Five Things to Know When Planning Your Finances as Global Nomad
Every global citizen, digital nomad, or expat needs solid planning in terms of finances and wealth management. Without the right financial planning, it will be difficult for you to manage and grow your wealth no matter how much your monthly income is. Financial hurdles are often faced by expats globally, which in turn can affect their monetary stability in a foreign land.
Keep yourself well-informed about the financial options so that you can plan your investments for a secured life overseas even after retirement. The pattern of saving and growing your wealth abroad will be different from what it was back home. Depending on your nationality and the current financial condition, you need to consider several factors while working on your financial plan that works best for your future.
Here are five tips that will ensure that you are following the basics and treading in the right path towards financial stability:
Set Financial Goals That Fit Your Overseas Life
As an expat or global nomad, you must establish and then prioritize your short, medium, and long-term goals based on their importance. If your goals are set, you would be focused on achieving them eventually. Your targets should include personal achievements and a detailed plan for the financial wellbeing of your family post-retirement. Here are some financial goals that many expatriates have:
- Make a budget and try to live by it
- Save for both retirement and unexpected emergencies
- Save for your children’s education
- Pay down debts, especially your expat mortgage
- Pay off credit card
- Buy a house or revenue property
Engage in Tax Planning Wisely
Expat tax planning goes hand in hand with financial planning. Living overseas would mean that your tax liabilities may differ from your native country. Taxes certainly add unwanted complexity to an expat’s life. Additionally, the constantly changing tax equalization policies adopted by various employers can have an annoying effect on your financial planning. Using strategies like tax deferrals during times when you have higher income can save some of your hard-earned money.
Keep Saving as Much as you Can
You must have sufficient savings or reserves when you start living in a foreign land. Ideally, you should have adequate money to fend for the initial six months as an expat. This can help in meeting fixed expenses like food, rent, and healthcare in case you lose your job or face unexpected problems in your host country. Through these savings, you can also ensure your financial planning and investments are in place and are not affected. Also note that you should try to save as much as you can when you are sending your money overseas as poor rates on your foreign exchange trades can really add up.
Make Smart Investments
Your financial planning as an expatriate should include integrating all your financial accounts and maintaining them systematically. Do not forget to monitor your investment portfolio closely at regular intervals. Also, make the right investment decisions on time so that you don’t lose out in the unpredictable financial market. Opting for international savings plans can be a great way to invest wisely. Diversification is always a sound strategy and your risk profile should be updated yearly, especially as you get closer to retirement. A lot of people are planning to move abroad for retirement, so keep in mind that you will need your money to last a long time.
Have a Robust Expat Backup Plan
Your new host country may not have the financial support system that you enjoyed when you were back home in the United States. So, having a solid financial backup plan can save you from a lot of hassles, especially during an emergency. For instance, an emergency fund will be very helpful when you need it the most. Ideally, you should create an emergency fund before you head to a new place. Of course, the fund should offer international support if you face any dire situation. Having a backup plan will help you focus on your financial planning and make sound investment decisions. It is always wise to be prepared for the worst, especially if you are moving abroad as a first-time expat.
Life Insurance: Part of your back up plan if you have children should also be buying adequate expat life insurance coverage – generally enough to pay off your debts and leave enough capital for your partner to live off for a set number of years to help offset the loss of your income.
Disability Insurance: Another often missed item of any financial plan that will back you up should you fall ill or become injured and are not able to work is expat disability insurance. Most plans will cover you after a 90 day waiting period and pay till you are age 65 if you are not able to work because of an injury or illness.
Every dollar, euro, yen or pound matters when you have just landed on foreign soil. Plan and make wise investment decisions to ensure that your financial goals are met in due time. The right preparation and financial planning won’t let you down even during the most turbulent times. We should also mention that your finances can be severely impacted by an illness or injury if you do not have adequate global health insurance coverage. International health coverage is another backbone of any financial plan when living abroad.