When you go on your profile, along the bottom, it has a list of options... About Me, Statistics, Friends, Contact Info. Click the 'About Me' tab, and you'll see a 'Country flag/Nationality' option with a little orange mark next to it, click that orange mark and change your flag. Bear in mind, this flag is not where you live, but your nationality. There is a separate option for Location, but it does not show a flag for that.