Senior international professionals tend to have complex finances.
And living abroad only adds to it.
According to HSBC’s Expat Explorer Survey, 75% of respondents (21,950 respondents worldwide)…
Say their finances become more complicated after leaving their home country. In this blog, we explore the common financial mistakes senior international professionals make.
And also look at ways you can control your finances for a better financial future.
Here they are.
1. Living beyond your means
Living abroad can give you the illusion of being on holiday, especially during the first few months.
This is amplified when you move to low-tax countries.
The excitement of a new location, new culture, new home, and new friends can affect your spending behaviour.
You may be tempted to eat out more often…
Furnish your home with new furniture…
Or shop in the luxurious malls every weekend.
By all means, you should enjoy your new lives.
But avoid being pulled into a lifestyle you cannot maintain.
2. Not setting up an offshore bank account
It’s expected to open a local bank account in a new country of residence to assist with day-to-day financial needs.
And, to have a salary paid into it.
However, an offshore bank account is especially beneficial for high-net-worth individuals.
The “ABC Expat Rule” is this:
If you are from country A and live in country B, then you should bank in country C.
3. Not getting your tax right
Once abroad, it's easy to forget your home country tax status.
If you're from the UK, you are required to inform HM Revenue and Customs (HMRC) of your intention to move abroad and submit a completed P85 form.
This is crucial to ensure they will not sought after you for tax, claim tax relief or any tax refund, and become a non-UK resident to avoid tax on certain incomes.
If you are a UK expat and want to learn more about getting your tax right before or even after you move abroad, visit the HMRC website.
4. Not researching the law on inheritance in the country you're moving to
This is especially for those moving to the Middle East, where countries are ruled by Sharia Law.
New UAE law states that local courts have the authority to determine how assets are distributed in the absence of a will.
This recent development has only stressed on the importance of having a will...
And is absolutely essential to ensure a secure future for your family.
The law is also applicable for all property owned in the emirates.
Under Sharia law, the wealth would be passed on to the nearest living male relative.
It is therefore your responsibility to ensure you have a will in place to avoid any inheritance obstacles that may arise in the future.
5. Neglecting your pension contributions
Many senior international professionals neglect their pensions contributions back home.
It's mainly due to lack of research involved on how to continue making pension contributions...
Or failure to set up the best alternative scheme.
It's easy to neglect your pension's limitations when moving abroad.
For example, if you're from the UK, there is a five-year window to continue pension contributions with a maximum contribution of £300 per month.
Beyond this amount, you would have to pay tax on their pensions.
6. Falling victim to unregulated financial salespeople
One of the worst mistakes you can make is assuming your new financial adviser is regulated.
Unregulated offshore financial salespeople are rife.
They often encourage investors to take out products that wreak havoc on their financial futures, with no focus on financial planning.
To know more, read this article.
Financial Education is the best way to avoid becoming another victim of traditional financial services.
7. Poor investment choices
Linked to the previous point…
Product salespeople sell products promising them the biggest pay-out.
These products are designed to line their pockets and not their clients'.
Often, senior international professionals like you are sold on the false idea of ‘free advice’…
Only to lose your money to hidden layered commissions and exorbitant exit penalties once you decide to move back home.
Here are 10 investing rules to live by, to help you on your way to making better financial decisions.
It's not too late to regain control of your financial future
We all have goals and dreams.
Many professionals move abroad to take advantage of overseas wealth.
Earning money in a low-tax country can boost or kick-start your investments.
They can do wonders for those who remain disciplined, focussed and motivated.
If you want to stay the course, make sure you're equipped with the right kind of financial knowledge.
Get started today by joining our high-performance community on AES Education...
And find resources that can fit your time, budget and lifestyle.
Or work with a fiduciary financial adviser in Dubai.
