Managing your monetary affairs can be quite complicated as an expatriate, especially if you have multiple bank accounts, are unsure as to the length of time you will be relocated and/or are paid in alternative currencies to your host country. However, just because things may seem complicated, that’s no excuse to ignore them and many expats find themselves in sticky financial situations when they do just that. Here are four financial mistakes that expats commonly make together with tips as to how you can avoid them.
1) Failing to plan
Every expat should have some sort of investment plan that details how they will accumulate and preserve their financial wellbeing. Whether you have your child’s education to fund, are planning on early retirement, were late starting your pension payments or are hoping to invest in a property in the near future, you need to understand what funds you will need to achieve your goals and will subsequently need to plan for how you will achieve them.
Start by developing a financial plan that details your financial goals, the amount of money you will need to attain them and the timescales over which you wish to meet them, together with any currency risks associated with them. Finally, prioritize them in terms of most to least importance.
Through having clear goals and a plan pertaining to how you will achieve them, you will have something to aim for, will be able to better manage your money and will be far more organized with your finances.
2) Having too many accounts in too many countries
Many expats move about on a regular basis from country to country and will open new bank accounts in each destination they temporarily call home. In addition to this, they may have several pension and credit card accounts. Not only does this mean that you are bombarded with electrical and paper statements from several different sources on a monthly basis, you will not be in a position to clearly manage your finances and, worse still, there’s a potential chance that you will forget about where you have accounts and actually lose track of some of your money.
The best way to manage this is to open a global bank account and then invest the time and effort it takes to consolidate all your finances into one place. All it may take some time to do this and the paperwork will be frustrating at times, in the long run it will make your life a lot more straightforward and you will be more better placed to manage your overall investment plan.
3) Ignoring currency risks
If you have multiple bank accounts in many different countries and/or are paid in a currency that is different to that in use in your host country then you may be exposed to currency risks. It is very important that you manage these risks appropriately. For more information and useful tips on managing currency exposures see the following two articles:
What every expat should know about foreign currency
Understanding how currency movements can impact expat life
4) Poor asset allocation
Once you have built an investment portfolio that is designed to meet the goals of your investment plan you will need to make sure that you allocate assets appropriately. The investments that you make will determine how much return you can expect from your money and how much risk is associated with your savings. It is crucial that you allocate assets in a manner that is appropriate to your long-term objectives, the level of risk you are prepared to take and the stage of life that you are at. For example, if you are young and just starting out on your career, you may be prepared to make riskier investments that potentially yield greater returns. On the contrary, if you are nearing retirement you will need to make sure that your money is invested in more secure assets.
If you lack knowledge of the products that are available on the market and/or are unsure as to what course of action best suits your personal circumstances, you should seek the assistance of a qualified financial advisor.
Did you make any financial mistakes while living overseas? Leave a comment and share details of them with our readers.
