So that’s 2019 all wrapped up with all eyes focused on 2020 and a new decade. What were your New Year’s resolutions this year? Maybe to travel more? To finally bite the bullet and take out that permanently-postponed gym membership? To switch to dairy-free milk?
As we welcome the second month of the year, I suspect many resolutions have already fallen by the wayside but I have a suggestion for a resolution to adopt for the decade to come. And I guarantee that it will have a positive and lasting effect on your life.
Make 2020 the year you start saving some money for retirement and safeguard your financial future.
If you’re a foreign teacher in China, or elsewhere in Asia, at some point you decided to take the plunge and start a new life abroad. I imagine that in all the excitement of discovering a new culture, meeting new people and rising to the challenge of a new job financial planning was not high on your list of priorities. That’s completely normal, starting and establishing a career in a new country can be a lot to handle, but that doesn’t mean your finances have to stay at the bottom of your priority list.
Once you are more settled it is vital to make sure that you start a savings and pension plan so that you can continue enjoying your life while working towards some concrete financial goals to keep you on track financially whether you end up staying in Asia forever, returning home or moving elsewhere.
Yes, I know pension funds are not something many people want to think about. Life abroad is exciting with so many temptations luring you to part with your cash, and you probably have ample disposable income to spend, but guess what? It is possible to live life to the max and save money at the same time.
Regardless of how long you are planning to stay in Asia, there is no time like the present to begin putting some money away. First of all, I would recommend examining your financial goals and your budget. You don’t have to be an expert to budget, there are many apps available nowadays to make it easy. If you are a frequent Alipay user, for example, Alipay actually tracks your monthly spending for you.
After that, it would be beneficial to look at how much of your salary you can afford to put away each month. This might curb your spending power a little in the short term, but over the longer term it will give you more freedom. It’s about creating something meaningful for the future rather than just blowing everything on temporal pleasures.
In China it is no secret you are being paid a premium to teach, what is not so well known is that you are probably being paid your pension in cash. That is to say a portion of your salary is your pension, pension schemes for the most part don’t exist in schools in China – so the question is what are you are doing with your pension? For those who live by the here-for-a-good-time-not-a-long-time philosophy that means extra money to spend living it up, travelling and enjoying a higher standard of living than they could afford at home. But they will be missing out on a golden opportunity to take control of their financial future and failing to make the most of the flexibility this income affords them to invest how and when it suits them.
If you are a teacher in China, the worst case scenario would be to wind up at the end of your tenure abroad with nothing to show for it. And this is easily done. While a cavalier attitude to spending might work while you are young and living in China, it will come back to bite you. The opportunity cost of spending everything you earn when you are working in a country which offers some of the most generous salaries for teachers is huge. Imagine yourself returning home where salaries are not so substantial, broke, aged 50 with no savings to your name. You will wonder whether the three holidays a year and 1,000 RMB plus weekends in “Found 158” were worth it….
I want to dispatch any idea you might have that you will be able to live off a state pension, wherever you are from. If you believe that you are living in fantasy land. In reality, your time working abroad may mean that your state pension entitlement is reduced. Ensuring you have enough to live off in retirement is entirely in your hands so the sooner you start saving – and investing – the better. Getting into a savings habit now will give you more time to earn interest and the potential to enjoy compound gains – the interest you earn on interest i.e. free money.
I cannot stress enough how important it is to think carefully about where to put your savings. If you don’t invest cannily you could lose money. If I was penning this article in the 1980s I might have seen some merit in leaving your money in a savings account at a bank, however, interest rates in 2020 are not worth talking about. In fact, savings deposited in the bank could actually be losing value due to inflation.
Interest rates, compounding, investing… if that sounds like a foreign language, maybe you could use the help of a professional? Contrary to popular belief, and despite the countless stories I have heard from teachers and other expats being turned away from HSBC and the like because they needed a few hundred thousand dollars more than what they had amassed, in fact you don’t need to have amassed or inherited a huge fortune to hire a financial planner.
A good financial planner will help you reach your goals based on your age, means and needs. There is a wide range of investment options out there so you need a professional who will listen to what your requirements are and tailor their advice and solutions to you and your circumstances. Dragging your funds back to your home country to sink into property and/or pension plans is not an optimal use of your money and has its short comings. If you’d like to explore expat-focused alternatives which are more flexible and will build your wealth more effectively, I’d be happy to talk you through them.
If you have trouble getting your head around the word pension, which has negative associations for many people, think of it instead as an investment for the future, which is essentially what every pension in the world is. Don’t get hung up on the wording and remember that planning for your financial future is all about empowerment. Every pay slip is an opportunity to get one step closer to stopping work. Keep that ultimate goal in mind and make 2020 the year you start to make the most of that opportunity.
Feel free to get in touch at firstname.lastname@example.org with me for a non-obligatory chat.
I work as a Financial Planner with expat clients to meet their financial planning needs and goals, with a focus on adequately protecting expats & their families, and helping people to grow their savings over the long term. I strongly believe in building meaningful and lasting relationships with clients to ensure the best client outcomes are achieved.