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Expat Debts: Repaying Your Debts Whilst living & working in overseas


‘Every day I get up and look through the Forbes list of the richest people in America, if I’m not there, I go to work.’ – Robert Orben

‘Don’t borrow from anyone you don’t want to loan money to.’ – Doyle Brunson (2 times World Poker Champion)
‘The easiest way for your children to learn about money is for you not to have any.’ – Katharine Whitehorn

Do you owe money?

How much and to whom?

Do you have that sinking feeling?

The consumers (that is you and I) of nations like the US and the UK are drowning under a sea of debt. Personal savings rates have slumped whilst borrowings have risen dramatically. Much of this is due to the booms in house prices.

Average homes have risen so steeply in value that an ordinary family can ‘release’ equity every year or two to live beyond their means, repay credit cards and loans and still live well. However, the reality is that wages are not rising as quickly as inflation and as soon as interest rates leap into life again, these debts will become unsustainable.

As I write this in early 2012, interest rates in the UK have stabilised and US rates are increasing monthly. It will need more rate rises before the problems really start to show themselves, but whenever you are reading this, one thing is certain: you will be better off having lower personal debts.

When it comes to repaying debts, there are three issues to be addressed. The first relates to your lifestyle, how much you earn and spend, what your money is spent on and whether any cutbacks can be made. The second issue is how to prioritise your debts to repay them in the most efficient way possible. The last is to cut up your cards to prevent you from getting even further into debt.

Expat Emergencies: Building an Expat Emergency Fund


An emergency fund is just as it sounds. A fund of money set aside just in case you really need access to money at short notice. Keep the money in a separate bank account with instant access.

As a general rule, the financial community feels that the amount you should have set aside should be equivalent to three months worth of your income. Some advisers would counsel you to keep six months of income aside. This might sound like a lot, but is really quite a sensible number.

For example, you might fall and injure yourself. If your company decides not to make sickness payments, or the insurance plan you have has a deferred period (an automatic wait before they pay you) or you are self employed with no employer based sickness assistance, you will still need money to live on.

This means that when the kids need piano lessons you do not use the emergency fund. However, when the boiler breaks and the house is starting to freeze, you do use it.

The whole point of the money is this: life has a habit of doing nasty things and it is only a matter of time until the next shock arrives – when that shock comes you will be better prepared financially to deal with it. This will mean that you only have to deal with the nasty problem rather than the problem plus financial issues.

Know the difference between Expat Saving, Investing and Planning

American Expat Family
American Expat Family

Americans, Europeans and other expats working as expatriates overseas on a long-term posting quickly realize that they have to deal with many of the same financial issues they faced back home – but now they lack familiarity with the rules and a support system to help them reach a solution. Luckily for most expats there are plenty of world-class financial advisors and professionals waiting to offer you their services – but you have to know how to get the best out of them. One basic question that people often don’t think to ask is: What is the difference between Investing, Saving and Financial Planning?

The key differences between the investing, saving and financial planning can be seen in the areas of:

  • Time
  • Risk-Return
  • Tax


Investing is simply the act of putting money to work for you. You can invest for a few days or for many decades. While many of us associate the phrase ‘investment’ with well-considered, rigorously analyzed, long term planning, it simply isn’t so. You can invest in the safest government-backed treasury bonds or in uranium mines on Pluto.

Saving in banking accounts is extremely ‘liquid’, or flexible. Most banks offer passbook savings (do we say ATM savings now?) that give you maximize freedom to withdraw money whenever you wish – but pay minimal interest. You aren’t really making any money in a day-to-day savings account, but are actually paying the bank for the security and convenience of leaving your money there. Banks also offer Certificates of Deposit (CDs) or fixed term accounts (90, 180 or 360 days are common) that pay a bit more – but severely limit your access to funds.

Financial planning is based on long-term commitments. Most professional financial planners start work with time horizons of 10+ years, since they tend to focus on retirement and education funding.


