Eight reasons why expats find themselves worse off
Written by Adon Beddoes on December 08, 2017.
Many people assume that all expats residing in Asia are living the high life, making the most of the increased disposable income that they enjoy due to generous expat pay packages and a lower cost of living. They imagine luxury accommodation, maids attending to every need and weekends away in exotic locations.
The reality is somewhat different and far less glamorous. In my time as a financial adviser in Asia I have seen all kinds of people come and go and some go because they can’t make the finances stack up.
Here are the eight reasons that expats often find themselves worse off than they were back home:
1. Fewer companies offer ‘expat’ packages
Fewer and fewer expats are landing generous all-expenses paid compensation packages from big multinational corporations. These days ‘localised’ packages which involve a more permanent commitment on the part of the employee and far fewer perks are becoming the norm. Even in places where general living costs are lower, as is the case in Vietnam, they can still quickly add up if you are paying for accommodation, school fees and flights home out of your own pocket.
2. Renting not buying
It is difficult for expats to buy property in Vietnam as well as other parts of Asia so many expats rent, sometimes paid for by their employer, sometimes not. While some invest in a property back home to gain a foothold, many don’t as it can be complicated to manage from afar, which means that many expats never get on the housing ladder and fail to build up any equity in property.
3. Failing to contribute to pension schemes back home
If you don’t keep up with payments into government pension schemes such as IRAs, 401ks, superannuation back in your home country when you are living abroad then you cannot expect the same benefits as your counterparts once you repatriate. You need to make a decision between continuing to contribute while you live abroad, or accepting that you will not receive full support from your government due to missed payments and make your own pension arrangements to compensate.
It’s all too common for couples to relocate full of excitement and anticipation only to find that the stress of moving abroad and setting up a new life drives a huge wedge between them. As we all know, splitting up is not only emotionally draining but it is expensive too.
5. Currency risk
Currency fluctuations can play havoc with expat finances, especially if you are earning in one currency and spending it in another. The more unstable a country, the higher the risk.
6. Unexpected costs
There are a lot of costs expats need to think about when living abroad which were perhaps not an issue back home. Health cover and school fees are two major ones, another is the fact that international fees apply to British children opting to go to university back in the UK. These are twice those paid by home students.
7. High relocation costs
Moving is an expensive business – flights, transporting possessions, accommodation deposits, connecting utilities – it all adds up. That’s great if you are with a company offering a fantastic package to move abroad with all the bells and whistles but easy to underestimate for those going it alone. And there is often not as much financial help on offer when it comes to repatriation.
8. Not all of Asia is cheap
Vietnam is one of the less expensive locations for expats emigrating to Asia but the cost of living in other destinations can be extremely high. Singapore, for example, is one of the most expensive cities in the world.
There are undoubtedly a whole host of benefits to an expat life. Many people enjoy the sense of adventure and feel their quality of life is improved due to a better climate or affordable healthcare. Some also benefit financially but often less than they expect.
Whatever your situation, financial planning can help you to make the most of your time abroad. Understanding the issues that you face as an expatriate and tackling them head on can make a huge difference to your enjoyment of your time abroad.
There are solutions to some of the issues mentioned above such as offshore banking, currency exchange specialists and pension and education fee planning. If you’d like to chat through the issues that are relevant to you with a professional, I’d love to hear from you. You can contact me at email@example.com.