Step-by-Step - Your Personal Financial Wellbeing Checkup
Embracing life as an expat is a thrilling adventure, with its unique challenges and opportunities that only other Aussie expats would truly appreciate. One significant aspect you can't afford to overlook? Your financial wellbeing. Living across borders can blur the lines of your financial health, but fear not!
This guide aims to offer clarity, so you can confidently navigate the financial waters of your expat life. Ready to dive in?
1. Understanding Your Financial Goals as an Expat
First things first, it’s important to dream a little. What do you envision for your financial future? Maybe it's purchasing property back home, travelling extensively, or preparing for a comfortable retirement abroad where you spend half the year in Australia, and half in the south of France chasing the warm weather. Regardless, it's essential to distinguish between your short-term and long-term goals. Remember, as an expat, you're balancing aspirations both in your homeland and your current abode. So, jot down your dreams. It'll give purpose to every financial decision you make.
The more specific you can make these dreams the better. Whether it be where you’ll retire, the amount you’ll need to spend on your property, how much you’d like to be able to leave your children or grandchildren – whatever the goal, the more specific and measurable they are, the easier it becomes to track your progress toward them.
The first step in assessing your financial wellbeing is determining how confident, clear, and comfortable you feel about your finanical goals.
2. Taking Stock of Your Assets
Okay, time for some inventory work. What do you own?
Start with Tangible Assets
Begin with what's immediately identifiable. Do you own real estate? Whether it’s a cosy apartment in Melbourne or a quaint cottage in the Cotswolds, each property plays a significant role in your overall financial picture. Perhaps you've also acquired vehicles, art, jewellery, or other valuable items while living abroad. Make a comprehensive list, jotting down approximate market values where possible.
Move on to Financial Assets
Next, think liquid. We're talking about bank accounts, stocks, bonds, exchange traded funds, and the like. Maybe you've ventured into the London Stock Exchange or invested in start-ups across Southeast Asia. Each financial endeavour, regardless of its size, contributes to your financial wellbeing.
Superannuation: Australia's Gem
For many Australians, superannuation is the unsung hero of long-term financial planning. Even as an expat, it's pivotal to track how your super is performing. Are you still making contributions, even while abroad? Remember, depending on your age and the duration you plan to be abroad, your super can be affected differently. So, keep it on your radar and ensure you're making informed decisions about it.
Foreign Assets and Their Nuances
Living abroad invariably means accumulating foreign assets, be it property, investments, or even retirement accounts unique to the country you reside in. But here's the catch: different countries have different tax implications and rules governing these assets. For Australian expats, it's not just about what you own, but where you own it. Some countries have tax treaties with Australia, which might affect how these assets are taxed. Furthermore, understand the inheritance and estate laws of the country in which these assets reside. The last thing you want is to be caught unawares by unforeseen legal complications.
Lastly, maintain a meticulous record. It's not enough to merely know what you own; you need to have documentation that can be easily accessed when needed. Consider using digital tools or apps that cater to expats, where you can safely store information about your global assets.
By the end of this exercise, you should have a clearer picture of where you stand financially. Assets are essentially the backbone of your financial health, and as an expat, you have the unique opportunity to diversify them across continents. Embrace it and make informed, strategic decisions along the way.
In assessing your financial wellbeing at this step, it's important to note that it's not about comparing yourself to others, but rather comparing your position to where you need to be to achieve your own financial goals.
3. Reviewing Liabilities: What Do You Owe?
On the flip side, what's weighing you down? From mortgages in Sydney to credit card debts in Singapore, you'll want to list every liability. If you have deferred debts or student loans, don’t overlook those. Managing debt across borders can be a puzzle, but acknowledging them is the first step.
When listing your liabilities, it’s also a good idea to outline the interest rates, the currency that the debt is in, which institution it’s held with, whether they’re tax-deductible or not, and if there are any balloon payments or upcoming changes expected. This can be a handy tool for any time that you have a financial windfall to quickly determine which loan you should pay down first.
