Wednesday, April 28, 2010

Protection and Prevention for redundancies

As an expat, there are simply so many things to spend money on. It's only too easy to live hand-to-mouth from month to month. As the wages come in, they quickly go out on holidays, outings, experiences, shopping.

But one thing you might have noticed during the GFC is how vulnerable the expat employee market is to an economic downturn. When things started getting nasty in the  financial markets, companies needed to cut costs in order to stay afloat. And not just small belt tightening, I'm talking about limb-removing cuts here. Entire departments losing 20% of staff, all foreign travel free fruit in the kitchen.

As expats, we can be a little more expensive than a local hire in many cases. We can demand housing allowances, children's education allowances, drivers, helpers (maid), blackberries, corporate credit card. The list of perks can go on...together with the incentive to sack expensive expats first during a crunch.

So what can we, as an expat, do to protect ourselves from this situation. Other than working hard, being innovative etc (which are covered off in a million other blogs), we should consider:

1. Emergency expense reserve
Set aside 3 - 6 months of expenses in cash or liquid assets (i.e. money market) for easy access should your source of income dry up. The cash reserve will allow you to pay your bills, while looking for a new job, and save you from having to liquidate your investments in order to eat.

2. Stand alone insurance policy
Your employer will, in many cases, provide you with some level of insurance cover. And in many cases, this insurance will cease when your last day at the company ticks over. This will leave you without insurance cover, and could be very stressful. Look into the costs of having a basic stand-alone insurance policy, so that you have emergency cover should you lose your job.

3. Stress test
Having a monthly budget is great while you have a job to keep track of expenses etc and exactly what you are spending. Now take this budget...and zero out your income. What impact does this have on your cashflow and long term financial goals? Use this opportunity to work out where you can make some savings in your budget to see you through. And use this to work out how long your savings will last in a worst-case scenario. Scared? Think you won't make it? Great - use that knowledge and fear to give you the kick you needed to start saving more!

Friday, April 23, 2010

TWFT: CGT issues for expat's buying Hong Kong property

Each week (or thereabouts) I'm going to post the most interesting piece of financial advice I've come across for expats during the past 7 days.

To kick it off, my inaugural expat finance tip is regarding Hong Kong property and capital gains tax.

It's true that one of the many expat-friendly tax rules in Hong Kong is that there's no CGT on the sale of property. And given its not uncommon for HK property to rise 30% in one year, that's a massive tax saving and a bulging purse!

But one thing to note as expat - when you return home, if you still own the HK property and decide to sell...uh could be stung with CGT! So for those Aussies and Brits who land back in Sydney or London, with their Mid-levels property still in the portfolio - sorry, but you'll now be taxed at your marginal rate on any gain made since the day you resumed tax residency.

I'm an Aussie expat living in HK. In 2000 I purchase a HK property for HKD$6,500,000. In 2008 I return to Sydney, at which time my property is worth HKD$8,000,000. The value on my day of repatriation is the new Cost Base for Australian tax purposes. 
In 2010 my property is worth HKD$10,000,000 and I decide to sell it; my capital gain is HKD$10m - HKD$8m = HKD$2m. This is converted to AUD and included as taxable income in my Aussie tax return. Ouch!

Some ways I could manage this:
~ Sell the HK property before I return to Australia
~ If I sell the property when back in Australia, 
a. sell in a year I'm not earning anything (or low earnings) so on a lower tax bracket
b. make a concessional super contribution and claim a tax deduction (maximum is either AUD25k or AUD50k depending on my age AND can only make a concessional contribution if self-employed or satisfying the 10% rule)
c. offset the gain with any other losses I've accumulated
~ Don't sell!

It's potentially a tricky situation so think ahead before returning home.

Monday, April 19, 2010

Saving money on makeup

Just to mix it up a little - here's a video from MakeupByTiffanyD. Tips for saving money on makeup/great cheap products.

Sunday, April 18, 2010

Using the fine print to your advantage

More about buying a property...

While in the negotiation stage for buying the property, we received a copy of the Contract of Sale. Going through the detail with a fine-tooth comb we stumbled upon:
1. The Vendor and their agent had the same surname (and an unusual one at that)
2. There was a caveat on the property from a finance company
3. A clause to release our deposit monies immediately to the Vendor for their use

What's so interesting about that?
Well, the same surname indicated the Vendor and their agent might be related - giving the agent either extra motivation to get a high price OR extra motivation to get rid of the property quickly. And the caveat indicated the Vendor had a second mortgage on the property - meaning they were under pressure to sell to repay this second mortgage. The deposit clause indicated the Vendor needed our money asap to repay debt or purchase another property.

As it turned out, we were spot on with 1 and 2 and sort of right with 3. Having a chat with our Buyer's Advocate, they went in to the negotiation offering an even lower amount than we had originally planned to offer (now AUD50k less than the asking price), but being completely flexible with settlement date. We also got clause 3 removed - our solicitor said this was too dangerous to remain as the Vendor can take your money and run.

