For many expatriate workers, their overseas contract is THE golden opportunity to set themselves up financially for life. They usually have high earnings, large living expenses such as housing are paid for by their company, and taxes can be significantly lower than their home country. However, it’s surprising how many finish up with little or no savings and return to their home countries with almost nothing to show for their hard work, why is that?
Of course, there are many possible reasons, but perhaps the most fundamental is the lack of any kind of financial plan. Expats arrive in their new country and quickly get wrapped up in work, after all, that is why they are there! At the same time they, and perhaps their partners, soon get involved in a busy social scene, mixing with other expats at expensive restaurants and bars. Knowing they are on high income, expensive holidays often follow, perhaps encouraged by their new expat friends who have already been to exotic locations and had a wonderful time! So, with no time or inclination to put together a financial plan, coupled with new, large expenses, a pattern soon develops, high income and high expenses, leaving little for savings or future plans such as retirement!
Inevitably there will also be calls from financial companies, offering to provide all kinds of planning and investment services with promises of big returns! Expats usually decline all such approaches, they have heard lots of horror stories about financial losses and unscrupulous advisers! Then they carry on as before, earning and spending without any kind of plan. Can it really be true that they don’t need any investment advice, regardless of who is providing it?
The first point to recognise is that expats DO need financial advice. They are away from their usual support network, in an unfamiliar legal environment and often unaware of the benefits they have being non-tax resident in their home countries. Few people have the knowledge or time to handle their often complicated financial matters. Secondly, it’s a big mistake to lump all financial advisers together, as with any service provider there are good and bad, it’s important to choose a company that is long established, with ownership that is directly accessible, not part of some far away listed company with faceless shareholders.
The benefits of selecting and using a professional financial consultant are many, but the most important is that he or she can help you put together a financial plan. A professional financial consultant has the knowledge and skills to take a detached, independent view of your financial situation, asking key questions that are vital in preparing a long-term, successful plan. This plan may not only be about making investments but also taking care of partners, children or even elderly or disabled relatives. It’s often shocking to find that high-ranking company executives have little in place to protect even their direct family, and sometimes don’t even have any kind of retirement provision.
A good financial consultant will ask a number of key questions to fully understand your financial situation and how that might impact on you and your dependents in the future. You might not have all the answers to hand, you might even find some questions intrusive but they are all necessary. A disciplined, independent approach is necessary to get a clear picture. Then a plan can be formulated, with your input, that you can follow and work towards. Critical parts of the plan could include regular savings, pension provisions, reducing debts and, of course, investing for the future, but all depends on the individual and his or her circumstances.
Once you and your financial consultant have agreed on a plan, you then have a financial framework that you can hopefully follow. Having a monthly budget and perhaps a savings target, people can then use the plan to make spending decisions, perhaps knowing that an extra holiday might mean missing a savings target. Meeting one of our financial consultants doesn’t have any financial obligations or cost, we’re always happy to sit down with you and formulate a plan. As with your business operations, not having a personal financial plan is planning to fail to make the most of your hard-earned income!
Guy Foster, Chief Strategist, discusses UK economic growth data while Janet Mui, Head of Market Analysis, examines US and UK inflation data. Last week was