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Personal Finance for Expats

How to Not Compare Yourself to Other Expats When Investing

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This next article will focus on how to not compare yourself to other expats when it comes to investing. When we speak about investing, most people assume we are investing in stocks and bonds. However, that is not the only way to invest, and furthermore, that might not be the way you want to invest. After all, you are your own person, with your own strengths, weaknesses, and value system. I say this because I believe we spend far too much time comparing ourselves to others, and this may actually be detrimental in getting us to where we want to be with our personal finances. So, how do we get started with not comparing ourselves to other expats?

Realize, first of all, that every expat will not invest their money in the same way. One person may want to accumulate gold and precious metals, while another person may use real estate as a way to invest their money, while yet another person believes in investing in equities. Also, depending on where someone lives and their country of citizenship and residence, they may have different investments or programs available to them. None of them are wrong, although they will each likely see different returns on their investments, with different timelines. Take the time to figure out the type of investments that work for you, given your life situation, risk tolerance, income level, and financial goals, and make sure your investments suit your needs, instead of being envious or resentful of someone who may currently be in a better financial situation than you.

Also, when you take a look at a wealthy expat’s life on social media or in a social setting, you are really seeing a small part of what is going on in that person’s life. While life as an expat can certainly be exciting, there are many challenges as well, and it’s not always easy living in a country that is different from where you grew up. Additionally, expats come from all walks of life, and not everyone lives on a fancy expat package in a walled villa with a private driver. Believe it not, some expats are just getting by, and are not necessarily in a better financial situation than the average person in the country they are living in. I would always be told by others or hear others say that we shouldn’t compare ourselves to others, because we don’t know what their life is all about. It is easy to compare yourself to others who may be doing very well financially.

But I believe that we should not compare ourselves to others when we are dealing with such an important issue as personal finance. Many people have sacrificed years of their life to get to where they are now. One very important thing that we can all remember regardless of our age is that we have to learn how to effectively save and invest our money, and all of us should do so according to our own personal situation and to the best of our abilities.

In addition to what has been already mentioned, comparing ourselves to others when it comes to personal finances and other areas of our life, may plunge us into a cycle of negative thinking that will creep into our minds and consume us. It is too easy to be negative, and there will always be somebody that is doing better than us financially. Comparing ourselves to other expats or even finance bloggers can make us feel like we have been let down. For instance, if you were able to save and invest 20% of your income this year, up from the 10% that you saved and invested last year, even though that is a big accomplishment, you will always find someone who might have saved and invested 35% of their income in a year. Thus, you will feel like you don’t measure up to others, and you will be frustrated with your results. Whatever changes you are making to your finances in life, try to be happy with them, because as long as you are doing what you can to improve your finances, you are on the right track. There is a quote that briefly states why we should not compare ourselves to others, which we can use here to emphasize the main point. The author is not known, but he or she says: “Bottom line: don’t compare yourself to others. Compare yourself to the person you were yesterday.” This quote is simple yet effective, because as long as you are making progress toward your financial goals, the person that you were yesterday is not who you are today. All of us are constantly evolving and changing, and that is actually a beautiful part of the human experience.

Too often, we look at the lives of the people around us and compare our lives to their lives. Most of us have done this before, so you are not alone in this regard, if you have done that. If such comparisons can help you to improve yourself and your finances, then that is a good thing. For most of us, these kinds of comparisons lead us into a trap of negative thinking, of feeling like we don’t measure up to others who have become more financially successful than us. We might then begin to feel like we are not good enough and that we don’t deserve to be financially successful or prosperous. The truth is that prosperity is our birthright. We have to make sure to focus on our financial goals and strive to meet those goals while staying away from the incessant comparison trap. With that being said, good luck with your investments as an expat and remember that you are unique, with your own set of skills and abilities, and your own life experiences.

The Need for an Expat Personal Finance Blog

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Despite what many people may think of us and the seemingly lavish lifestyles we are supposed to be living, we expats are a neglected lot, especially when it comes to obtaining good, relevant, and free (or cheap) advice on personal finance.

Performing a search for “personal finance for expats” online provides precious little that we can use. There is certainly not, at least that I have found, a knowledge base in a blog format where expatriates can go to read up on personal finance as it relates specifically to them.

Finally, advice such as “invest in an index fund” seems insulting to our intelligence, given that we probably could have figured that out by ourselves, and more importantly, because it ignores the array of investment options around the world. Indeed, there are numerous investments out there that many people have never heard of of, and we would be doing ourselves a disservice by not exploring and investigating what those options are. Because just as life as an expat requires flexibility, an open mind, courage, and an inquisitive mindset, investing as an expat requires those same qualities if one intends to be successful at developing a solid financial future.

Perhaps you work at an overseas office of your company, and are looking for ways to save for your retirement, as you are not very happy with the state pension plan of the country you live in.

Or perhaps you have started your own business and are now living overseas. You are excited but also apprehensive about this change in your life, and are worried about how you can invest money, now that you are living overseas.

