A fresh start, better weather, and lower costs are often cited among the reasons for someone to move abroad and continue their journey towards financial independence in a place that's both exotic yet budget friendly. I myself did something very similar when I moved to Hong Kong back in 2019 and the lower tax rates here compared to the UK have certainly boosted my progress, even if the costs of living are rather similar in general.
Before making the move abroad to become an expat there were a number of financial fears I had to face and overcome - the cost of visiting family and friends back home being the one that rose to the top of the list. In addition to this there were concerns around my ability to continue earning an income, money management abroad and back home, not getting hit by excessive tax, and being able to continue an investment strategy that aligns to the goal of financial independence. Everything comes down to preparation and provided you're willing to get out there and take the bull (market) by the horns you're almost certainly going to find a solution to your fears.
First Fear: Being separated from family
In my opinion this is the most important fear to overcome and really get comfortable with. You may think that this isn't financially related and the solution is an easy video call or message over the internet, but the problem goes much deeper.
Firstly, a video call session is never the same as an in-person meeting and there'll always be some scheduling awkwardness. It depends where you are in the world of course, but for myself being 7 or 8 hours ahead of the UK it requires a bit of planning and arrangement.
Secondly, is the very real feeling of "home-sickness".
Moving to another city to build your life once you're old enough is a common thing, but there's always a comfort of simply being able to hop on a train or get in the car and travel a short while to see family again whenever the urge or need arises, and at relatively low cost.
London to Swansea takes less than 3 hours on the train and if you're picking the off-peak tickets then it's honestly not that expensive.
It's much more complex when planes get involved and the journey not only involves more money, but also a lot more time. The costs of flying back home for a short visit will definitely rack up if done too regularly.
Would I be able to afford it, or would it put too much financial strain on me?
If I visited less often would I be able to handle it, or would I still feel far too separated from everyone else?
What if someone close to me fell seriously ill - would I be able to handle the cost of immediately hopping on a plane to go home and give my support?
What if I needed to completely move back home, what would that mean in terms of my financial situation?
What's the worst the could happen?
Life is always going to present you with different paths to choose from provided you're putting yourself out there and not simply staying within your comfort zone. To me, this is another one of those choices where there are pros and cons to each.
The biggest concern in this fear is if someone were to really need my help and for me to be present, as it would take me at least a day or two before I could arrive back in the UK.
However, these are worst case scenarios and with low chances of happening.
Provided that there are other family members or close friends around to help out on short notice, and as long as I keep more than enough in my emergency fund to fly home if I needed to, I figured that the opportunities far outweighed to cons of not going.
Second Fear: Work and earning an income
Moving abroad for a lower cost of living and lower tax rates sounds great, but I need to be able to earn an income in the first place. Thus, my second fear emerged...
Would I be able to find work?
Would there be a big language barrier?
Would I be eligible to work in the first place?
What would happen if I couldn't find a way to earn an income?
How long could I last and what would my plan be to remedy it?
What if I did find a job, but the income was much lower than expected?
While I'm familiar with the job searching process in the UK I didn't know what differences could exist abroad - both professionally and culturally. This could lead to difficulties in actually finding work after moving and could result in me burning through my emergency fund sooner than I had anticipated.
Looking for a job beforehand did come to mind, but eligibility from the perspective of the employer seemed to drop dramatically whenever they found out I wasn't actually living locally at the moment.
I was at least fortunate in that I have Hong Kong residency being British Born Chinese and going through the process of applying for it in my younger years with my parents, but I suspect if I didn't have this then there would have been additional concerns about visas and what not.
The other problem would be the salary rates for an equivalent job - could they potentially be much lower?
If so, this would be counterintuitive to moving abroad to work for "better financial advantages" since the amount of money I'd potentially be earning would be less than back home.
Stories of well paid expats and their luxurious lives are what we always hear about - and the life I'd honestly want - but I suspect there's some element of "survivorship bias" in this. In reality you don't hear much about the expats who are living relatively normal lives or may even be struggling to get consistent work locally.
