A couple of years ago I invested time in developing Charlton House’s business plan. This sets out our focus, values and key goals and objectives over the short, medium, and longer term.
As a team we revisit this regularly.
On the first page of the plan, that is only six pages long, we describe our purpose as being “…to deliver clarity, confidence, and contentment to every client that we work with”.
So, these are our “three C’s” that we aim to deliver for you:
The first of these, clarity, is probably the most important as confidence and finally contentment cannot easily be achieved if you first don’t have clarity over your goals and financial future.
Achieving clarity on what you want from life sounds simpler that it often is, as I touched upon in this recent article regarding goals and objectives.
Having spent time as an expat myself, I recognise that there are a number of additional challenges that overseas residents typically face which can get in the way of achieving this clarity.
Read about five of the most common additional challenges you might face as an expat.
1. How long will you work overseas?
One attraction of working overseas is that you’re likely to earn more than you would do while doing the same job in the UK.
Even if the actual gross salary is similar, in many parts of the world the amount of tax you pay will be less, and the overall cost of living will differ from what it can be at home. This means that you’ll have a real opportunity to rapidly accumulate wealth if you focus on saving money.
However, the temptation can arise for you to view your time working overseas as a short-term venture. This can lead you to set out to enjoy the fact that your salary can provide you with a much higher standard of living than you’ve previously been used to.
By doing this, you can create two problems for yourself:
- You’ll be getting used to a standard of living that, if you return to the UK in the long run, is unaffordable and unsustainable
- You aren’t saving any money.
The longer you’re working abroad with the same mindset the more you could be storing up future problems for yourself. We all know the familiar story of an expat who moved overseas for what was initially only intended to be a two year assignment and now, 30 years on, they are still there.
Given this, you can see how uncertainty over how long you will be overseas can create financial issues, and why clarity in your planning is paramount.
2. Where will you retire?
Once you have lived overseas for any length of time, it’s easy to get a taste for the international lifestyle.
You already read about the advantages of a cheaper cost of living in some places, but there are other factors, such as potentially better weather on a year-round basis, that can improve your quality of life.
A sizeable minority of British citizens end up retiring overseas. Indeed, figures from MoneyWeek show over 1.1 million Brits now receive their State Pension outside the UK.
Furthermore, the likelihood of doing so if you have been a working expat increases dramatically.
However, without clarity when it comes to your intentions, and some advanced planning, it is too easy to become unwillingly trapped overseas if your assumption is that your lifestyle will decline on return to the UK, even if you want to.
That advance planning will include an understanding of how some key issues could affect your overseas retirement. These could include:
- The effect of local taxation
- Your retirement spending plans and the potential effect of currency fluctuation
- The cost of living in your chosen retirement location
- Local healthcare provision, and the cost of any private arrangements.
All of these, as well as planning for any unexpected events, could affect your plans.
3. How do you manage your financial commitments in more than one country?
One of the biggest expat challenges is that you’re likely to have financial commitments in both your home and host country.
This issue can then be accentuated all the time you’re not sure where you will finally retire.
With assets in more than one country, you can end up juggling finances in different currencies and with different applicable tax jurisdictions.
You will also face potential challenges moving money between countries, and the potentially bigger challenge of currency fluctuation against what finally ends up being your home currency, once you’ve made the decision of where to retire.
Clearly, none of the problems are insurmountable. With careful planning, you can work through them.
4. How does being an expat affect your family?
Having children as an expat can bring extra financial pressures, particularly when they are young.
International schools can be expensive and local public schools may not always be an acceptable option.
As well as the financial challenges, you will also need to consider issues such as:
- Language barriers your children may face
- Their cultural needs and future aspirations
- The emotional impact of living overseas.
There will be additional challenges, for both you and your children, if you decide that the UK is the best place for them to be educated while you are abroad. This not only includes the financial aspect but also the effect on both them living thousands of miles away, and you being an expat “empty-nester”.
Then, there’s the potential challenge of ageing loved ones who may well still be living back in the UK. At some stage, you may need to consider their health and care requirements, and it’s easy to appreciate that arranging all this from thousands of miles away could be difficult.
5. What if the unexpected happens?
You also need to address the potential for unexpected events and how they could affect your plans.
Issues such as divorce, job loss, and long-term illness may be difficult to think about, but you need to face up to the possibility of them happening if your planning is going to be effective.
Dealing with any traumatic event is hard enough if you’re in the UK, but when living outside of your country of citizenship, such events can be devastating.
As well as the emotional challenges, they will also affect your finances. So, planning ahead in terms of how you’ll manage can be invaluable and bring you immense peace of mind.
The importance of cashflow forecasting
Not knowing what will happen can make it difficult to plan for the future, particularly for long-term objectives like your retirement.
This can particularly be the case if you aren’t certain where you’ll be retiring, and the amount of accumulated wealth you’ll need to maintain the quality of life you’re used to.
Rather than just hoping everything will work out, cashflow forecasting can go towards giving you clarity of intention, and can help inform your planning.
It can give you a clear idea of what steps you need to take, and when, to cope with future eventualities and help your decision-making.
Cashflow forecasting can also map out the effect of some of the scenarios you’ve read about here to see how your plans could be affected.
It’s good to go through your forecast at least annually, after key events, or if there is a big change in your circumstances.
Done effectively, it can provide you with the clarity you need to go forward with confidence.
Get in touch
If you’d like to talk to us about your own financial circumstances, or some of the issues you’ve read about here, then please get in touch.
You can contact us by email or, if you prefer to speak to us, you can reach us in the UK on +44 (0) 208 0044900 or in Hong Kong on +852 39039004.