Yesterday we began a new series of articles covering the concerns that many people admit are holding them back from turning their dreams of a new life abroad into a reality. We began by looking at loneliness and re-establishing social contact abroad, because this is one of the most anticipated concerns that would-be expats voice.
Today we’re going to turn our attentions to money matters – after all, if you get your finances right you stand a much better chance of surviving and thriving abroad. What’s more, we’re aware that lack of money is a reason holding back a lot of expat wannabes. So we want to show you how you can get a real handle on your finances before you go, and how you can stay on top of the bills once you’ve relocated. It’s nothing a little bit of concerted planning effort can’t solve.
We’re producing this series of articles now, well ahead of the New Year, because January is traditionally the time of year when we see an intensification of action from our readers as they use the new year/new start tradition to launch themselves into their new life abroad. Therefore, we want to position these articles now so that the answers to your dilemmas are available to you to research ahead of your move.
What’s the Number 1 Reason Why Expats Fail to Launch Abroad?
Money
It’s a very sad fact that yes, the number one reason why expatriates fail to make a new life for themselves abroad is because they fail to get their money matters right.
From the expat retiree who doesn’t factor in that he’s moving to a nation where his British state pension is frozen, to the expat graduate who fails to factor in realistic salary expectations when she relocates. From the family who fails to realise how much international schooling and health insurance will eat out of their budget each month, to the expats who fall foul of a fluctuating exchange rate that goes against them…
All are realistic possibilities, all are reasons why we have seen expats return home, and all are issues that could potentially have been overcome with more planning and preparation.
You need to be aware of what your new life will cost you month to month, how you’re going to afford to live, what potential pitfalls could affect your financial standing, and how you could overcome these in the event of a rainy day.
Affording to Move Abroad
If you want to move abroad but you’re not sure you can afford to make the move there are a number of options open to you…
1) Instead of seeing the move as a lifetime commitment and selling up and shipping out lock, stock and barrel, is it possible to put your current life on hold and move for a trial abroad first?
This could see you rent out your home in the UK instead of selling it, store personal belongings with friends and family and make a much more modest relocation that’s more affordable for you?
If you like the move then you can sell up when your house is more likely to sell for a decent asking price when the UK economy has improved a bit.
2) Have you thought about downsizing? In the UK there is still massive social pressure on people to own their own home and keep up with the Joneses, but if you ditch this stereotypical mould and break out you can live for a lot less abroad.
If you sell up you may well have a lump sum to enable your move, and as long as you have researched your destination well and are certain of employment overseas, your lump sum could help you re-establish yourself overseas in a decent rental property.
3) Do other members of your family want to relocate? Then why not pool resources with your siblings or parents and all move and live and work abroad together?
Financial Preparation Ahead of Relocation Overseas
Getting your head around money matters before you move is essential if you’re to enjoy a smooth relocation and a successful integration. Leaving thoughts about affording the move, tax abroad and how you’re going to earn an income until the last minute is not wise!
Here are the 10 considerations you need to go over before you are ready to relocate. Consider this your expat financial checklist…go through each question or consideration in turn and sort out your own answers or solutions accordingly. When you have completed this task you will be ready to move abroad…
1) How much is it going to cost you to move and set up abroad?
From selling your home and having to pay estate agent’s fees and early mortgage repayment fees, to shipping your belongings abroad…moving overseas costs money. You have to factor in your own travel and shipping pets too, finding temporary accommodation, new furnishings, perhaps even a new home or new car.
In other words, getting established abroad takes a whole chunk of money. Where is this money coming from, have you got enough in the pot to allow your move to really happen?
2) How much will it cost you day-to-day to live abroad?
You need to have a very realistic overview of what the cost of living is abroad. You need to factor in more than your groceries too! What about connecting up and affording your utilities each month? In hot countries where you perhaps need air conditioning, electricity costs can run high for example.
What about Internet connection, satellite TV costs, the cost of insurances and even communal costs in your new apartment complex for example. Speak to other expats on forums before you move to get a good idea of a required monthly budget. Be realistic not idealistic – after all you want a good life abroad not a frugal life!
3) How are you going to earn sufficient income to afford your new life?
If you’re moving abroad with the intention of working have you looked at a) the local prospects for a candidate like yourself and b) the average wage potential for someone like you? You need to know that you can find a job and that you will be paid enough for doing it so that you can afford to live. No social system will pick you up abroad.
If you’re going to buy or start a business, have you looked into the viability of that business? Is the service or product in demand, is it seasonal, how much can you earn, how much will you have to pay in tax, fees, licenses and staffing costs?
If you’re retiring abroad how far will your pension or investment income go?
4) What if you lose your job/an investment income fails, what’s your back up plan?
Sometimes plans go awry so you need to have an idea of alternative options open to you for earning an income in your new location. Are there other jobs you can do, other professions where you could seek employment? Ideally you will ensure yours is an affluent and successful destination where there are a lot of options open to those prepared to work.
5) What is the rate of tax in your new nation?
Whilst the UK is now officially a high tax nation, there are still countries out there that tax even higher! Look into the tax, social contributions and any other fees you will be liable for and don’t forget to factor these in each month.
6) Can you legitimately save tax by utilising the offshore financial marketplace?
Some people move to live abroad in countries where their foreign sourced income is tax-free – for such people it can make sense to keep all monies offshore, and only remit what they need to live on each month.
For others who are perhaps retiring abroad, the likes of QROPS and QNUPS can be ways to enjoy better potential, more diversified returns on investment thanks to the offshore financial marketplace.
It’s a place to peruse and explore with the assistance of a regulated and reputable, qualified offshore independent financial adviser.
7) Factor in currency conversion
If you’re going to be in receipt of an income in one currency and you’re going to be living in a nation where another currency is used you will be exposed to regular currency conversion. As any British retirees living in the eurozone are acutely aware, if an exchange rate falls against you, you can lose out each month to the tune of significant sums of money.
Consider using forward contracts to fix your rate of exchange to protect yourself from negative fluctuations. Speak to an FX adviser for more information.
What additional bills could become an issue in the future?
If you’re young free and single today, what about if you start a family in the future. You may have to pay out for school fees for example. What about if you’re retired and healthy and fit and active today, but an accident, illness or old age force you into a care home or into needing support in your own home?
Think honestly about the future and don’t bury your head in the sand.
9) How can you afford future potential liabilities?
Having identified the fact that you may incur greater liabilities in the future, ensure you begin thinking about how you will save and invest and put money by to protect you and your family over the longer term.
10) Have an emergency fund
Finally, before you move abroad you need to make sure you have an emergency fund of cash stashed away in a relatively easily accessible bank account. This money can be used for any unexpected expenses that come up once you have moved, it can be used to bail you out if you decide you hate living abroad (unlikely!), or it can be used if a rainy day comes your way before you have had time to establish yourself financially overseas.
Don’t go abroad without an emergency fund in place!
Don’t Let Money Worries Hold You Back – Plan to Succeed
As you can see, there are genuinely a lot of concerns surrounding money and finances that we all need to be aware of if we want to move abroad and have a decent standard of living. The good news is that if you plan carefully and are realistic about how you will earn enough money to live well, you can do far more than just survive overseas – you can have a fantastic quality of life abroad in the country of your choice.
Just don’t leave the planning to chance or until the last minute…and don’t forget that emergency fund. It’s an essential lifeline.