Five familiar financial mistakes made by new expats arriving in Hong Kong
Written by Carl Turner on February 14, 2017.
So you’ve been posted to Hong Kong and are looking forward to a new lifestyle in a new country and the chance to make the most of possibly a higher salary, lower taxes and a great standard of living. Many have gone before you and mistakes have inevitably been made! The good news is that you can benefit from the errors of others to make sure that you really take advantage of your situation to get ahead with your financial planning.
1. Failing to save
It’s all too easy to expand your spending in response to a higher salary, especially when you are exploring a new country and forging a new social life. That’s why you have to make a conscious effort to save each month by working out just how much you will put away and sticking to it. When you have savings, you remain in control, without them circumstances control you.
2. Unsuitable banking arrangements
I have seen all too many expats fail to adapt their banking arrangements to their new circumstances, running everything through accounts back home. I appreciate that banking regulations mean that there are always hoops to jump through when opening new accounts but it is definitely worth having a local account to manage the day to day such as paying utility bills and buying groceries to avoid paying excessive bank charges. Most of my clients also benefit from setting up multi-currency due to the extra flexibility.
3. Paying for invalid insurance policies
If you have just arrive in Hong Kong it is absolutely essential that you review all your existing insurance policies and check their validity. It is all-too-common for expats to continue paying for life insurance policies back home which have actually been rendered null and void by their move. Review all your policies and what your new employer offers you in terms of the insurance benefits and take out extra life, health and critical illness cover if they are needed.
4. Misunderstanding tax liabilities
Depending on where you have come from, you may still have tax liabilities back home. Make sure that you are absolutely clear on your situation and where you have to declare and pay tax. Cross-border tax is a notoriously complicated area so seek professional help. An expert will also be able to advise you on legal ways to mitigate your tax liability.
Hong Kong is a particularly different taxation system to what most people are used to so make sure you are aware of how and when your tax bill will be due. This isn’t automatically deducted from your salary. I have seen many people caught out with this when the tax bill is received and funds haven’t been set aside for this.
5. Omitting to plan for your child’s education
This is a really important part of any expat’s financial planning. Most expats look to the private sector for primary and secondary education, whether they go local or send their children to boarding school back home. That doesn’t come cheap and nor does the university education which will likely follow. Forward planning will help you spread the cost of school and university fees and enable you to build it into your overall financial plan.
New To Hong Kong?
If you’re a new expat, you may find my ‘New to Hong Kong’ free guide useful to help you settle down in your new surroundings.
I advise and educate new expatriates to Hong Kong on what financial planning opportunities are available to them, as well as helping them avoid the common mistakes many often make.
If you would like a chat about any aspect of your financial planning needs, whether its from offshore banking to education fee planning, I am here to help.