At Remitly, we’re here to support you, especially in your financial life. Whether you’ve moved to a new country to join a startup, work a campus job as an international student, or you’ve taken on some remote freelance work, our goal is to ensure that you feel informed and empowered about your finances. In this globalized age, it’s not just high-powered business execs or international jet-setters who have financial lives in different countries. So, in this guide we’ll suggest practical steps to organize and optimize multiple financial lives, and give you some tips and tools to make things a little easier.
What does it mean to manage two financial lives?
Whether it’s a question of maintaining personal and professional budgets, or you’re simply keeping track of finances in multiple locations, this type of financial arrangement is increasingly common thanks to remote work, self-employed people like digital nomads, and diverse family structures.
Defining the process
Having “two financial lives” means that one person has two separate sets of finances for different sets of expenses and savings. If they’re in different countries these will be formally differentiated by independent financial ID numbers. But if you’re maintaining different accounts in the same country, they’ll likely be under the same social security number and may even be held with the same bank.
Common scenarios
There are plenty of reasons why someone might choose or come into having multiple financial lives. These often revolve around employment situations, international moves or investments, or separate streams of income.
- Personal versus business finances
If you own a business or you’re self-employed, you’ll almost certainly choose to keep your business and personal finances separate. This would mean having a separate account for expenses and investments related to work. This account might not even be in your name; it could be registered with the business using an EIN, for example.
- Two sets of assets
Some people like to diversify their finances by keeping a main set of finances that encompasses their primary income stream and secondary investments, passive or other income, or assets from other sources. It can make it easier to see exactly how much of your income is coming from where, for example.
- International movement
Expats, immigrants, and international students will likely end up opening local bank accounts in their new home country, leading to two financial lives separated by geography. You may well find yourself making international payments between the two.
Why it’s important to stay on top of things
Ultimately, understanding how your money is coming in, being spent, and invested will contribute to your peace of mind and make it easier to stick to a budget or plan for long-term financial goals.
Common challenges in managing two financial lives
It can already feel like a challenge to deeply understand one financial life. When you add in a second set of finances, it might feel overwhelming.
With different sets of numbers to manage it can be easy to make a mistake like missing a payment deadline, or struggling to keep personal and business funds strictly separated. So, here are some of the common pitfalls to keep in mind:
- Differing tax regulations
Within the US, tax regulations differ from state to state. If you live in one state and have your business registered in another, you’ll have to be familiar with two sets of requirements. Similarly, if you live abroad, you’ll have to learn the tax regulations of your country of residence to make sure that you’re meeting all of the expectations.
- Currency exchange rates
If you’re sending money between two countries, this often involves a currency exchange. Understanding how the exchange rate will affect the value of your transfer can help you choose when and how much money to send to get the best bang for your buck. Of course, you’ll also have to keep transfer fees, which are separate from the exchange rate, in mind.
- Multiple banking systems
Every bank is different. Account types, eligibility, and what you have to do to remain in good standing can vary from establishment to establishment. This is especially true if you’ve moved internationally and you’re dealing with a foreign banking system.
- Balancing multiple income streams
If you’re a freelancer or a business owner, workload can be unpredictable, so the amount of money you make might change on a monthly basis. Without a steady, predictable income, budgeting can be more difficult. You might find this is true if you have multiple income streams from different projects or contracts, too.
Step-by-step management process
Now that we’ve identified some of the potential challenges, let’s work towards a solution with a step-by-step process for auditing your personal and professional finances.
Step 1: Assess your financial landscape
The first step towards two healthy financial lives is making sure that you’re familiar with your financial landscape. Start by gathering some key documents and information that you probably already have on hand:
- Bank statements.
- Recurring bills and expenses.
- Income details or payslips.
- Regular expenses or credit and debit card statements.
- Last year’s tax returns, if you have them.
If you have shared resources, like credit cards used for both personal and professional purposes, take note of these areas of overlap.
Looking at these documents will give you a holistic view of where you’re earning money and where you’re spending it. Keeping these documents organized and easily accessible will set you up for success.
