A good expat financial plan will help simplify complex financial decisions. It enables professionals on assignment abroad to best manage monetary assets to meet short-, medium- and long-term financial goals.
Whether you are embarking on an expatriate assignment soon or have been working overseas for some time, it is important to consider how it may impact your long-term financial situation. It is not uncommon to find expat wealth distributed between two or more countries. This can create a world of complication when you decide to repatriate to your home country - so the importance of seeking sound financial advice cannot be overstated.
What is expat financial planning?
What to consider when financial planning as an expat?
There are many considerations and dependencies when it comes to managing your finances before, during and after an assignment abroad. Are you moving to a country with a higher or lower cost of living than your home country? How will your day to day expenditure change? Are there additional financial outlays like school fees while you are overseas? In addition to all these personal aspects there are some elements of financial planning common to most expatriates:
Tax
As the adage goes, ‘there are only two certainties in life, death and taxes’. Accepting an assignment as an expat can make your tax situation more complicated. While your employer should be able to advise you on immediate requirements when it comes to tax, it is useful to have professional advice too. Your employer's equalization policy may impact the tax you have to pay and so does your country of origin. For example, US expats still have to file a tax return at home.
Trailing spouse
Many partners of expats who cannot work while their family are on assignment feel somewhat disempowered by the experience. Although not the only factor, being financially dependent when they are used to contributing to the household is hard. This is something that needs to be considered in expat financial planning. How can the financial needs of your partner be met while they do not have their own source of income? This may help prevent trailing spouse syndrome.
Financial Planning for Retirement
With an aging global population, planning for retirement has never mattered more. Accepting an expat assignment may impact your superannuation entitlement in both your home and host country. It may be further complicated by where you would like to retire. Some expatriates choose to return to their home country while others return to a country they loved while on assignment. All of these decisions will impact the best course of action to plan your retirement.
Financial Planning for Repatriation
The financial implications of repatriating to your own country, particularly after a long assignment abroad are often underestimated. Combine this with reverse culture shock and the difficulty of re-establishing yourself in your home country and its repatriation may be much harder than you anticipate. Make things easier by having the right funding in place so your return home is as smooth as possible from a financial perspective.
Expat Wills
Finally, no one likes to think about this very important element of financial planning, but it is important to plan for the other certainty in life, particularly if your role is high risk or you are working in a dangerous environment. Spending an afternoon planning and writing your will with a legal professional could save your family a world of problems, financial and otherwise, if the unexpected happens while you are overseas.
Expat financial planning is just one of the considerations for your expat assignment. Don’t forget to plan for your physical and mental health and wellbeing with international health insurance for professionals working overseas.