What's the worst the could happen?
Whenever you're about to make a big move in life the chances of success really come down to your levels of preparation. If you simply hop on a plane and go abroad without much thought on what you're going to do and how, then you're probably not going to last very long.
Personally I increased my emergency fund to cover an entire year of living costs - on top of an emergency plane ticket home. The plan was to try and raise this over time to cover 18 months, but the threshold was 12 months before I started to seriously take action on my move.
I also negotiated a remote working arrangement with my existing company - with the understanding that it may not work and there would be regular reviews on how things were getting on.
This allowed me to basically get settled and still have an income, with the knowledge that I'd have 12 to 18 months of costs covered should my job come to an end.
Ultimately this meant my ability to find my next job - if I needed to - was completely in my own hands as I could start building my contacts and network locally while still trialling the remote working arrangement.
Third Fear: Money management
Being someone who is working towards financial independence, the ability to properly manage my money ranks high on the list in terms of my concerns when moving abroad. Especially when considering that things could work a little differently elsewhere.
For example, what would be the equivalent of an ISA - which is purely a UK account type - and what are the differences in terms of how pensions work.
Does the Hong Kong pension scheme even have tax relief?
Are there employer match schemes?
What about banking, should I open a local bank account or go with an expat account?
What would that mean in terms of banking fees?
Is the local tax system easy to understand?
Would I need to report my earnings abroad and still owe tax in the UK?
What would happen if I did things incorrectly and got in trouble - would I get a heavy fine?
Will I need to pay for the services of an accountant?
Could the differences between the local systems and the UK systems mean that the advantages of moving abroad no longer made much financial sense?
What's the worst the could happen?
While money management may seem "easier" back home compared to abroad it's only really because it's a system that we're already somewhat familiar with - because we've taken the time to look into the details.
If you think about it, many people who have lived and worked in the UK all their lives still struggle with the UK's financial system. The same probably holds true for the locals in other places around the world.
So our situation in relation to others may not actually be that much worse off - we're just more aware of it and that's what makes us nervous.
It's a matter of spending the time to look at the details and recognising that if you were capable of getting more familiar with one financial system then you're more than capable of getting familiar with another, in time.
Just don't expect there to be perfect overlaps and instead learn how to utilise accounts or benefits that have some sort of equivalent nature.
Fourth Fear: Losing my tax shelters
It's almost impossible to know if your move abroad is permanent because things can change in the future. Even if you're confident in the move right now you never know what personal situations may arise where you decide that returning home is the best course of action.
This led to me having a dilemma when it came to deciding on the best course of action for the money I had saved and built up over the years in the UK within tax-advantaged accounts such as the ISA or my pension.
Withdrawing from my ISA means I would lose that tax-shelter status, and if I ever returned back to the UK there wouldn't be a way for me to get it back into an ISA without using more allowance.
At the same time, an ISA is probably not going to be recognised in another country since it's a UK specific thing - so any tax advantages I may enjoy if I were in the UK could in fact be lost while living abroad.
In a similar manner, pensions could be treated and handled differently in different countries; not to mention the hassle of actually moving them in the first place.
Could I try to continue depositing money into my SIPP that remains in the UK - would that be easier and would I still get the tax relief?
But then... what about currency exchange rates?
Would one of the currencies potentially become devalued by a lot in the future, putting my entire retirement at risk?
What's the worst the could happen?
Fortunately there isn't any urgency when it comes to moving or closing your existing accounts after you've moved abroad. But you do need to inform the service provider that you're no longer living in the UK and that may restrict you from certain services.
With this in mind I decided to keep all my existing ISA investments and pension within the UK where I could take my time to figure out if my move would ultimately be permanent or if there would indeed come a day where I "return home".
In the latter, I would have been able to keep all of my money within a tax sheltered account and can continue to enjoy those benefits. And in the former, since there isn't any capital gains tax in Hong Kong I simply don't have too much concerns in this area.