Investing is a broad term that covers every possible risk-return scenario – including those that don’t make much sense for the average household. Investing in rock-solid treasury bonds is very safe – but pays what is referred to as the “risk –free rate” that should just keep you ahead of the inflation rate in the long term (if you’re fortunate). Many of your friends have probably told you about the fortunes they’ve made in heroic stock market maneuvers. What they don’t tell you is that the risks they take will eventually wipe them out if they keep following the speculative road.

Savings plans are very safe, but the return is very low. They are designed for safety and convenience – not profit. In an economic environment where inflation is gradually decreasing, you will make a small net profit in a savings bank. If inflation is rising, you will probably suffer a small net loss.

Financial Planning should focus on instruments and techniques that offer moderate risk with relatively high returns. A reasonable financial plan will start with assumptions of long term returns of 5% to 9% — but in reality any plan showing from 8 – 12% returns can probably fit the category of “moderate risk, high return”. A professional financial planner beats the odds in two ways: 1) By working with a long planning horizon of ten years or more, the investment has time to ride out rough times and bearish economic moves, and 2) Professional management and a diversified portfolio will maximize returns while limiting risk in any market environment.


Traditional investments tend to be tax-blind. In other words, return rates are calculated independent of tax considerations, and it is up to the investor to deal with the tax people later. Be aware that profitable investments can incur several different types of tax consequences – including income tax, capital gains tax and estate tax.

Savings accounts yield interest that is also subject to tax – but the amounts involved are usually so low as to make it a minor consideration.

Financial planning can include estate planning – which is all about avoiding unnecessary tax. While financial planners are not necessarily tax experts, they should be well versed in the area of tax havens and tax-advantaged financial products that are designed to minimize tax obligations.

A final consideration for Shanghai expats is finding qualified professional advisors. Many foreigners in Shanghai have found that local branches of international banks don’t deliver the kinds of services they are accustomed to, and professional investment advice is extremely difficult to come by. There are plenty of people calling themselves ‘financial advisors’, but finding a qualified one can be a bit of a challenge.


Financial Planning is Your Responsibility


Expats have to realize that among all of their other personal and professional responsibilities, they can’t forget about the need to manage their own household finances while living over here. One of the most important step in real financial planning is making the decision to build a formal plan. If you’ve reached the point in life where you can start thinking about your future, then you need to write a formal financial plan.

Before we talk about what a financial plan IS, let’s be clear on what a plan is NOT.

2 financial planning pitfalls expats must avoid:

Household budgeting is not planning. It’s important. Do it. But it’s not the same thing as long term planning. A good financial plan will take into account the next 50 years or so, but it’s the first 10 years that are the most challenging. Young people get into the habit of living hand-to-mouth as they build their careers. It’s fun until you’re 25 — then its time to act like you know you’re supposed to have a clue.

Hint: The object is not to have a lot left over at the end of the month to put into savings – it is to start with a big amount already allocated for investment.

Quantum Finance. The other extreme is just as bad. Some people are so confident in their future earnings stream exploding into the stratosphere five years from now that even trying to plan for the future makes no sense. Entrepreneurs and young bankers are famous for this. “Why scrimp to save $1,000 when I’ll be earning (insert ludicrous sum here) in 5 years?” This is not planning. Put down the Maxim and do some math.
The SML Method: Short, Medium and Long term commitments.

A sensible approach to building a plan is to divide up your financial future into three zones. Short, Medium and Long.

Then ask yourself – what are the big expenses or investments that you can plan for in the next 3 years, the next 7 years, and for 10 years out? There are always surprises, but there are some big bills coming due that we are certain of. Start there.

Don’t overlook these common expenses:

Short term:
Emergency fund of cash
Wedding / divorce
Babies (see above)
Moving expenses

Medium term:
Education / tuition
Investment property

Long term:
Retirement age
Retirement income
Get as specific as possible, and use the process as a framework for discussion – not a fill-in-the-blanks quiz. Prioritize, and then get ready to make real choices.

