BNP Paribas Fortis helps expats prepare for tomorrow by saving today. [Contributed by BNP Paribas Fortis]
Basements flood. Jobs change. Welcome additions to the family aren’t always planned. Unexpected health issues may arise. Life is full of surprises. And while you can’t know what is going to happen in the months and years ahead, you can at least protect yourself against these uncertainties. You can prepare for that rainy day by saving in a way that is perfectly suited to your needs.
Moreover, it is wise not just to protect yourself against uncertainties, but also to think ahead in time to properly prepare e.g. a project for your children – say if you want to give them a financial head start when they move out and would like to buy their own home but need assistance. Our expert understands that a large number of expats in Belgium are here for their career, which often means making a comfortable salary. In addition he says, “Being an expat is commonly temporary, so their motivation to invest and think in the long term is low.”
He continues: “Because of this I try to emphasise the need for long term financial planning and protection against extra or additional costs that can arise. At the very least, they should prepare for the costs of moving countries or changing jobs. Expats need to prepare and save not just for today, but also for tomorrow.”
So what is the best means to work on these savings? The steps are pretty simple to start. First you simply start building up a cash reserve. The amount can vary – a few months’ wages or a percentage of your annual income. It depends on your spending habits. Next, you should save this money in a bank so you can establish a business relationship that you trust and get the support you may need. Then consider investing with your savings.
Consult with a trusted expert for recommendations. First of all and very importantly, define your personal view on risk and return. This will in turn determine your investor profile, which will help you and the bank find the most appropriate course of action for your money.
He points out: “Saving isn’t simply putting money in a piggy bank. You should also consider taking saving to the next level by thinking about investing. For instance, when the interest rates for simple saving accounts are lower than the actual inflation, your purchasing power decreases. If you don’t want to lose any money, you need to consider investing.”
Does investing sound intimidating or too risky? In an effort to provide investors greater protection and security, the European Union adopted a directive, MiFID, in collaboration with the banking sector in 2007. MiFID is short for the Markets in Financial Instruments Directive; in other words, a directive relating to the financial instruments markets covering shares, bonds, investment funds and so on. The point of this directive is to provide better protection to you and your investments with a policy of best execution on your orders, as well as rigorous provisions on transparency and information to be supplied to the investor. MiFID applies to all firms offering financial services or investment consultancy, from banks to brokers.
Knowing where to start with your potential investment can be difficult, however, which is where helpful experts step in and assist. “We have an easy way to determine your personal investor profile. We can offer a specialised questionnaire to analyse your investment expectations: do you trust in investments, how do you see risk, what certainty would you like to have for your investments? Then, based on your answers, we match one of the five profiles.”
One end of the scale is the ‘conservative investor’ – this person is wary of investing in the stock market or bonds in volatile currencies. Avoiding risk is paramount and this person chooses investments offering a return that is guaranteed or foreseeable. Capital protection is very important and this person prefers certainty to potential.
On the other end of the scale is the ‘aggressive investor’. Attracted to shares, this person attaches considerable importance to optimal diversification and is willing to take the risk for a high return. If you want to make aggressive investments, you need to have a basic knowledge of shares and the stock market and understand the financial instruments.
In between these two are three more types of investors – the ‘defensive investor’ who prefers certainty, the ‘neutral investor’ who aims for a balanced view on investing and the ‘dynamic investor’ who targets performance.
Whatever type of expat you are or investment profile you have, at the core is the importance of saving, potentially investing, and approaching this matter in a methodical way. “To intelligently save and invest isn’t something you make up as you go along. It depends on a personal, carefully thought-out, methodical process.”
The Step-by-Step plan always consists of the same five elements. On your own, this would be a little overwhelming, but with the assistance of a trusted expert, you should be able to go through this plan with confidence.
- Determine your investor profile
- Build up your reserves of permanent savings
- Optimise your tax savings
- Choose the solution that meets your savings and/or investing goal
- Finalise your investment portfolio
As stated, your risk profile is determined with a questionnaire. Meanwhile, your savings reserve can consist of cash, shares, bonds, investment funds and more. The exact composition and elements of your portfolio will match your personal risk profile. Your tax savings can also be determined : there are many tax experts on hand to assist in this often-technical area.
Whatever your saving goal, there can be various solutions to get there. Decide on the means that best suit your own personal requirements. And finally, you should evaluate your investment portfolio every year, to check if it is still adapted to your personal needs, as life and personal circumstances can change. This allows you to remain satisfied that the money you have worked hard to earn is kept and accrued in a way that is most beneficial to you. Whatever your investment profile, you will always have two options: you can delegate the entire investing part (investment decisions) to the bank, or you can choose to make them yourself.
It is clear – saving is vital. But how you save and where you save are also of utmost importance. Save smart. Consult a trusted expert who will support you and provide optimal saving and potential investing recommendations. Utilise your money and their expertise to put you in a position of comfort and confidence, no matter what the future may hold.