“Money, money, money / Always sunny / In a rich man’s world.” No one puts it better than Swedish pop group ABBA when it comes to money—and we agree. Decidedly, money is the difference between a better quality of life and a poorer one—the latter as a result of poor financial decisions. Expats who move to Singapore are the highest paid in the world, but imagine if they made poor judgment calls when it comes to investments.
Now, you may ask, what kind of poor financial decisions? Here are the top 5 common expat finance mistakes you should steer clear of:
1. Inadequate planning for retirement
No doubt you have money saved up for rainy days and perhaps retirement, or have pension contributions back home, but will it be enough to last you till the end of your days? Often, most people will run out of money in retirement, as mentioned by AES International, the main reason being people tend to live beyond their means as they see retirement as being a well-deserved, permanent vacation after working so hard. Worse, expats tend to spend lavishly even before retiring, as working abroad may seem like a long vacation, with Singapore having a higher quality of life, receiving a higher salary, the excitement of starting over in a new country and meeting new friends for drinks. If you intend to return to your home country after your overseas stint, maintaining pension or national insurance contributions is essential.
2. Not understanding tax policies or filing tax disclosures
AES International states that a majority of expats tend to overlook the fact that they need to change their tax status following their decision to relocate to another country. As a result, they end up getting double taxed—once from their home country, and another time from their current country; not to mention unable to tax relief or refunds. In the UK, aspiring expats should inform HM Revenue and Customs (HMRC) of their intention to move abroad and submit a completed P85 form. According to The Wall Street Journal, expats from the U.S. often forget that they have to declare their total income in the Foreign Bank and Financial Accounts Report (FBAR) and submit it to the Treasury Department back in the U.S. when their cumulative balance in your foreign financial accounts exceeds $10,000 at any time during the year. Consequently, they end up getting fined for almost half of the amount in their account!
3. Closing their home country’s bank and credit card accounts
When moving abroad to a new country, most expats tend to close all bank and credit card accounts back in their home country so as to start anew. However, closing all your accounts at once, especially healthy credit card accounts, can damage your credit score. According to Bruce McClary, Director of Media Relations at ClearPoint Credit Counseling Solutions, “The more you close at a single time, the more damage it does and the longer it takes to heal that damage. It can really tank your credit score in a big way.” Having an account in your home country also serves as a failsafe for when you experience issues with opening a new bank account in Singapore, and reopening a bank account when you move back later may be difficult.
On the other hand, there are expats who fail or forget to set up a bank account in Singapore after relocating, which results in them paying excessive bank charges when they make domestic payments, such as for utilities.
4. Failure to take into account different inheritance laws
You might have written a will back in your home country, and if so, it’s worth doing some research to find out if the inheritance laws in Singapore are similar to those back home. According to Singapore’s Intestate Succession Act, if a husband/wife passes away without leaving a will behind, his/her spouse will inherit the estate, unless their survivors include children. It should be noted that if you’re a married Muslim man from UK, you may be ruled by the Shariah Law in Singapore, so your assets may be inherited by your nearest living male relative instead of your spouse. So if you wish for your property and wealth to be distributed in a specific manner, it’s only wise to draft a will while you’re residing in Singapore.
If you’re still not convinced, our resident expert, Freddy Meindertsma, has written an article regarding the importance of writing a will that is worth a read.
5. Engaging unlicensed financial advisers and not being informed about your investments
Last but not least, it goes without saying that seeking the help of unregulated financial advisers can lead to negative consequences. However, part of the reason these unqualified financial advisers are able to pull it off is because expats tend to place too much trust in them, leaving them to manage all their finances and not asking to see the receipts. To a certain extent, you should be informed about the kind of investments you’re making, and make sure that your financial adviser explains the details and process to you thoroughly AND you understand. AES International has a helpful article about the tricks unregulated financial advisers use to scam unsuspecting victims.
