Expatriate Finances

This is the final article in the current series jointly written and published by Huw Francis (Employee's perspective) on Suite101.com and Tony Turton (Employer's perspective) on the Arnett Associates (International HR Consultants) website: http://www.btinternet.com/~arnettassoc/index.html.

We hope you've found them useful.

There's a common perception among people who've never lived abroad that the expat life is one of wealth and luxury. Unfortunately, that's not always the case.

Yes, there are many perks and the salary can be good, but the financial costs can be high too, especially without careful planning. Among the financial concerns for expats are:

1. UK-style pension schemes are not usually available to non-resident UK citizens.
2. Having money available quickly in a country you want it can be awkward and expensive to arrange if you're not prepared.
3. Your savings can be subject to taxes if you leave them in the wrong place, or move them home at the wrong time.

Local Salary Payments

However, a prime concern for expats is having enough money in the country they are living in to be able to live comfortably, but still have enough money in a safe banking system to pay for mortgages, pensions, investments, schools fees etc. If you live in Singapore, Hong Kong or somewhere equally safe (in banking terms) you'll not have a problem managing your money. But would you feel so secure if you had all your money in Laos or a central African bank?

Before you leave home is the best time to plan your banking and investment strategy. Take advice from your company, returned expats, current expats you have contacts with, and most importantly your bank.

High Local Inflation

The local economic conditions will affect how you want to be paid and how you manage your money. If you're going to live in a country with high inflation you need to be sure that your salary keeps up with it. If your salary is to be paid in local currency, how often will it be adjusted? Or will you be paid an amount equivalent to a fixed rate of US$ or GBP, so that every month your local currency salary increases? If the local inflation rate is exceptionally high you should push to get your employer to pay you directly in a hard currency; US$ are usually the best, unless a country has specific ties to another currency.

Exchange Rate Fluctuations

Even if a country does not have a high inflation rate, exchange rate fluctuations can cause financial difficulty for expats. A few years ago the US$ and the GBP were almost 1-to-1, making the US much more expensive than it had been for Europeans on assignment in the US. Discuss with your employer who will bear exchange rate risks before you go; when will adjustments kick in and how quickly after a fluctuation. After a major fluctuation has occurred is too late to start negotiations.

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