Did you blink over the holidays and wonder where they went? Christmas probably passed and before you could turn around you may have missed all the fun as it whizzed by you. We seem to travel through time so rapidly these days.
When we get to the New Year we tend to extend celebrations within ourselves by making personal resolutions about how we will make life better for ourselves. It is our way of using something tantalising to adopt innovative ways in which we can change and feel good about ourselves. But alas just trying to feel good about ourselves can be short lived as the reality of life settles ‘back to normal’.
By sometime in January you may have already reverted to old habits. Some New Year resolutions are fun amongst family, friends and colleagues. They are frequently a source of amusement to see who can make their own resolution last the longest in positive friendly competition.
These pledges for change are usually short lived as people accept the fun value. A ‘popular’ resolution amongst smokers is to quit but often after a few days of being short tempered and irritable the habit wins.
Only the minority see resolutions seriously, endeavouring to follow them through successfully. This usually applies to decisions which will ultimately benefit you if you are determined to make improvements for yourself.
As an expat in Asia do you feel the need to do something different? Are you secure? Are you comfortable that you have made adequate arrangements for your future? There are a number of important factors contributing to a successful life ahead. Each is important and collectively they create an archway of financial protection for you; no matter how young or old you are or how precarious your situation appears to be.
For the many expats who are serious about their future there is much to consider and a great deal of action to take. Over a long period of time you can achieve what you really want and be in an advantageous position in your long term future.
Let’s take some one-off examples to demonstrate:
Do you have any pension provision? Perhaps you have a scheme or two from previous employers? Have you reviewed these and assured yourself that they are adequate? Have you created any kind of addition to your pension provision to ensure that you have provided beyond the initial projected requirement?
Expats are often shocked at the amounts they ought to be providing for themselves. Inflation is the real pension nemesis. It can be a stealth attacker, creeping up on us without warning. For a number of years now we have been in a period of relative calm from inflation, although it is still very dangerous and real and according to many economist it’s ‘coming to get us!’
The antidote to this is compounding growth. By saving regularly you are building some inflation protection into your overall plan and this will certainly help. The positive effects of dollar cost averaging are quite remarkable allowing you to make greatest use of this phenomenon over a period of time.
What is your most valuable single asset? Most people mistakenly simply consider material possessions. In reality it is actually your power to earn a living. Many people insure their belongings and personal property; even their pets. But they overlook themselves as people of significantly real value.
If you were to suddenly die would you leave any liabilities behind for which your heirs would need to take responsibility? Mortgages or a loans would be simple but prime examples.
What about providing for your loved ones financially in the future? A spouse and children would need ongoing financial support and these could be secured by life assurance cover. Whether this is for your partner or yourself you ought to consider the catastrophe which could follow a dread event.
Even worse if you or your partner were disabled for life being unable to work again, how would you survive? This would create an even heavier drain on your resources. You can insure against future loss of earnings and be secure if you were disabled.
Do you have medical insurance for yourself and your loved ones? Whilst many do not perceive they will need expensive medical treatment there is always a possibility that this will become reality. By then it is too late and medical treatment can be beyond you financially. Whilst many expats see this as an unnecessary provision they are often all too shocked when “it does happen to them”
Are you aware of the global rules about probate and wills? Your executors are required to obtain a grant of probate for each jurisdiction in which you have assets. This process can extensively delay beneficiaries from access to resources to cover their living costs, causing serious financial difficulties for them. Is it not bad enough that a family would be grieving from a death without having these types of difficulty to deal with? Creating wills will assist greatly.
Where assets are more substantial you would be wise to investigate the use of trusts. These give greater flexibility allowing a succession plan to be created accounting for varying circumstances. Assets settled into a trust are not subject to a will or to probate because the trustees legally own the assets rather than the person who has died. Trusts allow you to plan for several generations. You may thus provide for grandchildren and great grandchildren if you so desire.
Most expats see this subject as low priority until they realise just how exposed they can be. This is not just about your regular income tax liability, it can relate to capital gains, inheritance tax, liability on pension income including the complexities of double taxation agreements where you have assets and from where you generate income.
Tax is complex usually requiring highly specialised evaluation and advice. Starting with an overall view and some strategic planning often allows you to get the feel for the future.
Many expats unexpectedly face difficulties they had never envisaged. Situations will often rear their heads out of nowhere creating havoc in your life. They are diverse and often create very difficult circumstances which need to be dealt with.
One example could be the refusal of a work permit where you or your partner have secured a job. Governments often appear fickle and unfair in these types of area. Such denial can change your entire family’s life for good when you are effectively an innocent bystander.
Another example is the calculation of pension drawdown requirements. These are often subject to complex rules resulting in restrictions which can leave you with less income than you had anticipated.
Do you have a resolution for 2016 about how your life may be improved in the long term? No matter whether you are a new expat or a seasoned old hand at living abroad it is almost inevitable that there are some aspects you are unaware of.
I can help you uncover these unknowns and ensure that you are on course to cope with any eventuality which may arise in the future relating to your “business of living life”. Get in touch with me today by calling +66 (0)2 653 1971 or emailing firstname.lastname@example.org
Andrew Wood has been an expat in Asia for 34 years and is Executive Director with PFS International. He has been writing articles for seven years and has made a significant contribution to the PFS International library of financial service articles dating back over ten years. These articles which cover the complete A-Z of financial planning are available to readers on request.
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