Two of the main benefits of living in Hong Kong are the low tax and increased salary benefits. Even with extra cash to play with, however, people still find themselves living beyond their means. Many leave Hong Kong in the same financial position they arrived in. Some even leave worse off. With increasing rents and an abundance of exciting new restaurants to try it is easy to push our financial futures to the back of our minds and just enjoy the expensive lifestyle, but there is no reason why we can’t do both with the right advice.
Start with a plan
How are you meant to know where you are going without a roadmap? Take time to review your current income and expenditure and write down your financial goals – short, medium and long term. Pinpoint specific objectives and prioritise the things that are most important to you. These could be simple things like paying off your credit card on time to more complex strategies like saving part of your salary for your dream retirement. Then make some decisions as to how you will achieve your goals. Once you have a plan in place, ensure you regularly review it to allow for any change in your circumstances, the market and new products.
Make sure that along with all your investments you keep some money in a liquid cash account for emergencies.
Treat your savings as an expense
Rather than treating whatever is left in your account at the end of the month as savings, set aside a small amount at the start of the month. Treat it as an expense that needs to be paid each month, the same as rent or food. You will be surprised to see how easy it is to accommodate your spending around saving. There are a number of offshore and onshore products available on the market to help you reach your savings objectives whatever the timescale.
Protect what you have
One of the most important and probably least exciting tasks. You should take time to write a will and appoint a power of attorney in case something happens to you. Without a will in place your assets will be distributed under the law of intestacy. Writing a will is an easy way of ensuring your loved ones endure less stress than they need to in the event of your death. Life insurance, income protection and critical illness cover are vital if you have dependents or loans and mortgages.
Set aside money for tax
Income tax is not deducted monthly so it’s easy to forget that it is due at all. To ensure you keep ahead of your finances, set aside a small amount each month to cover your tax bill at the end of the year. If this is not possible, tax loans are available at very competitive rates.
Don’t put all your eggs in one basket
Diversify your portfolio to help spread your risk. Invest in multiple asset classes and ensure you are not over exposed to any given geographical area or industry. There are a number of different products available on the market to help you do this. Sit down with a professional financial adviser to establish your risk profile and use this as a basis to build your investment portfolio.
Search the market
From medical cover to life insurance, make sure you are getting the best deal and not paying over the odds. Markets and products are always changing so it’s worth taking a few minutes to search what is available. This could save you considerably in the long run.
Plan for retirement
Take a few minutes to think about the quality of life you would like after retirement and where you would like to retire. Consider any pensions or savings that you have in place already and if there is a shortfall put together a strategy to meet it. While retirement may seem far into the future, the earlier you start the less you will have to save in the long term through the benefits of compound interest. If you have a pension in the UK you might be able to transfer it overseas to benefit from tax advantages and greater investment flexibility. Consult your financial advisor about this.
Buy a home
Buying a house may not be feasible with property prices at record highs in Hong Kong. However, you can take the opportunity to set in place a short term savings plan to ensure you have saved up a deposit when the prices drop. You could also consider buying an investment property abroad or in your home country. Research is key when buying a property overseas. It’s not only important to research the property market in the area but also the surrounding facilities such as shops, schools and transport links. These are all important when evaluating how rentable the property is and ultimately the rental yield. Conduct thorough research on the costs involved – are there legal or government taxes due in the country? Failure to pay government taxes in some countries can lead to action being taken so seek professional advice. One of the main risks in buying overseas property is currency risk. Factor this in when considering where to buy.
Seek professional advice
These tips will get you started, but it is worth seeking professional advice to ensure you are getting the best from the market.