Now that you know what expat finance mistakes NOT to make, it’s time to seek some help in planning and managing your finances. Most people think that financial advisors are reserved for high net-worth individuals (HNWI), but take it from us: Financial advisers are here to help you with your financial planning. Here are 5 licensed firms and bodies you might want to check out to help you get started:
- AAM Advisory PTE – Focused on individual financial planning needs, AAM Advisory has a fiduciary responsibility to ensure the interests of its clients are always placed ahead of its own. Ian Black Head of Wealth Solutions, assisting the expat community with expert advice regarding investments, retirement planning, saving mortgages and insurance.
- Professional Investment Advisory Services Pte Ltd (“PIAS”) – Established in 2001, PIAS offers a diversified suite of financial services and one of the largest, most respected and fastest growing networks of advisers in Singapore. Our trusted resident Finance Expert Freddy Meindertsma has built a solid network of expatriate in the region, with a passion for assisting expats protect and build their wealth through solid pension planning, life and health insurance and estate planning, and investment advisory.
- Global Financial Consultants PTE LTD (GFC) – Based in the financial district of Singapore, GFC is focused on safeguarding its clients’ financial future whilst allowing them to achieve their unique goals. As a privately owned company, GFC is not tied or influenced by any financial institution provider—allowing its advisors to access, compare and choose any MAS regulated product and pick the best solutions for their clients. If you’re looking for an advisor with a wealth of experience in Investment, Portfolio and Risk Management, finance expert Paul Gerard is your go-to guy.
- Providend – Providend is a licensed financial adviser and a registered fund management company with Monetary Authority of Singapore. Their services include general financial planning work, but they specialise in retirement planning, so consult them if you’re looking to secure both you and your children’s futures after you retire. Providend also takes pride with their unique ‘fee for service’ business model, which means they only charge a flat rate for advice and investment products are bought for clients on a zero-commission basis.
- Great Eastern Financial Advisers – Great Eastern Financial Advisers (GEFA) is a financial advisory firm where the range of products they can advise on includes life policies, general insurance and collective investment schemes. Additionally, their wide range of products caters to both individual and corporate clients. All their financial consultants have been meticulously selected through strict selection criteria in order to provide their clients recommendations made with professional expertise and tailored to their needs. If that’s not prestigious enough for you, many of their consultants are also credited members of the GE Life Achievers Club and Million Dollar Round Table (MDRT) clubs.
- Synergy Financial Advisers – Synergy is a financial advisory firm that provides financial solutions for their clients, ranging from TAPS (The Appropriate Product Selection Methodology), Personal Solution, General Insurance Solution, High Net Worth Solution, and Corporate Solution. Recommendations and planning cover issues of life insurance, health and disability and investment, so that you can be well covered and protected. For example, Dawn Wang, who is a client of Synergy, testifies that as a result of Synergy’s financial advice, her mother and her were able to claim pre- and post-surgery expenses, which they never knew were claimable.
- Manulife Financial Advisers – Manulife Financial Advisers is one of the newer financial advisory firms, having had their grand opening in early 2015. Backed by Manulife Singapore, the firm aims to provide both individual and corporate clients with a full spectrum of financial planning advisory services, as well as the strong governance and financial backing of an international financial services group. They cover both personal insurance such as family protection, health, children’s education and funding; and business financial advisory such as business succession planning employee benefit schemes, and keyman protection.
- Wilfred Ling – For a more personal touch, Wilfred Ling is one of the few financial advisers providing fee-based financial planning in Singapore. If you’re sceptical about engaging financial advisers from big companies for fear of exorbitant fees, he’s more than qualified to provide financial advice in regards to areas such as insurance advice, investment advice, tax planning, estate planning, credit management, retirement planning and education savings—for a reasonable price. Wilfred is also a regular writer for financial magazines and other online portals such as CPF Board’s IM$avvy primarily in areas of wealth management.
If you’re looking for financial advice in Singapore, do check out our panel of Finance Experts here. Drop us a line in the comments below if you require more help or you just want to share your experiences regarding financial management!
Cover image by www.kiplinger.com