Financial planning advice for expats in Hong Kong – don’t squander the opportunity to save
Written by Lynda Calver on February 20, 2018.
I don’t know what attracted you to Hong Kong – perhaps it was the opportunity to experience a unique culture, the draw of a base in Asia within spitting distance of incredible exotic destinations or just a yearning for a new adventure. Whatever it was, the happy by-product for many expats is a good salary with higher disposable income. That gives you the opportunity to stockpile significant savings and become financially secure while you’re busy making the most of everything this dynamic city has to offer.
That will, however, require some effort on your part. There’s no denying that Hong Kong is expensive – the second most expensive city in the world according to the Economist Intelligence Unit. Not only are rent and general living expenses high but there are many elements of life here designed to persuade you to part with your hard-earned cash. It is all-too-easy to fritter all your disposable income away on flights for weekends away, Michelin-starred meals or designer gear. So here is some advice on how to make the most of everything Hong Kong has to offer and grow your savings at the same time.
1. Get to grips with budgeting
Be absolutely clear on how much you need for your fixed expenses such as rent, bills, insurance and school fees so you can work out exactly what is left over as disposable income each month. Ideally all households should be run like businesses with all incomings and outgoings strictly accounted for. In reality this is rare but aim to make your household the exception! You should also take care to cut your cloth according to your budget when it comes to spending. That might mean saying no to some nights out and checking out some of Hong Kong’s amazing hikes and scenery rather jetting off to explore yet another exotic location.
2. Don’t forget taxes
There is no PAYE system in Hong Kong so you need to be savvy enough to estimate how much tax you will have to pay, not to mention restrained enough to resist the temptation to blow it all! I know it’s hard but you should set aside enough of your monthly income to cover the dreaded tax bill when it finally comes in. The tax year is from 1st April to 31st March and rates vary, starting from 2% and going up to 17%. For more information, it’s worth checking in with a financial adviser.
3. Prioritise saving
Once you’ve got a clear budget and know how much money you need to set aside for tax, you’ll have a pretty accurate figure of what is left over. Next determine a sum you can afford to save and, as soon as you get paid, before anything else gets spent, put that money aside. If you have a healthy sum to put away, it’s a great idea to set up a savings plan to ensure that the money is working as hard as it can for you and accumulating compound interest. Speak to your financial adviser about tax-efficient savings plans which will build your wealth. Hong Kong is, of course, a great place to invest as tax on investment is pretty much non-existent.
4. Contribute to your employer pension scheme
If you have the chance to contribute to an employer pension scheme – DO IT. Usually your employer will contribute too so that means free money to put towards your retirement fund. The two main types of scheme in Hong Kong are a Mandatory Provident Fund (MPF) or an Occupational Retirement Schemes Ordinance (ORSO). Accumulated savings are transferable for reinvestment elsewhere if and when you leave Hong Kong.
5. Find a financial adviser
As mentioned above, whatever your income level, if you don’t already have one, the time to find a financial adviser is now! There are plenty of them working in Hong Kong but choose wisely. Ask friends and colleagues for recommendations, do your research and go for someone who is experienced, fully qualified and licensed.
6. Be savvy about currency transfers
It is highly likely that while you are living abroad you will need to transfer funds out of Hong Kong back home or vice versa. Banks charge a fortune on transfers and are best avoided. Money transfers are best made via specialist brokers who charge minimal fees or commission so you get more money in your pocket.
Life in Hong Kong is wonderful and I have no doubt that you will make the most of the opportunities you have here and live your expat life to the full. Just remember that you also have a great opportunity to plan for your future financial wellbeing. Don’t squander it!