Relocating Abroad Is An Opportunity
Being offered an expatriate position can come with an increase in both salary and benefits. As such, your time offshore is potentially a great opportunity to get ahead financially, as long as you avoid some of the common pitfalls. It is certainly a good opportunity to ensure that you have an up to date personal financial plan.
Expatriates often presume that they have things taken care of without basing this on an in-depth financial review. Some individuals assume that their employer is taking care of these, but when it comes to personal finances this is rarely the case. Any inefficiencies or shortfall in insurance arrangements or savings will come to light eventually; sadly, sometimes when it is too late.
All About Planning
A good way of knowing if you are taking your finances seriously is to consider the last time you planned a holiday to some place new. If you spent more time reviewing destinations, flights, hotels and travel guides than you did reviewing your personal finances, then it might be time to conduct a careful review with someone qualified to advise you – and in most cases before you actually move offshore.
Start by considering where you are today financially, as this will help you identify the areas of highest priority. A good wealth manager will take time helping you get to grips with your current net worth and your savings habits, ensuring that your current arrangements will still be appropriate once you move overseas and that you are well positioned to make the most of your time offshore from a financial perspective.
Plan for the Future
It’s important to match the picture of where you are today with where you want to get to in the future. This will help you to set financial goals, identify any shortfalls and then consider how and when to address these.
Whilst expatriates typically earn more than their local counterparts, the fact they sometimes have mobile careers and can end up moving from place to place, or staying longer or shorter than initially planned, can work against them.
The high degree of uncertainty around a move offshore can make the establishment of a coherent financial plan more difficult for those with less experience in such matters. Often expatriates end up with fragmented advice and a wide range of financial solutions, when a single cohesive expatriation and repatriation strategy would have been more appropriate, far simpler and easier to manage.
Review What Your Company Offers
Most companies will provide you with guidance on the local income tax you will be subject to and may be willing to provide you with retirement benefits, but they may not provide you with any advice on the validity of any existing health or life insurance that you may have. They are also unlikely to help you with any personal banking arrangements. Not having the right arrangements in place before you start in your new role can make the simplest things, like receiving your salary, far more complicated then they need to be.
Whilst your employer may have put arrangements in place to ensure that you pay the correct amount of taxes on your earnings whilst offshore, have they also shown you what tax benefits you can enjoy? And if you move back to your country, have you been told about any benefits that you can retain to help you enjoy a smooth repatriation?
Protection – a Must
Most employers will ensure that you have some basic health insurance in place. Has there been a discussion around your specific family’s needs and situation? If a husband and wife were both previously working, but only one is now, if that person were to fall ill or have an accident, how long would the family get by? How much money would be needed per month? How long could they live on their savings? Does the insurance the company provides actually meet the needs of the family and was it negotiated on that basis?
Existing Retirement Benefits
As you will no longer be paying taxes in your home country, will that impact any of your potential retirement benefits? What is the company scheme supposed to provide you, and what might you actually need in the future? With life expectancy going up, government and company sponsored retirement schemes may not provide you with income to support your retirement. As such, private saving is necessary and your posting overseas may offer you just such an opportunity. Of course, the temptation to experience and travel more whilst overseas can mean that expatriates risk going backwards when it comes to retirement saving, so it is essential to put in place a plan early on and stick to it.
Dealing with Uncertainty
Ten years ago I moved from Europe to take up a role in Asia, initially for just two years. Ten years later on I am still here and have finally acknowledged that I will be living offshore indefinitely. Any expatriate will tell you from experience that almost no-one ever stays abroad for the length of time originally intended. The expatriate lifestyle can be enticing and having international experience helps you when looking for future expatriate opportunities.
The Expatriate Trap
Don’t fall into the trap of living your life as an expatriate in one-year blocks, putting off longer term planning until you have more ‘certainty’ – it may never come.
It is important that you act now and review your existing arrangements ensuring that you have a financial plan in place for you and your family. This does not necessarily mean that you need to replace or change what you are doing in your home country, although it will be important to consider solutions specifically for your time abroad that make the most of taxation, flexibility and your potentially greater ability to save.
Lars Wöldern, an Associate Partner at St. James’s Place Wealth Management, has worked with expatriates in China for ten years helping them find practical solutions to the financial issues that concern them most. He provides advice on all areas of wealth management, including retirement planning, wealth protection, savings and investments. Lars’ emphasis is on maintaining long-term relationships with his clients to provide them with a source of trusted advice as their financial needs evolve over the years. Email Lars at firstname.lastname@example.org
The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested. The title ‘Partner’ is the marketing term used to describe St. James’s Place representatives.