And surprise surprise - our first offer was accepted. The Vendor was under financial pressure but also needed to purchase a new home to live in. They took the flexible settlement a step further and made it 6 - 14 weeks so they can have simultaneous settlement when they find their replacement property. To be honest, not having a concrete settlement date is really unusual and a little tricky to manage, so our solicitor and mortgage broker are aiming to have everything ready by the 6 week mark (if we have to delay settlement it costs us an extra 7% of the purchase price - yuk).

Now it's a waiting game to see when settlement occurs.

Tuesday, April 13, 2010

Buying a house in Australia when you live in Hong Kong

After 18 months of Hong Kong's low taxes (15% compared to Oz 45%) the boy and I were able to save enough to purchase our first investment property back home. Buying a property from overseas is a whole different kettle of fish - you can't just do a drive-by inspection on your way home from work or go to the open-home on the weekend. Plus, you're now dealing in at least 2 currencies which can be confusing as well as expensive (exchange rates + bank transfer fees). There's so much to think about. No one really tells you how to do this so it's a little trial-by-error.

We haven't settled yet but I'm going to do a series of posts to cover the different issues we've faced or lessons we've learnt.

~ Firstly, think about how you are going to FIND the property. You've got a couple of options:
a. Spend every spare minute you have on real estate websites (
b. Get family members back home to check the options for you
c. Fly back to your home country for hunting missions
d. Pay a Buyers Advocate to find one for you

To be honest, we are pretty protective of our spare time and also wanted to buy in a different state to our family, so a and b weren't options. Option c was too expensive so we went with d. Yes, it cost us AUD15,000 to have someone find our property BUT, unlike our house-hunting friends, we didn't spend every weekend for 4 months driving around the countryside looking at properties. Plus, for Australian investment properties you can add these fees to the Cost Base of the property (which helps save a little tax if you eventually sell).

During the 3 months it took our Buyers Agent to find our property, we had 2 friend's weddings, 2 house visitors and a ski holiday - when would we have had the time to look for ourselves? Like everything, its that battle between money and time - which is more important to you. Ultimately, I'm happy we paid a professional to use their knowledge and experience to find our property, I would have got too emotional about it. Back to his fee - given he was able to negotiate almost AUD$50k off the asking price we figure we're still in front after paying him.

The time between when we met the BA and when they contacted us to say they'd found something felt like ages. And then it felt like they were rushing us when they called to say they'd found something and we had to move quickly. A little more follow up in the meantime would have made us feel more comfortable...but they definitely made up for it once we'd committed and they held our hands every step from there. So big tip - if you've made the committment to engage a BA, have EVERYTHING ready so you can go at the drop of a hat. This includes:
~ enough cash in an account for the deposit (preferably in the correct currency)
~ the ability to write a cheque in the purchasing currency

Next post - Use the fine print to your advantage...

Saturday, April 10, 2010

Its the big things

How many times do you read savings advice columns that simply say to cut out the Starbucks and takeaway lunches? These two always seem to make it to the top of every list but to me they're getting a bit stale. While I'm not saying these aren't good ideas, that can save around a thousand dollars a year, they do seem to suck the fun out of life a little!

Another idea is to focus on the big ways you can save money instead.

One area is travel. For example, my boyfriend and I attended a wedding in New Zealand over Easter. Given I was a bridesmaid we knew the date months in advance. And given the wedding was over Easter, flights were  no doubt going to be expensive. So I booked our flights in October last year. One week before we flew I double checked to see how much these flights now cost - and they were HKD4,000 more expensive! By booking 6 months in advance I saved over USD500.

Another area is big ticket items for your home. Checking websites like ebay, craigslist and Asia Expat in many cases you'll find exactly what you need for huge discounts - even free. It also doesn't hurt to ask around - if someone is thinking of gettting rid of the exact item you need, they'll usually give you a great price for saving them the time and energy of trying to sell it. When we moved to Hong Kong we purchased all our furniture from one of my boyfriend's colleagues who was moving into a smaller apartment. We saved thousands buying his furniture, not to mention saving hours trawling through the shops and more money again on delivery.

Clothing is another area to save big. The obvious thing to do is of course shop during the sales. But for special occassion dresses, sometimes you can't wait. While already popular in many other cities, new to Hong Kong is the idea of buying second hand gowns online. Designer Gowns HK buys and sells preloved designer dresses, shoes and accessories. And once you've worn your fabulous frock to the ball, you can resell it again so you never have to wear the same thing twice. Or if you'd prefer to see the dress in person, try the Pedder Building in Central HK.

The same goes for designer handbags. Not everyone wants a knock-off Chanel from the markets, sometimes you want the quality of workmanship of the real thing, without the moral dilema of buying fakes. Websites like and shops like Milan Station sell second hand designer bags for 30 to 50% off the original price.

Just these 4 ideas alone will save you thousands each year - and you can probably keep having your Starbucks!