A financial spring clean isn’t just for spring – it’s an any time of the year job. But if you’re only doing it once a year then spring is a good time to schedule a review of your finances. It used to feel on the whole that not much happened from one year to the next when it came to your savings, your tax requirements etc but these days, especially for those of us who live in France as ex-pats, things to do change, regularly and you could be losing out and losing money if you don’t undertake a regular review says Robert Kent of Kentingtons, a qualified (in both France and the UK), regulated (in France) financial and tax advice company supporting British ex-pats in France.
What to Consider
Increasing interest rates on loans, not increasing interest rates on savings, rising prices, more taxes… it’s the same everywhere including in France. Plus many expats in France also have the extra worry about fluctuating foreign exchange rates – which never seem to go the way you’d prefer them to.
Many people we talk to completely understand what is going on in the world, and may worry about it, but struggle with what it means for them and, more importantly, what they can practically do about it.
If you spend in Euros, think in Euros
It’s not unusual for expats to think very much in the currency of their old home, such as Sterling.
But, thinking in a currency that you do not live in creates risk. The credit crunch and Brexit have shown us just how much Sterling can move versus the Euro. As a French resident, thinking in Euros doesn’t just reduce the currency exchange risk, it eliminates it. If you can eliminate unnecessary risk, why not do so?
“But my pensions/rental income (etc) are in Sterling!” you say.
Well, that’s something that can – and probably should – be dealt with. Sensible planning, using FX companies to make currency moves work better for you, maintaining your savings and investments in Euros (which makes sense from a French tax perspective, by the way) and forward planning your income requirements.
If you have rental property outside of France/Eurozone, you should consider if this is the best thing for you. If it is purely an investment, it might be better for you to consider selling and creating more Euro income.
Do you have pensions that could be cashed in? For many pensions this can be done, in France, with an effective tax rate of just 6.75%, it’s definitely worth considering.
Could any of your income be turned into Euro revenue?
Whether you’ve been in France for one year, ten years or more – a rethink is a good idea.
What was the right course of action when you came to France, or a year ago, may not be right for the way life is now.
Hope For the Best, Plan For the Worst
When it comes to income planning, it makes sense to plan for the worst. Good financial planning is not about hoping for the best or gambling that something will go the way you want it to. It’s about creating as much certainty as possible. If you are living in Sterling, then ensure you have sufficient Euros to see you through a crisis. A crisis could be in exchange rates, the financial markets, a slowdown in the rental markets, property prices etc. – it’s different for everyone.
The point is to calculate how much income you might need for the next few years. Make sure it’s easily accessible and usable. A crisis, no matter what the source, should not cause you sleepless nights.
Don’t just think about what you need at today’s prices – build in inflation. Plan for higher inflation, which means assuming you’ll need a rising income for the next few years, whilst hoping that you don’t need it.
Rethink your investment Strategy
Interest rates at 0% mean that in real terms – your money is eroding. There are better ways to use your hard-earned savings and a sensible investment strategy is key. Simply keeping it in the bank is unlikely to help. Traditional market investment strategy of 60% of your capital in the markets and 40% in bonds, is out of date. Bonds mean that you may be paying them to keep your money (hopefully safely). This doesn’t mean that they may not play a role, just that they’ve become less central. If you have buy-to-let properties, what happens when they are vacant and/or you need to sell when the market is bad? Property is not always ‘as safe as houses.’
Not many people enjoy reviewing their finances and investments, but it can pay off in a way that makes you feel better and more secure for having done it.
If you would like professional, qualified help and advice for reviewing your finances and investments, get in touch with Kentingtons at: kentingtons.com