Expat Money: 10 Financial Planning Tips for Expats

A recent NatWest bank survey has found that 87% of expats feel they are better off financially than if they had stayed at home. This in spite of headlines announcing hard times for expats as they experience negative equity on homes and as currency fluxuations leave them high and dry.

So what are the smart 87% doing right?

1. Watch the locals

This is the number one tip: learn to manage your money like the locals. Who are at the same financial level as you Think in local currency, if you’re in Europe, invest in Euro-dominated nvestments, change your spending priorities according to what is locally available and practical, and understand the local systems and laws for making large purchases.

2. Attitude shift

You may not always find what you want, but if you are adaptable, open minded and happy to ask around you will find what you need. It is sensible to accept that the daily activities or food and supplies you were once used to may be too costly in your new country in order to stay within a budget. You will also find new things you couldn’t afford at home!

3. Watch the currency rates

The weak British pound and American dollar have given some serious headaches to the British and American expats. A long-term expat has less to worry about as these fluxuations will balance out over the years and have little to no effect on them.

4. Health insurance

Understand each country’s laws regarding healthcare and expats—they will vary according to your resident status. Some countries require medical insurance while others do not. If you are an expat resident in the UK you have access to free healthcare. If you live in France, you will have to pay part of the healthcare costs, so some insurance is necessary. Your employer may offer this as part of your package.

5.Transport

Consider not buying a car. In some countries cars and petrol are very expensive and public transport may be a better option. One option is t rent a car at times when you really need one, such as going on holiday or when you have visitors from home.

6. Taxes

If you are paying taxes in your host country (which you should if you’re working there unless you have an arrangement to pay taxes in your home country), remember that each country has their own rules and laws and eccentricities. If you have been transferred to your host country through your company, hopefully your employer will advise you regarding your tax responsibilities.

Some countries tax on assets, not just income. This is one case where you may not be treated as a local even if you work and live as one. Some countries, Australia for example, has ‘foreign investment tax’, for non-Australian investment growth, including ISAs and personal pensions, if those assets total more than a specified amount.

In some countries no tax is deducted from your pay slip so you will need to save some each month in order to pay the tax bill at the end of the fiscal year.

7. Stay informed about finance laws in your home country

Rules may change if your tax residency status changes. If you are a British expat you cant add to an Isa unless you’re a UK tax resident. You can keep the money and add it to the Isa on your return.

8. Buying a home

Call in the experts—especially experts who regularly work with expats, and come with recommendations. Many countries have a wide variance in these rules and procedures and they can change from year to year.

There have been some sad reports from Spain, where Britons have bought into illegal developments only to lose everything—home and money invested. These stories are not unique to Spain.

9. Avoid inheritance problems

Learn the laws regarding your assets. Don’t think you can always hide assets in other countries. If you live mainly in one country but have assets in more than one country, your main country of residence may charge inheritance tax on all of your assets, home and abroad.

Alternatively, your estate may fall under the jurisdiction of unfamiliar rules in the host country and getting a good understanding of the systems your descendants may face will cause fewer problems when settling your estate and ensure your wishes are fulfilled.

10. Escape fund

Well, perhaps not ‘escape’ but emergency fund. If everything goes wrong or if there is an emergency back home or if you simply need to get back to a place more familiar for a short time, having enough money for you (and your immediate family) to fly home is an important consideration.

Comments