Many expats come to Asia on generous salary packages and often they benefit from tax advantages too which means that they have an unparalleled opportunity to accumulate significant wealth while they are working abroad. If you are in the fortunate position to have increased your disposable income as a result of moving to Asia, don’t squander the chance to give a really powerful boost to your retirement saving.
I have talked in a previous post (link to post 20161128 – Planning for retirement – where do you start) about how to go about this. Now I’d like to tackle how not to go about it!
Forewarned is forearmed so here are five common mistakes that expats make with their money:
1. Buying the wrong investment products
There are a lot of investment products out there and it can be difficult to sort the wheat from the chaff. Those that are right for you will depend to an extent on your own personal circumstances – how far you are from retirement, how comfortable you are with risk etc – but as a general rule you should opt for globally diversified investment products via regulated providers who operate transparently and products that are both flexible and portable to fit in with your transient lifestyle.
2. Speculating on currency
Even professional forex traders find it very difficult to predict currency movements which can be extremely volatile. It is a high risk/high return enterprise that some people compare to gambling and certainly not the place to put the money you wish to invest for a secure financial future.
3. Purchasing a property on impulse
I’m not against investment in property per se, indeed, there is certainly a place for it in a diversified portfolio but too many expats have been lured by the prospect of owning property in an exotic offshore location without properly researching the implications and weighing up the risks involved. Nothing beats having your own home but if you are likely to be moving on in a few years, you don’t want to be burdened with a house that you are unable to sell because the resale market is insufficiently developed and/or there is too much competition from newer developments. Think really carefully before you commit to such a large purchase.
4. Maintaining a home country bias for your investments
We all tend to stick with what we know which often means that expats tend to favour investments from back home and hold cash in their home currency. That might not necessarily be the best option if you are based elsewhere. Geographical diversification is important. In addition, it can be tricky juggling incomes and outgoings in different currencies which is not infrequent if you are earning in one currency, paying a mortgage back home in another and paying university fees in a third. A multi-currency offshore account can be useful for flexibility and convenience
5. Relying on your home country financial adviser
Being an expat brings some cross-border challenges which can complicate your financial planning. There are so many new elements to take into consideration concerning tax regimes and regulations. That is why your adviser back home might not be the best choice. You will be far better served by someone who understands the market where you live and has experience of dealing with expatriates and the financial challenges they face.
If it sounds like you might need some local advice, we have a wealth of experience in advising expats from all over the globe who are living in Asia. Why not give us a call and find out how we can help you maximise the opportunity you have to build a healthy nest egg while living here?
A leading provider of expat financial services and wealth management services across Asia.