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What do you do with the savings?

Discussion in 'Teaching abroad' started by eburor, Jul 28, 2019.

  1. noncon

    noncon New commenter

    Depends on what your goals are. I bought a property within my first two years working in Saudi and put it on rent. I have family back in the UK that look after it for me. Now I'm working on buying my second property.

    One thing I would advise you to get is a lifetime ISA. Think of this as your pension as you no longer have one. Google it.

    Apart from those two, I also am not sure what to do with my savings. Should I open a stocks and shares ISA? Should I invest in stocks? Forex? Start a business?
     
  2. RoadToRags

    RoadToRags New commenter

    "To open and continue to pay into a Lifetime ISA you must be a resident in the UK, unless you’re a crown servant (for example, in the diplomatic service), their spouse or civil partner."

    Thought that getting the lifetime ISA as an expat was too good to be true. D-mn.

    +1 for bigging up Andrew Hallam. I think people mention him so much, as his books are a bit of a bridgehead for teachers to move into the personal finance world and take control of their investments. I have taken his advice, while also reading up a lot on passive investing separately, and am happy with the strategy to diversify investments through buying stocks and bonds etfs for the long term.

    To the OP, I ended up setting up my offshore account with Saxobank, and it has been fairly trouble free so far. Check out "brokerchooser", which gives way too much information, and see which broker might suit your needs.
     
    576 and TeacherMan2019 like this.
  3. TeacherMan2019

    TeacherMan2019 New commenter

    As a complete newbie to international teaching, I've been struggling with the fact that my relationship with this forum has been very one-sided: I take a ton away and don't have much to give back.

    This is one area where I fortunately have a large amount of expertise. I probably shouldn't go into my personal finance credentials too much, as it would likely reveal my identity fairly quickly, but suffice it to say I'm pretty well versed on all things investing. (Save for niche issues such as income trusts, etc)

    I've been familiar with Mr. Hallam for nearly a decade now (indeed, I use his first book "Millionaire Teacher" to instruct the personal finance course that I teach) and his writing is excellent. For folks that are critical of the whole idea of one person holding "the Holy Grail" of answers when it comes to financial decisions - I understand the instinct (it's a good one). It's not that Andrew has some silver bullet answer, it's that he offers a well-referenced, and relatively easy to understand guide to understanding concepts such as passive investing, asset classes, true diversification, and most of all, the terrible destructive twin forces of investment fees combined with financial illiteracy. As a Canadian, I was astounded to read of what is considered legal when it comes to investment schemes around the world!

    While investing in real estate has been a hit for many folks that live in urban centres over the last twenty years, the overall track record of returns is not kind. It's also incredibly risky to tie up such a large percentage of your investment portfolio in a single asset like purchasing a rental property.

    If you have general questions about asset classes, logistics, amounts needed for retirement, withdrawal strategies, or passive investing, fire away. For example, one member asked about the returns of the FTSE 100 earlier in this thread. The answer is: The performance of the FTSE 100 over the past 1-10 years is more or less irrelevant when it comes to your decision on whether to invest in it. The FTSE 100 is an index of 100 companies. Consequently, it makes sense to invest in it (or to be more precise, an ETF that tracks that index) if you are a fan of hands-off passive index investing. If you believe in the philisophy of index investing (which you should) then the most recent performance of a specific index is irrelvant. You either believe that the market is relatively efficient over the long term or that it isn't (and that you're smart enough/well informed enough to explot that inefficiency).

    Andrew recommends a specific advisor in his book (I'll leave that to him) that will help you create an index portfolio of ETFs. This is an excellent option. One other option that I'm a big fan of for people that want the easiest possible way to turn their paycheque into a diversified passive investing portfolio is the "robo advisor" industory. Currently there aren't many that work with expats due to paperwork issues, but there are some options if you look closely. Wealthbar in Canada for instance, works with Canadian expats. It's the same philosophy as opening a discount brokerage account and selecting passive index ETFs - just made easier for you, for a fairly reasonable price (much more reasonable than what folks are paying for investment products all over the world).
     
    motorhomer and Helen-Back like this.
  4. TeacherMan2019

    TeacherMan2019 New commenter

    I should also quickly point out that when looking at investments for your particular situation, it's always good to find a fee-only advisor to bounce your ideas off of.

