Thứ Hai, 2 tháng 6, 2014

Start young: Planning for the future

Start young: Planning for the future

By Andrew Wood   |   Sunday, 01 June 2014

The younger expat community is growing in Myanmar, attracted by the opportunities on offer in the fast-growing global region. A counting machine churns through Euro bills. Photo: Staff

This trend reveals a more prevalent integration of expats into local communities. They have left their welfare states behind and are catapulting into the future with enthusiasm. But what provisions must they make for the financial challenges they will face in the future? The encounters of a more independent lifestyle create the responsibility of taking care of their own long-term financial independence.

The earlier you start to make sound financial plans for your future the better prepared you will be for the tests ahead. Despite your revolutionary streak there will also be a relatively naïve side when it comes to personal financial planning. For many this translates into deferring planning until tomorrow; but tomorrow never comes and that sense of security creates complacency leaving expats exposed.

Start with long-term planning for financial independence. The earlier you begin the easier it will be to achieve your goals. You have a longer period to accumulate the wealth you require. Deferring until later will result in your having less time, making it daunting.

Many do not realise the level of wealth they require to sustain their golden years. Inflation plays havoc with the cost of living, almost invisibly as it happens so slowly. It is like gaining weight – you hardly notice until you get on the scales. For example an annual income requirement of US$30,000 today translates to $99,400 in 30 years, at a 4 percent inflation rate.

It is in your own interest to create a budget for yourself so you appreciate where your money goes and can manage some savings. Every expat is different so it is pointless to create a specific budget for all, although you need to take common elements into account. These include rent, utilities, food, local travel, medical and other insurance, additional expense during visa turnarounds, clothing, possible holidays and entertainment.

This last item is probably the most flexible. You need to make sure this does not run out of control. Probably sticking to the monthly budget you set is best. When you have created the budget you should have a little money left at the end of your month rather than a little month left at the end of your money. If you have set a sensible entertainment budget you need to monitor it and if you spend it all by mid-month, punishing yourself by staying home will be a way to ensure that you spread it farther in future months.

You may also need to deal with education debt back home. It is tempting to defer this until later when you feel you can afford it. The old adage of clearing debt before you save is also relevant in all walks of life. Here it is often best to apply some of your disposable income to this liability.

If you then take part of your disposable income and invest it in an international structured savings vehicle it will be like sending yourself an invoice each month and when you get used to treating this as a commitment you will be surprised at how it magically becomes just another regular bill which you know you need to pay. The trick is not to overstretch what you can save.

Some expats ask me how they would deal with a change of country. This can be tricky unless you tackle the challenge pragmatically. It can also be exciting. If you set yourself up properly now with a bank account in a tax haven and create an international investment vehicle in a tax haven it will not matter where you move to.

Beyond that the complexities often run to the local community and economy. Housing is cheaper in Bangkok but more expensive in Singapore than in Yangon. Some are surprised that housing is drastically more expensive in India than many other places. There are many aspects to consider when moving country. Having your finances in order will mean you have less issues to face.

Remember failing to plan is actually planning to fail.

Questions to the author can be directed to PFS International on +66 2653 1971 or emailed to [email protected]

Start young: Planning for the future

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