21 March 2017

Living the expat life is exciting. New country. New people. New food. And in terms of your personal finances, new opportunities to grow your wealth!

If you take the time to do the proper research and planning, your next expat posting could become an extremely profitable investment! To get you started, here are our 5 tips to grow your wealth on an expat salary.

1. Choose the right country

If a country is experiencing rapid growth, there will also be an increased demand for talent and opportunity to garner a lucrative expat package. However, growing your wealth is not just about making the highest dollar figure - a high salary-to-living cost ratio can also provide economically favourable circumstances for expats.

According to HSBC , the top 5 countries that offer expats “financial well being” (based on total household income, personal discretionary income and confidence in the local economy) are China, Switzerland, Singapore, Oman and Qatar; with Hong Kong barely inching into the top ten. In comparison, InterNations' Personal Finance Index lists Ecuador, Luxembourg, Mexico, the Philippines and China as the most “cost-effective.”

2. Negotiate your benefits

Expat packages comprise of three main elements: cash salary, benefits and tax. When applying for a local job, the most important factor is your salary. But for an expat, the benefits are just as important.

How much will your level of housing cost in your destination city? How much will your employer contribute towards it? Are they offering you a company car? Will they pay for your child’s education? Do they offer health cover? Will they fund an annual trip home?

While benefits can range from a lot to not much at all, one thing is for sure: the more living costs that you can get covered by benefits, the more salary you will have to invest.

3. Capitalise on local investment opportunities

Opportunities are everywhere. The problem is, we can’t see them. Working overseas however, opens your eyes to the bigger picture and thus can introduce you to investment opportunities that you could not fathom before.

What major trends are emerging in your region of work? Is there potential to connect the good/services that are around you with latent demand back home? Have you met some locals whom you could partner with?

While these local investment opportunities may not become apparent immediately, investing your time into experiencing and understanding your destination country as well as meeting new people to expand your global network are good places to start.

4. Set up an offshore bank account

A common problem that expats who are constantly on the move face is that their wealth ends up being spread out in various countries and currencies. This complicates the process of managing your personal finances and limits the potential of compound interest in the long-term.

So what’s the solution? Set up an offshore bank account in a jurisdiction that offers low or no-tax investments. This way, you will be able to access and manage your finances from anywhere in the world while benefitting from features like multi-currency banking.

Keep in mind that you will have to thoroughly research the bank and jurisdiction that you decide to trust your money to along with the associated fees.

5. Set up an offshore bank account

If you’re a busy expat who works overtime, or would rather spend your evenings and weekends exploring your new surrounds, invest in ETFs (Exchange Traded Funds).

ETFs are investment funds that track an index (e.g. stock index or bond index) and are traded on public exchanges. They are perfect for those who are just beginning their investment journey as they are liquid, have low fees, offer diversification and don’t require too much time to manage nor money to get started.

According to Warren Buffet, “a very low-cost index is going to beat a majority of the amateur-managed money or professionally managed money,” so that’s probably where you want to put your money on!