I remember feeling smart when I read books like The Wealthy Barber: The Common Sense Guide to Successful Financial Planning when I was a young university student in the early 90’s. That was quite a long time ago. The world has changed a lot since then.
Little did I know that some years later, I’d be having an absolute blast living abroad yet also wanting answers to important financial questions that few could answer for me as I globe-trotted around the world enjoying an international lifestyle. When I became a parent abroad, my concerns multiplied as my personal lens shifted focus from singlehood to couplehood to parenthood.
Family life is always complex. Family life abroad demands that parents really up their game in ways they may not have had to if they’d stayed in their home country. I’ve discussed some points about the transition for families living global lifestyles with Taylor White on the IREL podcast here and with Tayo Rockson on the As Told By Nomads podcast here.
I recently spent some time re-educating myself about financial matters through reading a fabulous book geared to expats like me: The Global Expatriate’s Guide to Investing: From Millionaire Teacher to Millionaire Expat, by Andrew Hallam (Wiley, 2014).
The bad news for me is that this book didn’t exist when I left Vancouver, Canada to enjoy living in different countries in Asia and Europe. The good news for you, especially for parents, is that you can take action now and get smarter about family finances abroad – get started with this book!
Andrew Hallam has generously granted me permission to provide you with a sneak peek into the introduction of his latest book on the Global Wise Parenting blog. I’ll be recommending his book, The Global Expatriate’s Guide to Investing, to as many expats as I can.
May you have a happy and prosperous financial experience as an expat wherever you may find yourself in the world. Enjoy the sneak peek!
Guest Post by Andrew Hallam, financial columnist and author of The Millionaire Teacher and The Global Expatriate’s Guide to Investing.
On U.S. television, when law enforcement close in on a white-collar heister, the fugitive often flees to a foreign country. He might steal a yacht headed for the Dominican Republic or fly a Lear Jet to the Caymans.
The 67 percent of Americans without passports might gasp at the ballsy border bounding foolishness. Doesn’t the crook realize that by leaving the country, Al Qaeda could bury him in an Afghan cave? Smile if you’re among the world’s 230 million expats. Such risks aren’t likely.
One genuine pitfall for expats, however, could be poverty in retirement. Many on cushy foreign packages may scoff at my suggestion. After all, there’s a large league of expats in South East Asia and the Middle East for which international living and working is a fast track to Millionairesville. There are international school teaching couples with children, for instance, saving more than $100,000 USD a year.
And the parents of the kids they teach? Most make the teachers paupers by comparison.
Not all expats (including millions in Europe) make buckets of money. But even those that do, face huge financial risks. In 2003, when I left Canada to teach in Singapore, I kissed goodbye to a defined benefit pension. Had I continued with my former job, I could have paid off a home, contributed modestly to investments, and received income for life.
Few expats have that luxury. What’s worse, most don’t realize they would need millions of dollars in the stock market or multiple mortgage free rental properties just to equal, for example, the retirement benefits earned by most public sector workers in Britain, Australia or Canada.
Such benefits are globally waning. But they’re still a reality. And most governments offer additional monthly cash. Social Security (for Americans), Canadian Pension Plan (for Canadians) and their equivalents for Brits, Australians, Germans, New Zealanders and others provide income for non-expatriates. But without maximizing contributions to these plans, we can’t fully open mouths to such morsels.
Most countries determine payments based on the amount of income employees earned coupled by the numbers of years they contributed to their home countries’ respective social plans.
Departing your homeland for a long-term contract or overseas adventure can leave you hungry—especially if your adopted country doesn’t offer pensionable benefits. As a result, most expats need to save more and invest more effectively than their home-based contemporaries.
Not all geriatric globetrotters, however, get forced to a street corner with a busker’s banjo. According to HSBC’s International Explorer Survey, 68 percent of expats report saving more money than they could in their home countries. So there’s plenty of hope.
But hope on its own is a lousy strategy. You need a plan. Start by asking the following questions:
How much money will I need to retire?
How much should I be saving and investing each month?
How am I going to invest?
One method to create or augment future retirement income is through the stock and bond markets. But many expats get rooked. Silver-tongued investment salespeople peddle dodgy products. Expats are easy targets. Offshore investment schemes are often slippery pitfalls. They reward financial advisors with massive commissions, hemorrhaging their clients’ profits through high hidden fees and kickbacks. Many expat advisors sell them exclusively, locking unwary folks into ten, twenty, even twenty-five year schemes.
Once an investor catches on to the fee-burdened riptide, it’s often too late. Those scrambling out of the water face redemption penalties up to 80 percent of their account’s proceeds. What’s worse, many overseas employers welcome financial sharks into their company seal pools. With the best of intentions, they endorse offshore pension sellers, most of whom have a single purpose: reaping the highest possible commissions from unwary workers.
I’ll show how to spend just 90 minutes a year on your investments, while thumping the performance of most professional money managers. Best of all, you won’t have to watch the stock market, follow the economy, or read the dull pages of The Wall Street Journal.
Sound too good to be true? It isn’t. Use the Internet while reading this book. You can also find mountains of additional academic support for this book’s investment strategies.
If you’ve invested poorly in the past, you have plenty of company. Dan Well, writing for Moneynews.com, reported the annual Chicago-based Dalbar proves most investors are like drowning ducks. While the average U.S. stock earned 384 percent (8.21% annually) between 1992 and 2012, the average American investor earned just 130 percent (4.25% annually) on stock market investments.
Such poor investment performance might make the difference between eating cat food and gourmet during retirement. I’ll guide you towards something palatable.
Once armed with investment history and theory, the book’s next sections get more specific. I’ll show where you can open your investment account, while describing how to make your investment purchases.
As easy, however, as this investment strategy is, some people may still prefer an advisor. I’ve profiled some well-trained, ethical guides. Once you understand their philosophy, you’ll know what to look for when picking an advisor.
As an expatriate you can live better, earn more and provide for a generous retirement. But you’ll need a plan.
Copyright, Andrew Hallam. 2015. Used with permission.
ANDREW HALLAM is an expatriate author and financial columnist. He writes for The Globe and Mail and AssetBuilder.com. Currently he and his wife, Pele, are global vagabonds. They give seminars to expat employees at international schools and businesses to promote financial wellness. Andrew wrote the international bestseller Millionaire Teacher, and The Global Expatriate’s Guide to Investing.