A very quick round up of today’s headlines from the European economic frontline reveal that Italy is the new Greece, the Greeks can’t afford to feed their children, France needs to prepare itself for ‘a new economic reality,’ Cyprus is one step away from junk status and the Germans are universally pessimistic about their nation’s financial future. In other words, the whole of Europe is under extreme fiscal stress.
I guess I couldn’t have picked a better day to order a copy of Michael Lewis’s Boomerang: The Meltdown Tour
then, which is described as ‘a tragi-comic romp across Europe,’ and which seeks to explain how Europe got in such a fiscal quagmire in the first place. However, whilst we can learn all about the mistakes and errors of judgement that led us into this mess, the question remains, if Europe’s in such financial turmoil, is it even safe to move abroad anymore?
According to an article in the Telegraph published on Friday, forecasting consultancy Oxford Economics and market researchers Opinium have evidence that shows that, “by encouraging pensioners to retire abroad, the Government could make a net financial gain.” But does this translate to expats themselves – i.e., is it possible for an expat to live well abroad perhaps on less money, and certainly in a more challenging economic climate than just 10 years ago?
Rather than being a resounding ‘yes,’ the answer to this question is more along the ‘it depends’ lines. I.e., it depends on where you go, how you choose to live, how your finances are structured and what sort of person you are. Now let’s qualify all of that…
Where You Live Abroad Really Matters
Back in the good old days when the pound was strong, Britain’s property market was booming and the general consensus of global economic opinion was positive, it was a case of those who wanted to move abroad almost having far too much choice in terms of where they could live well. Nowadays that choice is greatly restricted.
Many nations’ property economies have imploded or are teetering on a frightening precipice – take Cyprus for example, it’s banks over-lent to developers and there’s now a situation where banks are desperate for prices to remain high to justify their loans, but where developers cannot afford the repayments. This is a market waiting for implosion and negative exposure.
Alternatively, look at Spain and Greece and Ireland where the real estate economies have already faltered. Unfortunately it’s not a case of you being able to buy bargain basement properties, it’s a case of vendors being unwilling to sell at any price, banks being unwilling to lend, and any buyer having to contemplate buying into a dead or dying economy where any property euros they commit will be buried for generations.
Of course, one doesn’t have to buy a home overseas to move abroad, but a country’s property market is a good indicator for its overall economic health…
Therefore, if you look around abroad for a nation where the real estate economy is stable, you have to look long and hard. You could take a punt on Canada or Australia or New Zealand – or look to the BRIC nations if you want to see booming markets. However there are those talking down the former three, and many who want to err well away from any nation that’s booming – after all, as we all know, the busts that can follow a boom can be devastating.
Therefore, if you want to live abroad you need to pick your nation very carefully. You need to look for sustainability in the economic model, modesty in terms of spending and lending activity, affordability in terms of living costs, and safety for your own personal peace of mind. I.e., expats nowadays have to do their country-based research very, very carefully.
Your Expat Lifestyle Choices May Now be Restricted
Britons have to suffer the ignominy of a weak pound in the face of junk currencies like the euro and the dollar. I.e., even though other nations in the world have fared worse than us in the global financial crisis, we’re still the poor cousins of the world. What this means is that the days of going abroad and finding everything ‘so cheap’ are dead and buried.
Therefore, you may have to rein in your lifestyle ambitions if you want to live abroad. Retirees are often the most impacted as they may have a fixed income to exist on throughout retirement. Factors that have to be considered include not only the buying power of the pound, (or whichever currency you earn your income in) but inflation in your new nation, taxation wherever you’re exposed to it, and exchange rates as well.
Expats also need to think about any currency transfer costs they may incur, ATM charges for withdrawing money overseas from a UK or offshore account perhaps, and the way invested wealth is managed. Exposure to financial markets at the moment is very risky and frightening, whilst interest rates on so-called ‘low risk’ investments are rubbish.
If you’re committed to living abroad – and there are still plenty of reasons to consider moving away from the UK – you really have to be realistic about the lifestyle you will be able to afford. If you once holidayed in your preferred destination and found it affordable, a re-visit is in order as you may find the lay of the economic land is now very different indeed.
As long as you’re completely realistic about the lifestyle you will be able to afford abroad, there is nothing to stop you moving to enjoy it…which leads us neatly to the next point: –
Money Has Never Mattered More
Currently there is so much financial pressure on every single household in the UK that it’s impossible to hide from our own economic realities as individuals. In a way that’s a good thing! It hopefully means that more people who make the decision to start new lives abroad will do so with a greater understanding of their own financial positions.
In the past it has always been the case that the number one reason why expats fail comes down to money – therefore if more people are more aware of money potentially being an issue nowadays, hopefully greater numbers of people will get their finances sorted out before they go.
If you want to work abroad you need to ensure that your skills are needed, and that the salary you can expect to earn overseas will be enough to support your lifestyle ambitions. Beyond that, you need to know that there is more than one opportunity for you to find a job abroad. In the UK there is the state to fall back on, (albeit to a lesser and lesser degree), if you become unemployed – abroad you’re likely to be on your own, which is why you need to make sure your plan for working overseas is bullet proof.
If you’re going to be living off investment income, perhaps in retirement, you need to make sure your money is invested to make the most of any tax and financial opportunities that become apparent when you expatriate.
Whoever you are and however you will be earning the money to live abroad, you need to think about taxation – and about protecting your financial position as best you can. In terms of protection you need to have a lump sum available to see you through any financial barrier that could appear, and you need to protect your wealth, (either with insurance or at least by ensuring there’s more than one job opportunity wherever you’re moving to for example).
Knowing where your money is coming from, how much it is going to be worth relative to your new life abroad, and how you can best invest it and protect it are all issues that have possibly never been more important at all.
Have You Got What it Takes to Live Abroad?
Finally, it takes a special kind of person to become an expatriate. You need a whole host of attributes to successfully embrace the challenge of living abroad – and in these times of unprecedented economic turmoil, the challenge is even greater! You need to have an appetite for change, you need to be willing to adapt and be flexible, and you need to be tenacious and perhaps even frugal.
You need to carefully research where in the world you can afford to live, where in the world is still a good place to live, where you can enjoy a decent lifestyle – i.e., one that you can enjoy rather than just tolerate, and you need to ensure that you have the money in place – or at least the income source secured – so that you can build your new life abroad according to your own plans and ambitions.
It’s no longer easy to move abroad, perhaps hate it, change your mind and move on or back home. Every decision you make has to be tempered with careful consideration and research. The resources are available to you online to find out about a country’s economy, cost of living, security and safety, and even to find a job overseas – but to truly know what a nation is like to live in, and whether it could be right for you, you need to visit it first, and visit it for a period of time before committing to relocation.
You’re best advised to spend time living in a nation in a rented home and with just the basics around you before selling up completely in the UK and committing to a new life overseas. Nowadays we all have too much to lose – and the road ‘home’ is a much harder one if you make the wrong decision.