Or maybe you are a perpetual traveler, sailing the seas of the world, climbing the tallest peaks known to humankind, or hopping from one island to another, taking in all that life has to offer.

Whatever your situation is as an expat, if you are interested in saving and investing, then this blog will be useful and applicable to you and your situation.

Many personal finance bloggers and experts seem to be writing from a position where they cannot truly understand the situation facing us expatriates. While I am not a financial planner and don’t claim to know everything, I am writing to you as a humble expat who has lived and worked on three different continents, and someone who has first-hand experience of the challenges faced by expats. Additionally, being a tax advisor specifically serving the expat market, I believe I am positioned to offer advice to other expatriates, especially as it relates to foreign taxation and its various implications.

Throughout my life and travels, I have found that many expatriates have little or no idea how or where they can save and invest money overseas. This blog is intended for them.

Myths About Investing Offshore, Part 1

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Despite the fact that many people have little or no idea about the benefits of investing offshore, almost all of them have heard horror stories and are swept up by a constant stream of negativity around this topic.

There are various reasons for that, and what I shall do now is discuss a few myths regarding offshore investments. One thing to understand is, most of what you have probably heard about investing offshore is just plain false.

So let’s tackle this topic with an open mind and see what is really going on.

MYTH: People who invest offshore are looking to evade taxes.

FACT: The vast majority of individuals who invest offshore include expatriates who already live in high-tax areas such as the European Union and North America, and pay their taxes responsibly. When they invest offshore, they are seeking higher returns, without any intention of evading taxes.

Some people who invest offshore already live in low-tax areas, or are non-resident for work-related reasons, and are just looking to earn higher returns. A desire to improve one’s life through investing responsibly and successfully is the main reason people invest offshore, and not because they want to evade taxes.

MYTH: Only criminals, drug lords, and terrorists put their money offshore.

FACT: Again, the vast majority of people investing offshore are people like you and I. They only wish for higher returns, more privacy, and a reasonable alternative to the high taxation that may exist in their country of residence, by investing in a legal and responsible manner.

I believe one of the reasons such myths are spread is because domestic banks and financial institutions want you to keep your money with them, for their own financial gain. Banks want you to keep your money domestically, since it helps eliminate competition.

MYTH: If I already have money invested in my country of residence, there’s no need to go offshore.

FACT: Practicing financial diversity is crucial. Having access to top offshore funds, superb asset protection, potentially high returns, tax efficiency, and flexibility are a few of the reasons why it makes sense to invest offshore.

MYTH: Offshore banks and financial companies cannot be trusted.

FACT: Most of the largest banks and financial institutions in the world are located offshore, and many have received the highest ratings from independent rating agencies such as Standard & Poor’s and Moody’s.

MYTH: Americans can never enjoy the benefits of investing offshore.

FACT: While it is true that Americans are taxed on worldwide income, and that major low-tax districts are being pressured into sharing information with the U.S. authorities, the fact remains that investing offshore can still be a beneficial option for Americans.

Depending on where you live, as an American, you too can have access to offshore investments. The higher returns, flexibility, diversification of investment options, and privacy make investing offshore appealing even to Americans, despite the fact that there are additional reporting requirements in the U.S.

One thing for Americans to be wary of, however, is that certain offshore investments may be considered a passive foreign investment company (PFIC). If that is the case, the are stringent compliance and reporting requirements around this, not to mention tax implications. In such scenarios, it’s best to engage the services of a tax advisor, particularly one that is knowledgeable about foreign taxation.

MYTH: Investing offshore is only for the extremely wealthy.

FACT: While it is true that many offshore investments do require high initial amounts, the opposite is also true. There are investments out there that let you start saving for as little as $150 per month. This is an amount that nearly anyone living in a modern, developed country can comfortably put away, so it makes no sense to put off saving.

There are other myths out there, perpetuated by the media and even family and friends, but the main point to consider is this: people just like you are investing offshore and reaping the benefits of their decision. Why shouldn’t you also?

What Is Offshore?

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Contrary to what you may have heard, offshore does not necessarily refer to a faraway land or tropical island in the middle of nowhere. In fact, anywhere outside of your domestic environment is, ipso facto, offshore.

Depending on your citizenship, where you live, any relevant tax treaties, your source of income, and what your investment objectives are, nearly any country can be offshore. For example, Canada can be considered offshore to an American, just as the Isle of Man can be considered offshore to a German.

There are many terms thrown around when it comes to investing offshore, but a few important ones to consider as an expat are “low-tax district,” “tax haven,” and “offshore financial centre (OFC).” These simply refer to a country in which an investor places his or her assets because of the country’s low(er) taxes.

In fact, by some estimates, more than 15 percent of countries could be considered tax havens. Therefore, when you invest in a low-tax district, you are basically investing in a foreign country that has favorable tax laws.

In future articles, we shall discuss the economic, psychological, and even moral implications of investing offshore. However, for the moment, I wanted to make sure that we had a common understanding of what offshore means in terms of saving and investing.

Just as being an expatriate might mean you are living and/or working in a country other than where you were born, investing offshore means you are investing in a country other than the one you are currently living in.

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