|
Dear Reader
Welcome to June's newsletter!
We are fast approaching holiday season with many expats taking a well deserved break often to see loved ones back home.
In this newsletter, we look at four ways expat families can damage their financial futures as they navigate the messy middle phase of working life overseas. Some key principles apply to those who remain firmly in the UK too!
The rest of this month’s newsletter is packed with ideas and links that you may find interesting. As always, we’re here if you'd like to discuss how any of these ideas might apply to your unique situation.
Feel free to share - I continue to grow my business since moving firms, if you know anyone who might benefit from this content please do share, it would be really helpful.
Regular numbers update
Markets - unimportant and important numbers!
|
|
Inflation - the real enemy
|
This month's reflections - an expat life's 'messy middle'
Working life tends to split into three phases. There's the early stretch, when you're setting things up and putting your financial structure in place. There's the final stretch, when you're winding down towards retirement. Between these two phases sits the long middle stretch where most of life actually happens.
In this middle phase, the main work of building your financial structure is often done. The accounts are open, contributions running in the background, the investment strategy was chosen years ago and likely doesn't need to be reinvented. From here on, your job isn't to add something clever; it's to leave the structure alone and let it do what it was designed to do.
Unfortunately, the temptation to interfere with a plan is strongest precisely during the stretch of life when such interference is most damaging. And for British expats, that temptation comes from more directions than it does back home.
The Busy, Messy Middle
The middle stretch is demanding for everyone. Careers are at full intensity. Kids are at their costliest. Parents back home are starting to need help in ways they didn't before. But living and earning overseas adds a layer on top of all of that.
Choosing to build a life abroad is a big decision, usually made for good reasons — a better role, a higher income, a different lifestyle. The package looks generous on paper. The assumption is that the higher earnings will translate directly into a higher savings rate.
But many expat families experience periods where this is not the case. Expenses creep higher, living standards increase perhaps more than earnings, the cost of everything rises significantly, trips home become eye-wateringly expensive. Savings capacity drops or disappears for a while.
Added to that, uncertainty brings decision paralysis. Being an expat tends to come with a degree of uncertainty, after all, loss of employment often comes with losing the right to live somewhere. Not knowing where you might end up later in life can make it hard to make long term financial decisions and often leads people into long term holding patterns.
The Four Ways People Interrupt the Machine
Four actions show up time and again.
The first is to reduce or pause savings. The plan is always to catch up later, once things settle. In practice, the contribution paused for a year often stays paused, and the compounding you gave up is gone for good.
The second is dipping into long-term investments for lifestyle expenses. Higher rent, big trips, unpaid time between jobs, something to give your child a head start. Each decision is defensible on its own, but the consequences for your long-term financial independence quietly become a problem for your future self.
The third is getting too clever. A colleague describes a structure that saves tax, or an investment that's been performing well. In the moment, the tried-and-tested approach seems dull and the novel one seems enticing — especially when life elsewhere feels out of your control and optimising your money feels productive.
|
|
When earnings are good, all those years of sacrifice start to really pay off, you sell your business or your stock awards materialise, a thought creeps in: surely it shouldn't just be more of the same?
Continuing to do the simple, boring thing can feel almost foolish when you're doing well — as if success should be matched by something more sophisticated. The data points firmly the other way. Continuing to do the simple, boring thing is usually the most productive choice you can make.
And finally, the fourth is lack of repatriation preparation. Leaving it so late to prepare for a return home or dream move that there is a real financial impact, often an unnecessary tax bill. Make sure you have time to put your investments into the right structures and accounts. Make sure you have some joined up thinking across finances and tax especially.
The Discipline of Restraint and Preparation
Because the pressure to interfere is constant and the justifications are usually reasonable, restraint during this phase takes real discipline. For expats, with more pressures and more noise, it takes a little more.
Consistent contributions and uninterrupted time during this messy middle are among the biggest drivers of financial independence later on. Perfect discipline isn't always achievable, but this is what it looks like to aim for:
- When money is tight, make your contributions the last thing you reduce, not the first.
- When a new idea or structure comes up, ask whether it's actually better than what you have, or just newer and more interesting.
- When something tempting comes up that would mean dipping in, ask whether the cost is worth what it might mean for your long-term plan.
- Seek professional advice before repatriating to make sure you do not sleepwalk into a big tax bill.
If you're in the busy, messy middle and you already have a plan in place, the most useful thing you can do is get out of your own way. If something has come up that's making you consider changing course — a new opportunity, a piece of advice, a big expense — talk to us before you act. In most cases, the plan you committed to years ago is still the right one to stick with.
|
Every situation is different. If you'd like to discuss your own financial plan, please reach out.
Compliance disclaimers: what they should really say.....
The value of investments and any income from them can fall as well as rise. You may not get back the full amount invested, you may get more. Past performance should be used as a guide only and is not a guarantee of future performance.
Reading, videos, podcasts
Watch
Game theory [7 minutes] is a useful tool for decision-making in situations where the outcome depends on multiple parties. It provides a systematic way to analyze the interdependence of individuals or organizations and their potential strategies.
|
|
Listen
Finance Borrowed It From Life [8 minutes]. Reflecting on how the most valuable things in life—health, relationships, skills, and creativity—are built slowly through consistent, repeated effort
|
Great visuals
Thank you
As always, I hope you enjoy this month's updates, do let me know what you enjoyed and any ideas you might have for future newsletters.
Meanwhile, here if you need.
With best wishes, Gary
Gary Smithson - Partner, Farringdon Asset Management Singapore and Malaysia
gary-smithson-farringdon.kit.com
|