16/12/2014 – In our role we are fortunate enough to meet many Aussie expats who live in some beautiful locations and we never grow tired of hearing what amazing lives they live. However over the past couple of years a common topic has been part of my conversations with expats and that is some cannot afford to return to Australia.
There are a number of reasons for this but we have highlighted below what we think are the three most common reasons:
- They get drunk on the lifestyle – when you become an Aussie expat for the first time its an amazing change in your lifestyle. For some it enables you to travel more frequently to places you could only have dreamed of when you lived in Australia, for others it means that you are able to send your children to schools that offer opportunities that can’t be matched in Australia. Maybe it enables you to hire help for around the house which frees up your time to spend with your family. Maybe it is all of the above. When any or all of the above occur suddenly your expenditure increases dramatically in areas that you wouldn’t have had to budget before when you were living and working in Australia. The extra disposable income you were relying upon to set yourself up financially whilst you are overseas has now been dedicated towards funding your new lifestyle.
- They are working in roles that don’t exist in Australia – the very nature of the world market means that Australian expats are able to work for companies and in roles that don’t exist in Australia. If they are working for very large companies offshore then their role may not exist back in Australia. Whilst building your career offshore has many benefits some expats find that when they decide to come back to Australia quite often they have to take a demotion both in job title and remuneration.
- Financial mismanagement – when you live and work overseas you will find that you join the hit list for every offshore financial services professional and company. Whilst there are some good operators unfortunately there are also a lot who are no more than a glorified salesmen. We would even go as far as saying that they couldn’t read a balance sheet or pass a internationally accredited financial planning exam. With a bit of extra disposable income you decide to do the right thing and approach one of these “salesman” about organising a financial plan and setting up a savings plan. A year later your “adviser” has moved on to another role or country and you find out that the product you bought wasn’t quite what you wanted however what wasn’t explained to you was that you are now stuck in it for a lot longer than you originally thought and if you decide to exit it early you will be up for massive penalties.
When we are talking to expats about the above events they have either experienced some or all of the above they ask what they could have done differently that would lead to a better result financially. The answer that we give, whether its to a single expat working in a low to middle management job or a expat working in a senior management position with a family, is the same. Start early and contribute often. When you first become an expat and you sit down to work out how much you will make, what your expenses are and how much you will have left over, that is the time to commit to start saving. Not when you have a maid and are taking three holidays a year. If you start early you are putting aside funds that you won’t miss because you have never had those funds in the first place. By maintaining a savings plan with those funds you will ensure that when you do decide to return to Australia that you will have more than photos to show for your time away. If you do need to take a cut in salary at least you will have a nest egg built up to make up for the difference.
The second comment that we make is to make sure those savings are held in a currency that you intend to spend most of your working career in. If you decide to live in the US or the UK for the next 20 years then it makes sense to hold those funds in US dollars and Pounds however if you only intend to be overseas for 5-7 years and plan to return to Australia after then it makes sense to accrue your assets in Australian dollars. Unless you are based in China it is very easy to move money back to Australia and if you would like any recommendations on the methods that I recommend clients use then please get in contact. Do not try and guess the Foreign Exchange market. Not even the professionals can get it right so what chance do you.
The third comment that we would like to make is research the financial adviser that you chose to work with. LinkedIn is one of the best inventions for investors looking to gain a greater insight into what a prospective adviser can offer. On one page you can see his or her qualifications, see any recommendations that their clients have given and most importantly see whether they are one of those “salesmen” we were referring to before. Have a look at their working history. Do they bounce from company to company frequently? Do they have an extensive background in financial services or is this their first try?
And the last comment that we would like to make is its never too late to start. If you’ve already been overseas for a number of years start today. Remember the Chinese proverb “a journey of a thousand miles begins with a single step“. With the new year almost upon us now is an ideal time to commit to your financial future.