In assessing your financial wellbeing in this area, you can review your Debt Serviceability Ratio, which is your Total Monthly Debt Repayments divided by your Total Monthly Income, a ratio which should not be more than 30%. It's important to also review the amount of good debt vs bad debt that you currently have, and how you feel about your current liabilities overall.
4. Income Stream Analysis
Navigating the ebb and flow of your finances begins with understanding your income streams. Are you drawing a salary from your local job abroad or perhaps benefiting from rental income back in Australia? Maybe it's a combination of both, or even more diverse sources. With every dollar, euro, or yen that trickles into your bank account, it's imperative to have a clear picture of where it originates and how it influences your overall financial tapestry.
Equally important is the need to understand the tax implications of your global earnings. Each country has its tax regulations, and as an Australian expat, you're navigating a unique intersection of domestic and international tax laws. By being informed, you're not just complying with regulations but also optimising your foreign-earned income to work best for you.
In assessing your financial wellbeing here, it's important to review how confident you feel about your income sources. Are you receiving income only from your employment and you expect that this will continue to increase over time, or do you have multiple sources of income?
5. Monthly Expenditure Review
Diving into the realm of your monthly expenses can be quite the eye-opener. As an expat, you're often straddling two worlds – the allure of exploring new experiences in your adopted country and the comfort of familiar pleasures from Australia. These choices can lead to a unique blend of expenses. Perhaps it's the occasional splurge on a nice meal out in Singapore over a bottle of wine, or the costs associated with keeping a connection to home, like international phone plans or shipping costs for beloved Australian goods.
Moreover, as you track your outflows, you might come across some unexpected drains on your wallet. These could range from foreign transaction fees on your credit card to subtle nuances like differing utility billing cycles or unexpected local taxes. Currency conversion, with its fluctuating rates, can also complicate matters. One day you're feeling triumphant about the exchange rate, and the next, you're puzzled by the unexpected dent in your finances.
To truly grasp the intricacies of your spending, it's beneficial to use budgeting tools or apps tailored for expats. These tools can automatically convert currencies and categorize your expenses, making it easier to identify where you might be overspending or where there's room to save. After a comprehensive review, you'll not only have a better understanding of your spending habits but also gain invaluable insights to adapt and streamline your financial strategies. This proactive approach ensures that every month isn’t just about expenditure but also about learning and financial growth.
Your financial wellbeing with regard to your monthly expenditure is often a simple matter of having clarity over where your money is going. As an expat, money without direction or purpose can quickly find another home, so it's important that you're clear over your monthly expenses.
6. Assessing Your Insurance Needs
Insurance acts as a safety net, ensuring peace of mind in the unpredictable dance of life. As an Australian expat, the insurance landscape can seem even more complex due to the dual considerations of your homeland and your adopted country. Start with health insurance: does your current plan cover international care, or will you need to invest in a separate global policy? Understand the nuances, from hospital stays to doctor visits and even potential repatriation needs.
Life, TPD, Critical Illness and Income Protection insurances are another crucial avenue. Does your existing policy consider your expat status, or will there be hurdles in claims if, heaven forbid, something were to happen while you're overseas? Don't forget about property and contents insurance, either. With assets potentially spanning continents, ensure you're protected against theft, damage, and other unforeseen circumstances. Lastly, consider liability insurance, especially if you're involved in business ventures abroad. Familiarise yourself with the local regulations and cultural expectations related to insurance in your current residence, and always keep an eye out for policies that cater specifically to the unique needs of expats
It's also important to review the currencies of your personal insurances, as this could have a significant impact on the payments for your loved ones in the event of an unexpected claim. Not all insurers will allow you to hold your international or Singaporean insurance policy in Australian Dollars for example.
Insurance brings about peace of mind, and this is why it's so important to your financial wellbeing to ensure that you have the right coverage in place for you and your family. Getting the foundations right is critical to your long-term financial success.
7. Superannuation Health Check
Ah, the super! An integral part of any Australian's financial planning, the superannuation fund is your ticket to a comfortable retirement. But being an expat adds a few layers of complexity. First and foremost, are you still actively contributing to your super while living abroad? While it might be tempting to let it sit, regular contributions, even small ones, can make a world of difference in the long run due to compound growth.
