For someone in your position I would make the following suggestions
1. The rainy day fund
Done
2. A pension. Putting 5% to 10% of your income. Invest it cautiously but get started, don't wait until you identify the perfect pension. Don't over contribute to the pension, because the money can only be used within the constraints of pension rules. The govt gives you tax relief but they restrict what you can do with the money. Although these has been made much less restrictive in the UK recently.
See, this makes perfect sense to me, but it's also where my bewilderment begins. How do we invest in a pension? Who do we speak to - an advisor, a company, a bank - and how does it work? How do we identify what to invest in? Is it basically one type of several pension products that we'd choose? If so, how do we identify the best product, and how do we set up the payments? It's not like walking into a shop; and that's what we mean when we say
We don't know what to do with our money. I mean, we know that we should have a property and a pension and a rainy day fund, but we literally have no clue
how to start a pension. We don't understand the system.
3.Use smallish money to actively invest in shares. Say 10 shares at €2k a time. Read the financial press and back your judgement. You might loose heavily or you might do well. The purpose of this activity is to determine if investing with significant money suits you. That is a question of temperament.
Thanks -this has the makings of a strategy
But again, we don't know where to go to buy shares. I am used to seeing the prices of individual shares at, say, 60 euro for SAP or 30 cent for AIB. Are you saying that we should target businesses that have an individual share price of around 200 euro? So, for example, based on the industries I mentioned above (fast food, gambling, shipping, waste disposal), we'd invest as follows (for example):
- EUR 200 in Dominos
- EUR 200 in McDonalds
- EUR 200 in Paddy Powers
- EUR 200 in Ladbrokes
- EUR 200 in Garbage Company X
- EUR 200 in Recycling Company Y
- EUR 200 in Maersk
- EUR 200 in DHL
- EUR 200 in Primark
- EUR 200 in cheap clothing company abc
^^ Is that basically what you have in mind?
4. Buy a property. It makes no difference weather you will ever live in it. These are uncertain times, a 2 bed apartment in London today will be a 2 bed apartment in London in 20 years time. You don't get that type of certainty with any other investment. Borrow as much as you can comfortably service.
This I understand. But I was thinking that if we do that, we won't have any money left over to eventually buy our own residence without a huge mortgage (or is there something I'm missing?). We actually have no plans right now to buy a residence as we don't yet know where we'll eventually settle (or when).
Also, while our income stream is very strong right now, it won't be when we eventually go back to the west. Rather than netting 90k per year, we might only net 55k. We have another 2 or three years high income guaranteed, and potentially a lot longer, but I don't want to be in a situation where we've relocated to the west, only net 55k, and have stretched ourselves too thin based on when times were good and we were netting 90k. We'll do our level best to stay where we are for as long as possible (e.g. until they kick us out or it becomes uneconomical).
BTW - we are planning on starting a family in 2016. By family, I mean one child. I know that kids are a big expense, but we're absolutely set on just having one.
This is basically my own financial history from 30 to 35, except I bought the property in Ireland.
Really appreciate it
I've been around the block a few times. On that particular bit here's my advice.
1. Don't believe that you called him and not the other way around. I'd bet anything you 'heard' about him from other 'friends'
He works for a company that was highly lauded on a busy expat forum. The forum has a culture of hatred for financial advisors, but this one company was the only one people had any time for. My wife and I went to see one of their people last year (a lady who was mentioned positively on the forum), but my wife didn't like her. The company proposed this other guy instead and he helped us to secure a decent life insurance policy and told us then to come back to him in 6 months once we'd amassed a rainy day fund. We've amassed one, so it's time for us to meet again.
He has recommended keeping our rainy day fund in an offshore account and I think it's the right choice. However, he would charge 200 dollars for setting it up ("paperwork" like signatures etc) and he says he'll return this if we give him business in terms of investments. I'm not sure what to make of that. I'm a natural born skeptic and will challenge him to explain and justify everything he says, but given my ignorance of finance I feel I have little option but to use an advisor.
2. 'Friends' are sometimes paid for referring.
Good point. Noted.
3. The expert will have subliminally got to you. In the pub talk, the expat web advertising, the expat helpful advice on living, in the local English media article, followed by big advertisment somewhere.
You're right - the company are frequently on expat radio and they have a columnist in the local expat paper.
As expected I'd agree with all you've posted Cremeegg. Even though I've never done shares I think the smallish amounts over time could work out well. And he's young and can go with the ebb and flow of it, and the temperament is a good indicator too. I'd say that also applies to property investment.
Apart from Ireland i've invested in property here, bought twice and sold once, so far it's worked out. But I think it's much harder to manage property that is abroad. And stay away from places one doesn't know about. Bulgaria, Spain and Dubai. Proven markets like London will always be ok.
Thanks. I live in Dubai and I wouldn't buy anything here. Ever.