Expat Tax: What taxes are expats living in overseas liable for ?


An issue to pay very close attention to is the type of taxes you pay. I say this for several reasons. Firstly, there are many types of taxes (income, capital gains, inheritance, etc) and just because you are not paying them now, does not mean that won’t be paying them in the future (inheritance).

What I am getting at here is that you try and get the most benefit from your time investigating taxation. The easy way to do this is to find a tax return or wage slip and calculate the type of taxes that you pay. For example, you might suddenly realise that you pay very minor rates and amounts of tax on dividends but lots more on interest earned in savings accounts. If you have only a limited time and appetite for research, it makes sense to try and save money on the larger of the two amounts.

Very simple stuff here, I know, but how rare it is to find someone doing these things… An understanding of rates charged to you is also useful. For example, you might suddenly find that an overlooked area of income is free of tax. A great example of this currently exists in the UK for income earned gambling – it is all tax free. Whilst I am not suggesting that we all take up the horses for a living, clearly there are people that can earn an income in this way. If you are one such person, it makes sense to spend a little more time and effort at it and be more professional. Such an approach could yield a tax free income which will certainly help to pay the bills each month.

Another example, this one in Belgium, relates to property. Personal tax rates in Belgium are cardiac arrest inducing they are so high. When buying a house, there is a tax at purchase in the region of 11% (I say ‘in the region of’ because it differs from one part of the country to another). However, presuming that you are a resident in Belgium, ALL income earned if the property is let is free of tax. It makes no difference whether or not you have a mortgage against the property and wish to deduct interest charges. The government wants you to declare the income, but will not (at the time of writing) be taxing the money. As you might imagine, many Belgians are landlords, most owning more than one property.

A third example is back in the UK. It relates to the current rules taxing dividends from UK shares. If you are a current basic rate tax payer (22%) and dividends earned are taxed at just 10%, whilst your income stays in the basic rate band. If you are investing for income, a few FTSE shares paying reasonable yields might therefore become very attractive. Any income that the same person would earn in a savings account would be taxed at 20%. Plus, if you select your holdings carefully, many large companies increase their dividend payments each year (unrelated to interest rates of course) and there may be the opportunity for capital growth too.

In the country in which you live, are there opportunities to benefit like those above? Without some basic study, you will never know.

Treaty Shopping

Many corporations choose to have offices in other countries. They will do this to enable their business to pay corporation taxes in other jurisdictions where rates are lower. Some will use a low tax nation, others will use high tax countries and benefit from discounted rates.

For example, if you pay corporation tax at, lets say, 40%, it may be possible for you to have a subsidiary pay tax in another country at only 20% on a portion of your profits. The savings in taxes are made and retained by the company.

Most western nations will have double taxation agreements between each other which ensure that taxes paid in one nation do not need to be paid elsewhere. If this is good enough for global giants to save money, it should be good enough for many others amongst us.

However, a word of warning is required. This is an area of tax planning in which specialised knowledge is likely to be required. If you do not have the skills, be very careful indeed. International tax planning will be very complex at best and so if you are only hoping to save a few thousand, it probably will not be worth your while even investigating.

Expat life assurance: Protect your financial responsibility


‘Do not take life too seriously. You will never get out of it alive.’ – Elbert Hubbard

‘Lives, like money are spent. What are you buying with yours?’ – Roy H Williams

If you make a list of topics for a financial advisor to discuss with clients in order of priority, life assurance should always be at the top. Quite simply, within the financial services arena this is the absolute beginning.

Simply put, anyone that has children or debts or shared responsibilities or virtually any type of financial commitment should have life assurance. How much they should have is another matter, but for now, let us settle on the requirement to have something in place.

