Financial Planning for Expatriates
As an expat your circumstances are likely to change more often than if you were in your home country. Clear financial advice and planning means that expatriate life is without worry and that your future is taken care of...
Financial planning requirements vary from country to country and expatriates living in Spain may need to allocate their investments in a different way. These are the elements that make expatriate financial planning different.
One of the first financial steps when relocating abroad may involve exchanging currency to that of the new country. It is important to search around for the best deal at both banks and specialist currency dealers.
If an income is received from another country in another currency, it will need to be exchanged into the currency of new country. The impact of a regular currency conversion can leave a person exposed. Currencies move quickly and often; it may be necessary to “forward book” some of the currency exchanging to fix the rate of exchange.
When it comes to arranging savings and investments, different currencies also need to be taken into consideration. In principle, if the investments are generating income used to live on, they should be in the same currency as the expenditure.
Emergency Cash Fund
Regardless of the country of residence, an amount of cash should be instantly available for emergencies. In the case of expatriates, this fund needs to be higher because inevitably additional trips back home are required (for example, trips to see ailing and infirm relatives). The amount required depends on individual circumstances and a financial adviser takes this into account when financial planning.
Expatriates need a bank account in more than one country; a local bank account is required in the local currency. It is also often necessary to retain a bank account for residual issues in the home country.
Choosing a bank
Some banks are available in Spain and other countries (for example Santander and HSBC) which could make it the preferred choice; a bank might be chosen because it has a conveniently located branch and cash-machine. Banking regulation differs between countries which requires extra vigilance (the Spanish Cajas and the German Landesbanks may be examples of this in the future).
With double taxation agreements between, for example, the UK and Spain, it must be determined in which country tax is paid. This involves definitions of "residence" and "domicile". In a home country these are likely to be the same but after relocating, they may be different. Inheritance tax is different and it is easy to be caught in two tax regimes.
A recent survey found that the highest concern for expatriates is to ensure that they have enough funds for retirement. If retiring in a new country there are many factors to take into account such as what to do with a pension from another.
Many British expatriates state that the health care in Spain is as good as the UK. However, despite this many of them return to the UK in later years due to health problems. It is worthwhile to look into the Spanish state health care; additional health care cover may be required.
If children are involved in a family move to a new country, schooling is a concern. Many countries have a requirement to pay towards education costs. School fees might be required to educate children at an international school. There is also the option of boarding school (this is an expensive option).