With another New Year only a few days away, I decided to replace my regular monthly update of financial issues affecting expats with some of my top financial tips for ensuring a prosperous New Year.
1 Make a will
2 Deploy excess cash effectively
3 Review your employer pension scheme
4 Review your risk profile
5 Create an “in case of death” folder
6 Get a state pension forecast
7 Review your life insurance provision
8 Fortify your cyber sandbags
9 Review your mortgage arrangements
10 Review your investment portfolio
Make a will
Writing a Will is one of the most common things on the never-ending ‘to-do’ list. Yet having a one is important if you want to take care of your family, particularly in cases where there are ex-spouses and children from previous marriages. Not writing a Will can leave loved ones facing chaos and distress.
Expatriates should consider writing a Will for each country they have assets in.
Deploy excess cash effectively
If markets finish the year at the same level as they are at the time that I am writing this, then 2018 will be one of only a handful of years in the past century where holding cash has turned out to be more profitable than owning stocks.
However, over the medium to long term, cash is certain to lose value in real terms as inflation erodes its purchasing power.
In addition, if your bank fails, a maximum of only GBP85,000 is protected.
While it makes sense to keep an emergency fund (6-12 months of expenses) on deposit, there are better ways to deploy the rest.
Review your employer pension scheme
If you are fortunate enough to have a pension scheme available through your employer, it would be worth knowing how it works. I.e. how much can you expect from it in retirement and, if it is a defined contribution scheme, how is the money invested (often the default investment settings are not the best).
You should do the same for pensions frozen with previous employers too. Use this link if you have lost the track of the scheme details.
Review your risk profile
After a prolonged period of stability which lulled many investors into a false sense of security, we have seen a return of market volatility in the final quarter of 2018.
If you have been feeling overly uncomfortable with recent market moves, it is possible that your portfolio is out of sync with your risk profile.
Create an “in case of death” folder
An “in case of death” folder is a single file where you keep all of your important personal and financial information together. It allows easy access to these documents in the event that you’re no longer around to help.
Find out more here.
Get a state pension forecast
Firstly, you can obtain a forecast of the state pension that you can expect in retirement here.
Once you have done that, you can look to make up any gaps in your contribution history; generally doing so is a good idea. Find out how here.
Review your life insurance provision
Here are some useful questions to ask:
- Do I have enough life insurance to secure my family if something happens to me?
- If I only have life insurance through my work, what would happen if I left that employer?
- If I set up a life insurance policy in my home country, has the insurer confirmed, in writing, that I am still covered, now I am an expat?
Fortify your cyber sandbags
Barely a day goes by without reading about a new act of cyber crime.
While these attacks are becoming more and more sophisticated, there are steps that we can take to reduce our exposure:
- Change passwords on a regular basis;
- Use 2 factor authentication as much as possible;
- Don’t access important information (e.g. bank details) over a public network (e.g. Starbucks free wifi) as it can easily be accessed by others;
- If using public wifi, install a Virtual Private Network (VPN).
Review your mortgage arrangements
With interest rates more likely to rise than fall, now is a good time to review mortgage arrangements. Many people think that mortgaging or re-mortgaging on reasonable terms as an expat is impossible. This is not the case.
Review your investment portfolio
The end of a year or start of a new year is always a great time to review an investment portfolio. As well as general performance, that review should encompass whether the portfolio is in line with your risk profile (see point 4), whether it corresponds with your goals/objectives and whether you are exposed to any biases (e.g. home country bias or holding a large portion of your wealth in shares of your employer).