Whether you or I like it, any type of financial responsibility means that someone is dependent upon us and our abilities to earn and pay. This may mean that if you die you will leave debts to your relatives, or perhaps they use your income to survive (children and a spouse or an aged parent?) or you travel extensively and it will be costly to have your body transported home.

The reason is, to a certain extent irrelevant. What matters is that if you are in such a situation and need to have life assurance cover but do not, you are now aware.

From here, it is important to understand the approximate level of cover that you need. Before I launch into this, I ought to point out that virtually everyone on earth thinks that they either need no cover or they ‘have enough’. However, the real situation is that most people need several times more life assurance than they have!

Expat Pension planning: a huge problem without a solution to please everyone.


Pension planning is a huge problem without a solution to please everyone. Therefore, it will continue to be avoided and postponed for as long as possible by the political elite. I can’t say I blame them either.

That means the YOU will have to take responsibility for your own retirement savings. Ideally, you should start immediately. Failure to do so may result in personal catastrophe for you later in life. Your ability to survive in the modern world is entirely dependent on your ability to pay for goods and services. Without that ability, you may be in grave trouble.

Future governments, as already discussed are going to have real problems paying for the retirement of their population. If, when you get to retirement age, there are no more state nursing home beds available, what will you do?

Since this report is being used online, it could be read in many different countries. Therefore, I am not going to attempt to explain how pensions operate as I am most used to the UK system and it may be worthless information for you.

The problem is that pensions are a very complex area of finance. Generally, your government would like you to save towards your retirement as that takes some responsibility away from them. To try and encourage you to save, they offer tax incentives.

Many of these tax incentives are in the form of income tax relief. Obviously, this costs the government money. Quite rightly, governments are concerned about being taken advantage of by savvy investors. So they apply many rules and conditions to these schemes.

At the time of writing, the UK has 8 (yes eight) sets of pension legislation in force. In 2011, this will be reduced by new rules designed at simplifying the system. I don’t think I would be judged harshly by fellow financial colleagues for saying that the UK system is almost impenetrable to most professionals. What you, as the lay person are meant to do, I have truly no idea.

Therefore, it is vital that you obtain competent advice from a professional in your own country. Once you have done that, the best advice I can offer is that you save as much as you are able to afford each month. Then find a fund to invest in which offers you the highest return (or yield) each year for the lowest amount of risk.

At the same time, the paragraph above is both the most simple and most powerful pension planning advice you can get. Please read it again. If you are able to save in a tax free or low tax environment offered by your government, do so. Take advantage of the tax breaks as much as you can.

If you have been following the above closely, you may be thinking that I am recommending that perhaps a bond fund or a managed fund might be suitable. Generally these are of low / medium risk. I personally believe that this type of fund is suitable for pension planning. High risk funds should not be for your pension money. Avoid the temptation to take big risks and feel like a high roller. Instead, find a steady performer.

If you are able to join a scheme offered by an employer, do so. As a rule, the employer will contribute in addition to your payments. This will help the fund to grow more quickly. If you are able to join a company scheme and have a private scheme running as well, this is the best option. It will enable you to fund your retirement in most circumstances. If something happens to your employer, you will still have some pension money safely set aside.

In all forms of financial planning you must try to fully understand the risks you are taking and then find solutions to diversify that risk for your own safety.

I hope that this section has been able to alert you to the problems that you may face without being too alarmist. Whatever you choose to do, it is vital that you do something and if you are doing something, that you start doing more. Otherwise, please don’t say that you were not warned.

American Expatriate tax planning & expat tax tips


‘The current tax code is a daily mugging’ – Ronald Reagan

‘The avoidance of taxes is the only intellectual pursuit that still carries any reward’ – John Maynard Keynes

Where do you start with a subject as deep and intricate as taxation? Modern day tax codes are impenetrable even to many accountants. This means that the chances of you or I getting our tax returns right are what a race-goer might call ‘an outsider’.

If I take the UK as an example, legislation, rates, allowances and exemptions change every year. Keeping up with it all is not easy for the lay person. In fact, keeping up to date with tax laws is not terribly easy for the professional either.

