3 Tips to Optimise your Finances
Whilst I applaud positivity in life, it’s also important to recognise that many people have been adversely affected by the events of 2020. Sadly, more people seem likely to suffer.
As expats, many of us have been affected too. Increasing numbers of people I know are having to accept “localisation” in China. Others find themselves unemployed.
Nobody in my world is really talking about this so I thought I would put together three tips you can implement to secure your finances. While they might not all apply to you, I hope at least one or two are of help:
1. Construct an “all-weather” portfolio
We are unlikely to have seen the last market crash that marked the beginning of this year. My clients quickly recovered from that event because they have portfolios designed not only to grow but to protect during adverse conditions. Much advice concerning such portfolios can be found online, of course, although it can sometimes be difficult to separate good advice from bad. In broad terms, an all-weather portfolio is constructed from parts that all move in different ways, providing protection by not having “all your eggs in one basket.” Whilst typically shares / stocks and bonds played this role, the monetary policies of governments around the world have reduced the effectiveness of bonds as a diversifier. Such alternatives as absolute returns, derivatives and dividend-paying shares might be considered.
2. Remortgage property
Now would be a good time to consider releasing equity from your property by remortgaging. As an expat, interest rates are generally higher than a local (if you hold property back home). However, if you need an injection of cash then this might be one way to achieve it.
It’s important to ensure that an y loan you take out can be repaid. Ideally the rent you are getting from the property you own will cover any mortgage costs.
You will also want to be careful about the terms and conditions. Whilst a tracker (that follows interest rates) can seem attractive, with so much money being injected into the global economies, there is a danger of inflation in the medium- to long-term.
3. Savings plan options
If you have an international savings plan that is beyond its “establishment period” – normally 18 months or so – you can reduce or even suspend payments for one to two years (depending on the plan provider). If you have made payments into your plan for some time you may be able to partially “surrender” your policy and take some cash out. Lastly, if the need is really pressing and there’s no other alternative, there’s the option to fully “surrender” a plan, although fees will have to be paid to do so.
I hope these three quick tips have been useful to you. If there are other areas of financial restructuring you would like me to look at, please don’t hesitate to reach out. Also please do comment if you like this blog.