The younger expat community is growing in Russia attracted by the opportunities on offer in one of the fastest growing regions in the world. This trending downward in age has also revealed a more prevalent integration of expats into local communities. They have left their welfare states behind and are catapulting into the future with enthusiasm. But what provisions must they make for the financial challenges they will face in the future? The encounters of a more independent lifestyle also create the responsibility of taking care of their own long term financial independence.
The fact is that the earlier you start to make sound financial plans for your future the better prepared you will be for the tests ahead. Despite having that revolutionary streak there will also be a side which is relatively naÃ¯ve when it comes to personal financial planning for the future. For many this translates into believing that they can put off planning until tomorrow. But tomorrow never comes and the sense of security today creates complacency leaving these expats exposed.
I have spoken to some relatively young expats who have all told me that they wish they had been educated on financial planning at school because they did not realise that inflation and compound interest had such an effect on their lives; that financial planning early relieves a great deal of pressure later when plans are in place and their wealth accumulation is underway.
So, where should you begin? There are a number of aspects to every personâs life which they will encounter and need to deal with. The major events include: retirement planning; buying your home; educating your children; planning for major purchases and making sure you have the right protection for yourself, your family and all your assets. There are also peripheral areas which need to be constantly viewed. These will change depending on the places you live, where you come from and where you have assets situated. This is the complex subject of taxation. Careful planning is required in this respect if you know what your circumstances will be.
If you are a professional expat these aspects may not reveal themselves to you until it is almost too late. Maybe you will be asked to relocate with your employer at some time in the future. This will require considerations such as childrenâs schools, whether you have a property in your current location and the often unforeseen tax planning.
All these aspects will affect most of us one way or another during our tenure as expats. There will be other circumstances which may arise from time to time like having disabled children or a family member who suffers from serious medical setbacks. This may even be you. In the overall scheme of things where should you begin to make some sort of start on a plan for your future?
Probably the first and most important part of long term planning is your retirement or financial independence. The earlier you begin the easier it will be to achieve your goals because you can make adjustments along the way. This affords a longer period to accumulate the wealth you require for this important period of your life. If you leave this to a later age you will have less time to accumulate assets making it daunting.
Many do not realise the level of wealth they will require in order to live in their golden years. Inflation plays havoc with the cost of living but so many do not see this as it happens so slowly. It is like gaining weight â you hardly notice it until you get on the scales.
If you need $30,000 per year today to live, at a level 4% inflation rate that would translate to $99,400 per year in 30 years; or $81,400 in 25 yearsâ time. Using this latter example if you retired at age 60 you would need to accumulate around $2.6 million to last you until age 100. That would mean saving an escalating amount of $2,000 per month for 25 years. If you defer this until only 15 years to retirement you would need to save around $6,000 per month.
The thing to do is to start at what you can afford today and increase the amount you save each year so that you are effectively hedging inflation. This makes it more palatable. But the later you leave it the more painful it will become. These realities are often surreptitiously overlooked in favour of a better lifestyle today. The secret is to balance your lifestyle and party sometimes but not every day.
You are also likely to need some guidance in establishing some sort of plan and projection into the future. Most young expats feel that a financial adviser is not appropriate for them and have the misconception that formal financial advice should be reserved for later in life. Nothing could be further from the truth. A professional adviser will guide you through all aspects of your requirements and be able to help in all facets of your own personal situation. He or she will work with you and should be patient in encouraging you to move forward into and through each phase of your financial life.
The internet and the highly beneficial education it offers can be very useful. However, as much as there are positive aspects to what you read there are also negatives. Beware of the traps that lurk via people who are trying to operate scams. If you are attracted to some sort of investment or scheme which will make you a fortune in no time at all disbelieve it. If something appears too good to be true then it invariably is.
Many of the things you read on the internet are exaggerated and stretch the truth. People also have a tendency to accept them as gospel, even though there is no real evidence to support claims. One of the best developing examples of this, as a comparison, is medical conditions. If you look up details of a specific condition you will likely get the wrong idea because the description is what could happen rather than what will more likely happen. People regularly condemn themselves to death after reading about the silly thing they have wrong, which is actually nothing at all.
Meet your adviser in person. Get to know him or her. See their firmâs office. Meetings in Starbucks are all too common and really only prove that the person does not have a bona fide office for you to meet in, or something else to hide.
Above all try to be pragmatic about your planning. If you make a list of all the aspects you need to look at, see if your adviser raises all these points and offers you longer term solutions for planning to take account of them. Do not be afraid to seek a second opinion from another adviser.
Making sure you have a solid plan in place is key to successful financial planning and the younger you start the easier it will become for you. Using practical ideas is also essential. Donât forget that plans like these will need regular review along the way to take account of changing conditions and circumstances. The only constant in life is change.
Questions to the author can be directed to PFS International onÂ +7 495 9677648 or email to [email protected]