With this as my guide, I am going to make a stunning recommendation as to how to handle your taxes. It is this:

Do everything you can to pay every cent or penny in taxes that you might owe.

I realise that this is not exactly creative advice but it is very sound. Only ten years ago, cheating on taxes was a worldwide sport. Everyone was involved in a little creative accounting. However, the game has changed.

Please don’t misunderstand me because tax laws were complex and confiscatory in the eighties and nineties too. But, the penalties for tax evasion are now far stronger than at any time in the past. If you live in almost any English speaking nation, it is a fair bet that penalties for tax crimes are tougher now than any time in history.

To clarify: Tax evasion is ILLEGAL and Tax avoidance is LEGAL.

This means that if you use loopholes in the law to save tax you are ok, but should you just fail to declare income you could be facing big trouble. However, tax authorities worldwide seem intent to try and blur the distinction between evasion and avoidance in the hope that in years to come, everything that saves you tax will be illegal.

In reality, this means that your choices are limited to:

a) earning nothing so creating no income to tax
b) moving to Bermuda or somewhere similar
c) paying everything that is asked of you

Paying up might not be fun, but if it saves you from a spell in prison, it is certainly worthwhile.

Tax Freedom Day

You may or may not have heard of this. In the UK, it is calculated annually by the Adam Smith Institute. Other counties will have similar calculations made.

Tax freedom day is actually calculated to give an average number of days each year that an individual must work for to clear his tax burden. Each country will differ in their actual TFD but as they are calculated worldwide, it is possible to compare like for like. Imagine that it works rather like the Big Mac Index (calculated by The Economist magazine) to compare prices of an identical product worldwide.

Many of the western nations currently have a Tax Freedom Day somewhere between early/mid May and mid July. That is a lot of days working for the government before you start for yourself.

At this point, I ought to make clear, that I am not suggesting that you seek to pay no taxes. Obviously, there are some functions performed well by government that will continue to need to be paid for. Examples would be policing and the courts, education, healthcare, public transport and many others.

However, from the perspective of the individual, saving a small portion of your annual tax bill might make a noticeable difference to your available income. If it can be done relatively easily and, of course, legally, then it is worthwhile.

Using Tax Allowances

In general, it is always wise to use all tax allowances that you can find IN FULL. This means that you should save into a pension scheme for the tax benefits (and of course, to help you to retire) and other savings schemes that allow tax free interest, freedom from Capital Gains Taxes and more.

There are some circumstances though when investment merits should stop you from making investments into tax efficient schemes. Governments have a habit of allowing very large tax allowances for investments when the investment itself has little appeal. In other words, they will use the general public, via tax incentives, to do the government’s bidding.

A great example of this can be found in the UK with something called a Venture Capital Trust.

A VCT is a way of investing in an unquoted company (at a preset date) and receiving tax breaks. The company, is small (there are limits to size), high risk, and often in the technology field. The investment is illiquid (so you cannot sell easily), has a minimum term of 3 years (so is impossible to sell before that time), usually for larger investors – £100,000 and above (so if you lose money, you lose a lot) and is regulated far more loosely than normal stock market investments.

The tax allowances are excellent (both income and capital gains tax can be offset or deferred) but in general these benefits are still not enough to make this an interesting investment. You may have saved £30,000 in tax, but if you lost £100,000 in total in the investment, it was hardly a winner.

All of the above said, a VCT can be a stunning investment as you might imagine that small, high risk, innovative companies can be very profitable. But, the tax laws surrounding such an investment are complex and don’t necessarily help the investment.

Whatever your views, it is important to use some or all of your tax allowances each tax year if you can. In fact, the best thing you can do is to buy a book about taxation and become an amateur sleuth so that you may do your own tax research.