    Also key to understand the tax treatment for different investment options in the eventual place that you would like to retire. For example, here in Canada, dividend and capital gains income (derived from a well diversified non-registered investment portfolio) is treated much more favourably than rental income. You can withdraw $50,000+ from your portfolio most years without paying more than 10-15% tax or so if done in the most tax-efficient manner. That, plus the vastly superior returns of the asset class as a whole, makes stocks/bonds portfolios a better investment for most folks than real estate. Real estate does allow you to leverage money efficiently, but the risk there is pretty massive.
     
    motorhomer and Helen-Back like this.
  5. Penny10p

    Penny10p Occasional commenter

    I would second the advice of other posters to keep your bank account open. Decide on a UK address that you can use easily, ( I use a parent address like many others on here) and change your address to that. I have worked overseas for many years and never had any problems with the bank. I also had a credit card account which I kept open, again without any problems. It is useful to have access to UK money when you first move to a different country because there are often quite large initial costs (rent etc) and it can take time to get set up with a local bank. If you open an ISA while still in the UK you can keep it open while abroad but you cannot add any money to it. It will, however, continue to accrue interest ( the miracle of compound interest that the Millionaire teacher guy refers to makes it worth doing if you have a spare few thousand to tuck away before making the move).
    I also opened an account with a well-known UK stock broker company called Hargreaves Lansdown before I made the move. It is extremely difficult to open such an account if you are not resident in the UK , so again better to do before you make the move. I use their fund and share account to buy and sell shares. I just do small amounts for fun and a learning experience. I have, however, recently read the millionaire book so I am thinking of putting some money into tracker funds through them.
     
    motorhomer likes this.
  6. Penny10p

    Penny10p Occasional commenter

    Just a thought about the property idea. I do not own property but I know several people who have UK property which is let out. For some it has worked very well but for others it has not. Potential problems include unreliable agents, long periods when no tenant can be found, annual tax returns to be done, tenants who do not look after the property, and the ongoing maintenance required.
     
    TeacherMan2019 likes this.
  7. the hippo

    the hippo Lead commenter Community helper

    The smelly swamp-dweller has just returned from the UK, where he was trying to sort out some kind of savings or investment account for his TPS lump sum.

    The bad news? You cannot open a new account in the UK if you are non-resident. Even if you have a current account, your bank or building society will not allow you to open a new one if you do not actually live in the UK. (I use a friend's address for correspondence and he did not want me to give the impression that I actually live there, as this would affect his Council Tax etc.)

    Interest rates in the UK are so low that you cannot help wondering whether it really would make much difference, even if you could shift a big pile of cash into a deposit or savings account. Much more worrying, of course, is the pound's continual downward slide against the euro and the dollar.

    The good news? Well, I am not sure that there is any. Most of the UK seems to be one big traffic jam. The English countryside. that most beautiful of national treasures, seems to be fast disappearing under an avalanche of tarmac and new housing developments. But I did enjoy my pint of bitter, roast beef and Yorkshire pud, together with a trip to a lovely English bookshop.
     
  8. Penny10p

    Penny10p Occasional commenter

    Another thought. I have friends who have put their savings into off shore savings accounts while teaching overseas. It seems to have worked well for them.
    The low interest rates that Hippo mentioned are one reason why some of us dabbled in the stock market!
     
  9. the hippo

    the hippo Lead commenter Community helper

    Yes, Pennny10p, you can indeed put your cash into an "international" savings account and then you will not asked to provide a UK address. The bad news is that some of these accounts require a very large pile of cash and the interest rates? Yes, they are just as bad as the lousy rates at most building societies and banks in the British high street.
     
