Unrealistic expectations can empty savings of entrepreneurs-wannabes expats who are thinking of starting a new business in Spain.

MANY Brits move to Spain thinking they'll easily start up a new business there and live happily ever after.

Unfortunately a large percentage of these expats face financial ruin due to lack of knowledge, poor financial planning and unrealistic expectations.

As a result, many expats return home poorer and disillusioned having found it impossible to establish an income in Spain and using all of their savings to survive.

If you're considering a new life in Spain then these handy tips from Yolanda Solo, author of Spain: The Expat Survival Guide will help you avoid the financial traps that leave you broke.

1. Build a Safety Net
Before coming out to Spain, you should work out the minimum you are going to need to survive for at least 12 months and make sure you have it stashed safely away in case you get in trouble. If you find yourself eating into this safety fund then this gives you a good early indicator that you're not self-sufficient in Spain.

Wherever possible you should consider renting out your home in your own country rather than selling it so that you at least have an asset that's worth something should your Spain plans fail.

2. Consider Testing Your "Good Idea" At Home First
If you've never run a successful business before then it's not going to be any easier in Spain. If anything, as an expat who may have limited Spanish language skills, you'll be at a massive disadvantage.

Of course, tourism businesses that rely on local attractions will only work in Spain but other businesses should be setup and stable in your home country before you opt to "export" them to Spain.

3. Beware The Setup and Ongoing Costs
Starting a business in Spain costs more than you might expect and as soon as you're up and running the government will expect a hefty national insurance contribution every month whether you're making money or not.

The alternative is to do it the "dodgy" way but sooner or later expats going down this route will get caught, fined, kicked out of the country or locked up.

If you don't think you'll be able to cover your day-to-day costs (like mortgage payments, food, living expenses and running costs) plus at least EUR 250 for essential taxes each month on top then seriously reconsider how you expect to survive.

4. Don't Assume You'll Make Money Out of "Wealthy" Expats
Think about it - if you've scraped together your life savings to leave your old life behind and you're struggling to make ends meet then you're probably not alone. Many expats are just about surviving financially in Spain.

So if you're hoping they'll have plenty left over for your pampering, coaching or personal shopping services you'd do well to make sure first.

Businesses that can become part of the stable local community or that cater to tourists who expect to pay for recreational businesses are a safer bet than relying on other expats for your income.

Yolanda Solo (photo) is the author of Spain: The Expat Survival Guide - A comprehensive look at the realities of moving to Spain and why it can be a financial and emotional nightmare.

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