Currency fluctuations are always going to be a concern but considering my investment portfolio is globally diversified I didn't see any additional exposure compared to what I already had from before - at least nothing significant enough that I could do something about anyway.
Fifth Fear: Investing Abroad
Passively investing while living in the UK is probably as easy as it could possibly get. There's no shortage of well diversified low-cost funds that are managed by well established financial institutions, such as Vanguard, and there's plenty of liquidity for these funds.
Unfortunately these services might not be available after moving away and the products provided by foreign financial institutions may not be an exact replacement for your favourite go-to fund.
Vanguard for example doesn't have much of a presence in Hong Kong, and the small number of ETFs they offer aren't very liquid and may not share the same advantages when it comes to the US's additional dividend tax for foreign investors.
To me this means more costs for less certainty - which is a bad combination in my opinion.
To try and solve this I needed to research what other options there were in terms of financial institutions but the problem was that they all came with unfamiliar costs and unfamiliar products.
Additionally there was an issue with trust. Since I wasn't familiar with many of these alternatives it didn't sit well with me to place a large portion of my wealth and future wealth into the accounts managed by them.
What protections are in place for the investor, if any?
There's also the added concern of currency exchange rates once more.
Should I find a fund that's GBP denominated and convert my money each time from the local currency each time I want to invest?
But then, would the costs of conversion potentially increase my overall costs and have a long term impact on my returns?
What if GBP strengthens, does that effectively mean I'm getting less for my money and therefore will not profit as much over the long run?
Or should I invest in a fund that's denominated in the local currency?
But what if the available products in the local currency are limited and don't follow my ethos of passively investing into a low cost fund that's diversified?
Could I actually stick with my passive investment strategy while living abroad?
What's the worst the could happen?
There's almost no choice but to take the leap and learn when it comes to investing abroad - just as we all had to with our first investment back in the UK.
Thankfully, since Hong Kong is a well established financial hub it does provide a wide range of products from well established financial institutions that operate globally. With a bit of research I managed to find certain ETFs that did follow my strategy of tracking the global index at a low cost and could purchase these from well established platforms.
Sticking to the more well-known names will remedy the concerns that accompany unfamiliarity, and over time this will subside as more confidence is built in the service.
When it comes to the currency I ultimately chose to invest in USD denominated funds based in Ireland. Hong Kong's dollar is pegged to USD which reduces exposure to conversion rate changes, and the fund domicile allows me to avoid the 30% dividend tax as a non US-resident.
I'm still exposed to the USD:GBP conversion rate but my opinion is that this is a stable enough currency pair that any fluctuations will not matter in the long run - plus the trend does seem to be in favour of USD on the long term charts.
Final Scribbles (The Benefits)
At time of writing I've now been an expat for just over 18 months and have loved every moment of it. I feel I've grown as a person and have experienced life in ways I wouldn't have been able to had I simply stayed in London, or anywhere else in the UK.
Despite all the fears - financially and non-financially - I'm really glad I made this move and can see myself living here for at least another couple of years.
The one sad thing so far is my inability to visit home - but this hasn't been caused by a financial barrier.
With all the other fears subsiding slowly but surely here's a quick list of the benefits I've been able to enjoy since my move:
My remote working arrangement still stands and has allowed me to stay employed right the way through my move.
I pay much, much lower tax.
I still get paid in GBP which has luckily strengthened against the Hong Kong dollar in recent times.
My emergency fund remains untouched, and eventually I reduced it after my confidence grew.
My stocks and shares ISA back in the UK has continued to grow over time, giving me some really healthy returns.
My investments in Hong Kong are completely tax free and provided I stay abroad for at least 5 years, there'll be no liabilities if I ever go back to the UK.
And the most important benefit since my move: I found love and got engaged!
But I suppose this now leads to a new financial fear - the costs of a foreign wedding.