  10. stopwatch

    stopwatch Established commenter

    Your school say they will pay some of your salary in GBP:
    • Will this be at the current exchange rate, or as a fixed amount? if it is a fixed amount, based on current exchange rates, go for it as the £ is currently worth a lot less than it has been for many years. If it is a fixed amount, but is a lot less than the current exchange rate, get it paid in local currency and then exchange it when you transfer to UK. Bank rates are OK, but a little less than money transfer companies, who are willing to negotiate depending on the amount you send.
    • Absolutely, definitely keep your UK bank account open. This helps to keep your credit rating going whilst you are out of UK. I had accounts with HSBC and Halifax and both were fine for us to keep our UK address. Your Mum's address would be fine it you don't have a huse in UK (I assume you are not considering a UK property before leaving? if so - DON'T DO IT!)
    • Why don't you buy a UK property as your main residence, using your overseas salary? You could rent a room via 'spareroom.co.uk' which a) keeps your house secure b) gives you an address to live in when/if you come back for holidays c) provided you with an additional income (around £4-5,000 per year per room) and d) is an investment as the house price WILL go up whilst you are away. There are a couple of caveats regards this idea. Happy to give them to you via personal message if you like.
    • Have your names included on the electoral role for the address you have as your bank address. My understanding is that this is legal/kosher.
    For further information and help, try britishexpats.com which has lots and lots of help and forums.

    Where are you moving to?

    PM me if you need more
     
    motorhomer likes this.
  11. taiyah

    taiyah Occasional commenter

    Unless there's NO other option, NEVER EVER let an employer transfer any part of your salary. Getting involved in getting to know the fluctuations of the (or any) currency is a must for all expats. For example, with Brexit in such a mess and knowing that the BoE had a press conference this week I held off transfering. The difference is an 11% positive swing between my pay going in and 3 days later. The other rule is to set yourself a minimum rate, don't transfer for the sake of transferring.

    Like many have said property is a popular option but as an expat the only loans you can get needs a 30-40% deposit and you need to borrow a minimum of £100k. When you do decide to come back and get a mortgage it won't be as easy either. Its been so tight since the GFC days.

    Off shore accounts have been pitched over time but like the wise banker friends have consistently said, "Do you think those accounts are designed for the average working Janes and Joes?" Push comes to shove these banks will use Jane's and Joe's $£€¥¢ to cover the money of the more immoral professionals and traders. Depending on where these banks are officially registered your rights to a savings (compensation) protection may not exist.

    Other than that, each thier own. Some save to buy a house. Whilst others out there are just thinking of retirement top ups and perhaps buying that beautiful second home villa in a dream sunny location.
     
  12. dumbbells66

    dumbbells66 Lead commenter

    To avoid any of this, get yourself a currency account with your UK bank. I have a USD, and Euro account attached to my GBP account (barclays). The vast majority of international schools will pay you in USD (outside of europe). Keep it in the currency account until the market drops, then transfer as much as you want.

    Once brexshit happens, well, if it ever does the pound is going to nosedive. Thats when you want to change your dollars or euros
     
  13. 576

    576 Established commenter

    40% deposit and you need to borrow a minimum of £100k.

    That really depends... In County Durham / Tyneside you can get property for significantly less than 100k. And I'm true the same is true for other parts of the UK too.
     
  14. taiyah

    taiyah Occasional commenter

    That's obvious isn't?

    Those who are not blessed with cheap but cheerful counties; certainly with Liquid Expat, the minimum £€¥¢$ to borrow is £100k. There was a forum dedicated to this way back around April/May. My current loan is through them.

    Golden rule for property investment is to thoroughly know your area.
     
  15. TeacherMan2019

    TeacherMan2019 New commenter

    Why do we seem to be debating weird anecdotes here? Who are your "wise banker friends"? First of all, what exact type of account are we referring to when we say "offshore accounts"? That covers a broad range of investment or savings accounts in an even broader range of countries. Any combination of which will have different laws.

