EXPAT FINANCIAL PLANNING – WHY IT IS DIFFERENT

Being an expat can be a very rewarding experience. The joy of learning a new language, meeting with individuals of different nationalities, for British Expats an improved climate and the chance to see different cultures and a way of life are amongst the rewards.

Some things are more difficult including dealing with officialdom in a foreign language, not knowing all the local customs and being away from family.

Some things are just different. In this category comes financial planning as an expat. There are more factors affecting your planning and a requirement to allocate your money in a different way. Possibly you can save more? Your pensions will require more planning and you are less likely to be able to rely upon your employer for pension provision.

Here is a list of elements that make expat financial planning different

Currency issues

As soon as you leave your home country and relocate abroad you will need to exchange currency to that of your new country. It is very important that you search for the best deal; many banks are expensive. You should see what specialist currency dealers can offer.

If you will receive an income from your home country, such as a pension, it will need to be exchanged into the currency of your new country. You are then exposed to fluctuating rates. The impact of a change in exchange rate could leave you exposed. Currencies move quickly and often. Specialist currency companies allow you to “forward book” your currency exchanging to fix the rate of exchange for future transfers.

Similarly, currencies need to be considered for your savings and investments. As a principle, if investments are generating income for you to live the investments should be in the same currency as your expenditure.

Emergency Cash Fund

Regardless of where you live, we all need some cash that is instantly available for emergencies. As an expat however, this fund needs to be higher than if you were in your home country. Inevitably you will be required to make trips back home. A visit to see ailing and infirm relatives is a good example of this requirement. The amount depends on your individual circumstances and a good, independent financial adviser will include this in your financial planning.

Tax

The tax situation can be, well taxing!! Double taxation agreements between, for example, the UK and Spain, means that you need to be clear about which country will you pay your tax? And what about residence and domicile? In your home country these may be different definitions. But overseas, these are often the same. Inheritance tax is calculated differently and it is easy to be caught in two tax regimes.

Retirement Planning

A recent survey found that the biggest concern for expats is the provision of a big enough pot for retirement. If you are planning on retiring in your home country you will need to save sufficient (and currency comes into play again here) for, as an example, the cost of housing which may be greater in your home country than in your new country. If you are going to retire in your new country there are many factors to take into account such as what to do with your pension from home (see our QROPS page)

Health Care

Many expats state that the health care in Spain is as good as the UK. However, despite this many people return home in later years due to health problems. It is worthwhile looking into the state health care of the country you are moving to and you may need to consider additional health care cover.

International Schooling

If you have a family when you move to your new country schooling is a concern. Many countries have different systems for paying for education costs. You may have to pay school fees in order to educate children at an international school. Or you and your children may wish to use a boarding school but this is an expensive option; something I know from personal experience.

To make sure that your expat life is without worry and that your future is taken care of, you should have a financial adviser who will provide you with regular reviews and support. As an expat your circumstances are likely to change more often than if you were in your home country.

If any of the issues above are a concern to you, to discuss your requirements click on
Find an Independent Financial Adviser.

This article has been provided by Barry Davys MBA of the Spectrum IFA Group. He is an expatriate himself who has lived in Spain for 5 years. He can be contacted by email at
Barry Davys. There is also a resource website at Expat Financial Advice in Spain

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