Money Management Plan for Expats and Those Planning an Escape

Whether you’ve already expatriated or are planning your escape abroad in the not too distant future, you need a money management plan that works for you, your circumstances and your plans for the future.  Such a plan needn’t be complicated or overly restrictive, but it does need to get the right balance in place between meeting any debts head on, and making the most of your savings.

Having worked with some of the leading expatriate financial brokerages, taxation advisers and international solutions providers, we at Shelter Offshore feel that we can pass on what we’ve learned to you, to enable you to get everything in place for your move abroad, or to support you in your new life as an expatriate.

In this report therefore, we will present a money management plan for both expats and those who are planning an escape from their own home nation.  Whilst the information contained herein is generic, it is recommended that you seek personalised and individual advice from a qualified financial adviser before making any significant financial decisions.

Step 1 – Face Your Debts

We have written fairly extensively about managing debt issues if you’re an expatriate in recent articles such as ‘Practical Help for Expatriates in Debt’ – and the number one point to put across is that you must face your debts head on.  It can feel overwhelmingly tough to sit down and go through to whom you owe money, how much you owe, whether that debt is secured and the rate of interest you pay on that debt.  But if you want to get out of debt that is exactly the first step you need to take.  You then need to prioritise your debts – the most significant are those secured on your home or your car for example – and work with the lenders to come up with a repayment plan.

At the end of the day, any firm you owe money to just wants their money back, (with interest), therefore if you present a way forward, showing them how much you can afford to pay each month, there is little they can do but accept your offer if it is a reasonable one.  If you don’t feel able to manage these steps alone, seek help from the Citizens Advice Bureau in the UK, the equivalent in your new home nation, a debt counsellor or a trusted friend.

Step 2 – Get a Contingency Fund in Place

If you’ve already moved abroad it is imperative to have a contingency fund in place in case you ever need to get out of that country or in case you ever need to get home to a family member or a friend in need.  Your fund should have enough in there to cover flights home, hotels and any other essential payouts you might have to make during such a period of time.  Some expats may feel comfortable just having an unused credit card available to cover such an emergency, and this can indeed be the most convenient way to pay for emergency flights for example, but you do also need the money available to pay off the credit card debt!

Think about having something like an offshore savings account with a small but reasonable sum in that will see you through an emergency.  You can get better rates of interest or find better terms from an offshore savings account compared to some of their onshore equivalents – but speak to an expat IFA to find out more.

If you’ve yet to make the break to your new life then your contingency fund will be in place to help you move abroad with as little stress as possible.  Even if you’re moving abroad and you have a job in place already, chances are there will be an interim period between finishing one job and starting another that needs to be funded.  And for most people the reality is, when they move abroad they spend a certain period of time with no income coming in at all – and at a time when there is an awful lot to pay out for!  So a contingency fund needs to be robust, easily accessible onshore and off, and funded steadily and sensibly so that you can manage your move abroad without financial stress setting in straight away.

An offshore bank account might be your best option for such savings – chances are you can get one from your own high street bank.  Such accounts are internationally accessible, and you can even save in a different currency from your own if you think that would be beneficial to you for when you move abroad for example.

Step 3 – Prioritise Your Property

If you have benefitted from lower interest rates on your mortgage recently, don’t now waste the extra cash you’re saving, use it to overpay your mortgage.  Speak to your lender to find out how much you’re allowed to overpay by each month or each year, and if you can, work to pay any extra cash off your home loan.  Your mortgage will probably be your largest debt in your lifetime – what’s more, it eats up your wealth in interest payments.  So the quicker you can shorten the term of your mortgage, the less interest you will pay over its duration.  Find out what’s feasible by speaking to your lender and your financial adviser…

Step 4 – Prioritise Your Pension

By moving abroad you probably mess up your pension plan!  Your plan may originally have been to stick with one employer for life, pay into their final salary scheme and retire at a reasonable age with a more than reasonable pension in your pocket!  However, just by breaking the pattern in your plan and moving abroad, you have messed things up for yourself!!  In all seriousness, who among us has ever had a pension plan that we have managed to pay into every month consistently during periods of upheaval such as moving abroad?  According to stats and figures from many of the leading financial institutions, few people make good, consistent payments towards one dedicated pension in their lifetime – and we expats are almost the worst!

By moving abroad we understand that we may lose the tax benefit of a personal pension in our old home nation, we may lose our access to a company pension plan and we may find ourselves abroad with no vehicle into which we can save for retirement.  Which is why the wonderful world of offshore pensions has recently changed – specifically to address this issue for expatriates and international individuals who travel extensively for their work.  You can now transfer all qualifying onshore pensions into an offshore equivalent called QROPS – the acronym stands for qualifying recognised overseas retirement scheme.  Such a scheme is backed by the British government, it allows your pension to grow offshore tax efficiently, and you even lose the restriction of having to buy an annuity with your pension when it matures.

Not everyone would benefit from moving their onshore pensions into an offshore vehicle, and not all offshore pensions are the same – therefore it is incredibly critical to seek professional and qualified experienced advice about this – but suffice to say, there are excellent pension options and alternatives in place for expatriates.  And it is never too early or too late to start saving towards retirement!  Find out more today from your adviser – or contact us to find an adviser in your location who can assist you.

If you’ve yet to move overseas and are worried about pension issues – such as whether you should continue to make NI payments in the UK so that you can secure your state pension – you too need to speak to an international adviser.  You can find out from them how best to manage any pension plans that you have in place, and the best way forward for you and your retirement savings.

In Conclusion

A money management plan for expatriates and those planning on moving abroad needs to find the right balance between managing debts and maximising savings.  With commonsense, prioritisation and a little bit of sage and timely advice along the way you can soon get your financial affairs in good order, and enjoy your time living overseas in the exciting new nation of your choice.