I know that this is boring. I am truly sorry. However, it will be well worth your while. If you think about it, tax is possibly your largest monthly outgoing and as such, should probably be given a little more importance in your life. Once you understand the range of allowances, deductions and exemptions in existence, you may be able to cut a few hundred (or more) each year from your tax bill.

Going about tax reduction in this way is certainly safer than the traditional route of asking for cash payments for everything you do and hoping that you are not caught. As I said earlier, the penalties for tax evasion are very serious these days.

Most pension systems will offer some sort of income tax relief against your contributions. This is to encourage you to save (thus reducing the burden on the state when you reach retirement). They will also usually allow the funds invested to grow free (or nearly) free of tax. This will help the fund to grow more quickly and you will receive a greater benefit in your retirement.

Almost everyone that I have ever met (personally or professionally) could be doing more to aid their pension planning. This means that there are potential tax benefits available for increased pension savings to virtually all. Does this include you? If you were to save an extra 500 or 1,000 each year into a pension scheme, would your actual tax bill be reduced by 100 to 500? Sure, it costs you money, but you will reap the benefits.

Guardian Wealth Management – Dubai, United Arab Emirates


Guardian Wealth Management has a dedicated team in place to help you every step of the way.

Our financial advisers have had extensive training and experience in advising clients with their financial matters and we select them for their high level of professional ethics, interpersonal skills and personal integrity. They are highly qualified and continually progress their professional development.

Guardian Wealth Management refers to our advisers as financial consultants. The dictionary definition of a consultant is “one who gives professional advice or services”. Our consultants encourage clients to “consult” with them – to deliberate together over the expert advice they give to reach the right option for them.

Expat Asset Management: Calculate your net worth.


Asset management
The first thing to do is make a list of everything that you (or you and your partner) own which has resale value. By that, I mean anything that is an asset. You might own five thousand books, but if they were all bought second hand in charity shops you will not be selling them on for much. In this case, you shouldn’t count them.

Assets might include any of the following:

– Property (residential, commercial or land)
– Cash in the bank
– Shares in stock market quoted companies
– Hard assets (gold, silver, diamonds, etc)
– Collectibles (antique art, furniture, etc)
– Unit trusts or mutual funds
– Shares in unlisted companies (perhaps a family firm)
– Corporate or government loans (known as bonds)
– Pension funds

The list may be big or small, only you know. Take your time and try to think of everything you can.

I would now like you to put a value next to each asset. This value will be either the amount that you think the asset is worth (for example art is very difficult to value) or, in the case of quoted assets such as shares, the real value. If you need to find a value, just check in the daily papers or online.

The one major problem area here is property. Generally, the biggest asset any of us own is our residence. But what is it worth? Equally importantly, since we all need a place to live, and would need to buy elsewhere should we sell, why include it in the list?

My thinking on this subject is yes, you should include it in the list. We will do this for two reasons. Firstly, if you have a mortgage against the property,  the mortgage is a big part of your budget and planning. If we are to include the debt (and we must) then we might as well include the asset too. It will make you feel better! Secondly, if you are flattened by a lorry next week and die, you can bet that the tax man will be including it as an asset in your estate.

Property is a problem asset for a second reason. Since we have presumed that it will be your largest asset it will make a big impact on your balance sheet. However, you don’t truly know what a property is worth until you put it on the market and try and sell. This will make your balance sheet rather weighted towards an asset that we cannot really appraise.

With a little luck, you now have a long, long list of assets and valuations. Add them together and find out how much you own. I hope, for you, it is an impressive number that will make Donald Trump jealous.

As I’m sure you can now guess the other side of the net worth coin is how much you owe. Do you have any debts? Do you know how much they cost you (monthly) and how much you owe? Can you name the lenders?

To get a clear idea of your situation, a list will (if you have a lot of debts) need to be made of companies, payments and balances. In calculating your outgoings, any debt repayments were listed.

Once this list is complete, simply minus the debts figure from the assets and you are left with a number which represents your net worth.

Is it positive or negative?