    As previously mentioned, The Millionaire Expatriate details the exact logistics needed to invest money outside of your home country. What are we even talking about when we say things like "use money to cover immoral professionals and traders"? Your money isn't invested in the bank itself (unless you directly purchased shares in said bank), it's invested in specific equities. The only situation something like this might occur in is what's known as a "margin call" and that only effects you if you were doing fairly exotic things such as borrowing money from a brokerage to invest.

    As a general asset class, equities severely outpace real estate over the long term. Furthermore, I repeat the risk involved in putting your entire retirement portfolio into a single asset, that depends on the local housing market's whims is terrible irresponsible.

    Understanding currency markets is a good idea, but keep in mind that those markets are generally efficient. You might believe that Brexit will happen and the Pound will nose dive, but there is a substantial chance that it won't happen as well. The markets have priced that risk in already. All of the major currency movers hire dozens of geniuses that work 90-hour weeks and use the latest technology. Do you seriously think that you can price risk in better than those people?

    When it comes to saving and investing, keep it simple! Focus on what you can control (i.e. asset allocation and fees) and not on what you can't (short term market performance, currency gyration, etc).
     
    Powergnome3 likes this.
  16. Flanks

    Flanks Established commenter

    Actually the market is almost entirely controlled by Algorithmic trading now. Traders are one of the professions which have already seen massive job losses due to developments in AI. Humans can't keep up with the volume of trades.

    Not relevant to this discussion of course :)
     
  17. TeacherMan2019

    TeacherMan2019 New commenter

    Agreed. The geniuses now just set the Algos. The end result is the same - a pretty damn efficient market most of the time. If you manage to beat those currency market makers, it's luck, not skill.
     
  18. taiyah

    taiyah Occasional commenter

    @TeacherMan2019 did you totally miss the part about each to their own needs.. Funny how Flanks had to remind you that computers play a huge part in both market trends and trades. Keep reading your book. Update when you hit $USD1 million of liquid and actual assests. Till then, your rant is full of holes... Where have you been since the GFC?? The pound has never recovered since its slide.
     
    Last edited: Aug 3, 2019
  19. TeacherMan2019

    TeacherMan2019 New commenter

    But it's not really to their own needs. We're discussing math here @taiyah, it's not really debateable.

    There are several points to address here without getting personal.

    1) Flanks sought to clarify a very specific point. Whether you consider traders making specific buy/sell decisions one at a time, or creating algos with pre-programmed instructions to buy/sell, the end result is that extremely smart people try to take advantage of each other every day in markets - thus making them reasonably efficient over the long term. Google Eugene Fama for more info.

    2) Your challenge is humourous because there is no possible way to prove any net worth at all without breaking the forum rules. I'm sure there is zero chance that you'll believe me, but if we include the value of my wife and I's commuted pensions (somewhat liquid given that we could pull them out if we wanted to fairly easily) we have just over $1M USD of liquid assets (plus a house with $150K equity in it). Not that it really makes any difference, because even if I did prove that I had the assets, (maybe I inherited it?) it still wouldn't show that I knew anything about investing. Only math really proves that.

    3) I'm not sure what holes specifically you are referring to? Whether or not a specific currency has been on a slide is not relevant to the principle that extremely few people in the world can predict with any accuracy where a currency is going to move. The people that can predict this correctly even 60% of the time make tens of millions per year and should probably be working for NASA. Simply provide me with any academic evidence that the average person can predict currency markets and I'll commend you and leave you to provide advice to others here.

    4) The math around advising folks to leverage their retirement savings in order to investing in a single rental property to fund their retirement is just not sound advice. As part of a large retirement portfolio it could help diversify, or perhaps investing in REITs as say 10% of a portfolio might make sense, but a single property is just incredibly risky.

    I'm just trying to help people here, I don't want to fight. This isn't personal to me, I just don't want people following financial myths and anecdotes.
     
    Bill8899 likes this.
  20. taiyah

    taiyah Occasional commenter

    @TeacherMan2019 Have you forgotten that the OP is merely gaging different perspectives and experiences from others. Noone, including myself has told the OP to put this eggs in one basket.

    Best qoute of all, "But it's not really to their own needs." Oh dear God... Let's end with that sort of wisdom.
     

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