Moreover, familiarise yourself with the current regulations surrounding super withdrawals for Australians living overseas. There might be tax implications, penalties, or other nuances that you should be aware of to avoid unexpected financial setbacks. Another consideration is the potential of consolidating your super funds. If you've had multiple jobs back home, you might have more than one super account. Consolidating them can simplify management and potentially reduce fees. Being proactive about your super's health ensures that your golden years, wherever they might be spent, are as gleaming as possible.
The rules regarding contributions to superannuation are forever changing, so it’s important that you’re seeking professional advice here to ensure that you’re taking advantage of the opportunities as they arise.
Many make the mistake of comparing their super to the Australian-based colleagues and friends, even though they have significantly greater assets outside of super saved up for their retirement. For your own financial wellbeing, ensure that you're clear on the role super is playing for you, that it's invested appropriately and working for you, and you're not missing out on opportunities as an expat to minimise your tax.
8. Estate Planning Considerations
Estate planning, although sensitive, is pivotal to ensuring your wishes are honoured and your loved ones are taken care of. As an expat, the intricacies multiply. What happens to your assets in your adopted country versus Australia? Would there be complications due to dual jurisdictions? Start with drafting or updating a will that clearly outlines your wishes for all assets, both local and international.
Then, consider the benefits of having a power of attorney in place – someone you trust to make decisions on your behalf if you're unable to. Since laws vary from country to country, it might be wise to have separate wills or legal documents for each jurisdiction to ensure clarity. And don’t forget about trusts, which can provide additional layers of control and tax advantages depending on your circumstances.
At this step, assessing your financial wellbeing is about reviewing how confident you are that your estate planning strategies accurately reflect your current wishes.
9. Currency and Foreign Exchange
In the age of globalisation, managing multiple currencies is the norm for expats. But, with fluctuating exchange rates and hidden fees, the realm of foreign exchange can quickly become a quagmire. It's not just about sending money back home or bringing funds to your current location; it's about optimising those transfers to ensure maximum value. Explore reliable currency transfer platforms known for offering favourable rates and minimal fees to Australian expats.
Furthermore, consider setting up multi-currency bank accounts to manage and access different currencies seamlessly. By staying informed about exchange rates and understanding the nuances of currency conversion, you position yourself to make financial moves that are both timely and cost-effective.
Finally, don’t make the mistake of looking the proverbial gift horse in the mouth. If you’re waiting on an opportunity to transfer funds back in Australian Dollars, take advantage of the opportunities of a weak Australian Dollar when they arise. You don’t need to pick the top or the bottom, but simply take advantage of weakness when it arises if this aligns with your goals.
Your financial wellbeing will often receive a healthy boost by having a regular plan to gradually transition more and more of your wealth into your long-term currency, which for many Aussie expats will be the Australian dollar. This reduces the risk and anxiety of exchange rates working against you.
10. Seeking Professional Help
Venturing into the complex world of international finance can be daunting, even for the savviest individuals. There's a myriad of regulations, considerations, and potential pitfalls that only increase in number when you're straddling two or more countries. That's where a seasoned, expat-friendly financial adviser comes into play. They bring to the table a wealth of experience dealing with the specific challenges faced by expatriates.
When seeking such expertise, ensure that they are familiar with both Australian financial systems and those of your host country. Look for advisers with glowing testimonials from fellow expats, and remember that their insights can save you not only money but also potential legal headaches. Their guidance can be the compass you need in the vast financial seas of expatriate living.
Whether your finances need a bit of a healthcheck, or you're looking for a Finanical Adviser who will be there for you every step of the way, it's important to know that seeking a professional Adviser can be a valuable boost to your financial confidence and wellbeing.
Look at you, taking charge of your financial wellbeing! As you continue this incredible expat journey, remember the importance of regular financial check-ups. Whether it's Sydney’s shores calling you back or another adventure on the horizon, ensuring your finances are in order will let you embrace the future with confidence.
To Your Financial Success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd - No: 200305462G | MAS License No: FA100035-3
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General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.
*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.
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