Step 2: Keep personal and professional finances separate
Once you have an overview of your financial lives, try to separate them as much as possible. If you haven’t already, open separate accounts for your business and personal use. Use separate debit or credit cards for your separate financial lives.
Keeping your finances separate protects your personal assets from business liabilities. It can also simplify bookkeeping and tax filings. Outside of paperwork, having a separate financial life for your business increases your credibility and professionalism with clients.
Step 3: Streamline with digital tools
Getting a clear picture of your financial lives can be an organizational nightmare. To make it easier, try finding digital tools that help automate the process. Here are a few of our favorites:
- Credit Karma
A free personal finance platform owned by Intuit, this platform has taken up the key functions of the very popular app, Mint, which has now closed down. Check your credit score and net worth or monitor your spending all from an easy to read dashboard.
- FreshBooks
This cloud-based accounting software is designed specifically with small business owners and freelancers in mind. You’ll easily be able to manage invoicing and expense tracking with this tool.
- QuickBooks
If you’re a small- or medium-sized business, you might opt for QuickBooks, which is a more robust accounting software from Intuit.
Step 4: Set clear goals for each financial life
Each of your financial lives should be moving towards targeted goals. For example, you might have savings goals for your personal finances and revenue goals for your professional finances. To ensure that you’re moving in the right direction, consider setting “SMART” goals:
- Specific
Your goal should be clearly defined. Identifying key players and smaller steps along the way towards achieving your goal will be helpful.
- Measurable
The goal must be quantifiable so you can easily track your progress with objective data.
- Achievable
Ensuring that your goal is realistic and possible with the time, energy, and resources you have is key. Start small—if you achieve your goal, you can always set a larger one!
- Relevant
The goal is aligned with your long-term goals and objectives.
- Time-bound
Assign a specific timeline to build a sense of urgency for yourself and create a calendar for accountability.
Step 5: Track and review regularly
Knowledge is power, goes the old saying. Monitoring your financial lives consistently is one of the most important factors in success, so set a recurring time to do quick reviews—maybe weekly or fortnightly. Then, hold yourself accountable to doing more in-depth studies of how your finances are doing. Consider doing these more extensive reviews on a quarterly basis, for example.
The information that you’ll get from these reviews will help you make informed decisions about how to move forward. You can evaluate how you’re doing in regards to your goals, spot any bottlenecks, and make necessary adjustments.
Professional support for your financial life
Even with all of the digital tools available, monitoring your finances may be something you want to delegate or outsource to a professional. That’s especially true if your business is growing and the numbers you’re dealing with are growing with it. Here’s what you should be looking for if you’re considering consulting professionals:
Financial consultants and advisors
Expert support can save you time and money. If you decide to meet with a financial consultant or advisor, be sure to look for someone who specializes in dual financial lives. This is especially important in complex financial situations, like managing international finances.
Online consultation options
If you’re living abroad, it might be worthwhile to have a financial advisor to keep an eye on things back home. On the other hand, you might want to employ a financial advisor in your target country if you plan to move. Take advantage of online consultation options to meet with financial advisors remotely in these scenarios.
The first steps towards financial fulfillment
Managing your dual financial lives will help you reduce stress and improve your overall financial health. Take the first step by reviewing your financial documents, and keep the different elements of your financial life apart as much as possible.
If you’re thinking about separating your finances into personal and professional accounts, check out our guide to opening business bank accounts in the US.
FAQs:
What’s the easiest way to manage two financial lives effectively?
Use digital tools to streamline processes, open separate accounts, and focus on clear goals for each financial life. Automating transactions and reviewing your finances regularly will also help.
How can I simplify managing finances across two countries?
Opt for multi-currency accounts, stay updated on exchange rates, and use financial platforms that specialize in global money management for clear insights and secure transfers. If you’re in any doubt, consult professionals who are experienced at working across borders.
Are there specific tools for managing personal and professional budgets simultaneously?
Yes! Tools like FreshBooks and YNAB (You Need a Budget) cater to personal and professional finance needs, making dual management easier.