for a long time was if we could afford to take the plunge into the Foreign Service. We had great paying Civil Service jobs in the DC area, but our pay was offset by the great sucking expenses of DC area living. It made us wonder if it was truly worth it to stick with those careers.

I heard from many of my new hire classmates that joining the Foreign Service was a pay cut. This was true for me and very true for my wife as she became a "trailing spouse" and quit her job. I knew she could eventually get some sort of embassy employment but nothing like she was making before.

The pay you may see on the job advertisement isn't the only consideration for this kind of career. The Foreign Service has many monetary benefits to ease living overseas. We get a cost of living allowance in high priced countries like Sweden and there's other pays to offset hardship conditions in other countries so each tour will be financially different.

They provide us housing and utilities while living overseas. We don't mind not choosing our housing but that trade-off isn't for everyone. We're also not building equity in a house since we sold ours. I think it's worth it since we don't have the headache and expenses of renting out a house from overseas.

I knew we couldn't compare working in DC to working abroad because our spending patterns would change. Overall, the added benefits and changes in spending have worked out as I expected. Here's a peek at that in case someone else is grappling with the same decision.

Typical Americans Compared to Our Expenses




Below is what the typical family spends their money on from most to least alongside our expenses. The chart doesn't include amounts or percentages since that's personal information for our part. I'm also leaving out personal categories like investments, health care, children, education, etc.

I added in a guess for vacation travel spending since it wasn't in the average household lists I found. It might be included in the transportation and entertainment categories but I call it travel in the chart. Regardless, I found the average vacation spending and plugged it in the list where it might fit so I can compare. This is just a rough look and I'm not an economist so bear with me. On the right of that typical family list is how we spent money on average over the past 3 years before the Foreign Service.

NumberTypical FamilyOur Expenses
1HomeHome
2TransportationFood
3FoodTransportation
4Misc ExpensesCash
5TravelMisc Expenses
6EntertainmentTravel
7CashEntertainment
8ClothingClothing

Houses and cars (with gas, repairs, etc.) are expensive and we were typical there. We enjoy eating out and it pushed food higher on our list. We threw around a bit more untracked cash so apparently we used cash more than the typical family. Our travel and entertainment were a little lower so it might be in those categories if I tracked cash better. I just spit this out from online banking so there wasn't much effort on this review. Overall, we were mostly typical.

Before Foreign Service Compared to Overseas in the Foreign Service


This wasn't just a matter of changing jobs. It's been a complete lifestyle change reshaping our personal finances. We're not like typical Americans while living overseas:

NumberBefore FSOverseas FS
1HomeFood
2FoodTravel
3TransportationMisc Expenses
4CashCash
5Misc ExpensesEntertainment
6TravelTransportation
7EntertainmentHome
8ClothingClothing

We still eat out and it's more expensive here so it's our #1 expense! The home category plummeted to just stuff we've bought for the apartment such as some 220V small appliances. Not paying for housing frees up much more money for other things like travel and entertainment. I joined the Foreign Service to improve our ability to travel and expand our reach to more of the world and it's worked so far. We may have less income but I think we get to use it in better ways.

We don't have cars anymore and use the great public transportation in Stockholm so transportation expenses plummeted. This will increase in the future as we need cars again. We're setting aside money to help with future transportation expenses since this will vary by country.

Housing costs will become a problem again during stateside assignments. There aren't any added pay benefits there other than higher locality pay in DC. It'll hurt having to pay for our own housing after this. We're not building equity in a house now so that would be a complete retirement expense if we don't save up some money or buy another house. It's part of the trade-offs needing some attention before retirement hits.

Where will we go and what kind of housing do we want when we're done with this? We don't know for sure. In the meantime, it feels good not being locked into something. I prefer to save up some money and remain flexible. We're nomads with nomad expenses right now and it works well until we decide to finally settle somewhere... assuming we ever do. :-)

1 comment:

  1. Same phenomenon when I switched from a good paying job in Private Industry living in expensive Seattle to my first DoD Civilian job overseas in Japan. It was a pay cut...on paper. However, with the Housing money and the Post Allowance (COLA), I actually ended up having more disposable income. It's the only way to live in my opinion.

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