|Disclaimer: I have no background in finance. This is not to give you any investment advice, for that, you should do your own research or hire the appropriate professional.Okay, good, now that’s out of the way, let’s discuss finances. First, why am I bringing this up? This has nothing to do your job? You didn’t chose this profession because you wanted to be rich, you wanted a life with meaning… That’s all well and good. And I believe most of you when you say that. However, poor financial planning can hinder your ability to take the jobs you love or finance important experience because you need to take a job that pays the bills.
So, how do you plan your finances?
- You need a budget. Not necessarily the app, but you need to know how much your lifestyle costs, even if you are not financially independent yet. You need to that information to be able to provide financial proposals. A lot of people ask me advice on how much should they charge for specific consultancies or how much should they list as their salary requirement. One solid step in that direction is knowing how much it cost to maintain you and being able to minimally support that.
- Build an emergency fund. An emergency fund, for those that don’t know it, is your emergency savings. About 6 to 12 months of your salary in somewhat liquid form (not attached to long-term investment, a savings account would do just fine). Usually, only 3 to 6 months are advised for the emergency fund, however, in this line of work you are more prone to tap into this resources. Examples: International moves, visa costs, settling in to a new country, medical bills… More importantly, if you are dealing with freelance work or consultancies, you will be able to handle the delays in payment or any issue that may arise in a particular period of time. Don’t overestimate the role that an emergency fund can have in your peace of mind or your ability to make sound career decisions. You don’t want to reach the point where your choices are fuelled by desperation.
- Look for a low fee bank that allows easy international transactions.Those can be such a nightmare! So, it is important to research a bank that will cater to those specific needs. If you like your current bank, then look for the alternatives to send or receive money internationally and how much they would cost.
- Get good international health insurance coverage. That seems like it is not a personal finance issue, but it most definitely is… You never know when you going to be needing this, but I can tell for certain is that you don’t want to be left paying your ridiculous high hospital bill in Panama… Or the United States.
- Try to keep your rent expenses below 30% of your salary. It’s just an arbitrary rule that helps you figure out your rent budget. If you are in a place that you need to drive or expend a significant amount of money in transportation (which is the reality of most developed countries) that means that 20% of your expenses will probably go to that. So having the 30% rule helps keeping some legroom for building an emergency fund, having a bit of savings AND enjoying yourself. That, in places like DC, NYC, Geneva, London, Luanda or Rio may be really tricky, I know. But it helps giving an overall perspective on how you should chunk your money.
- There is no universal investment answer all countries. There really isn’t. That´s why is important to do your own research on the specific country you are in before investing. Don’t be afraid to understand how the banking system works if you are willing to open new bank accounts. Sometimes, it is better to maintain your home account, if it makes you feel more confident with ability to make decisions with your own money and rates are reasonable.
- Understand how taxes work in the country that you are working in and if you will have to pay them, when and how much? The last thing you want is to be made to pay 25% of your income in taxes out of the blue. Be prepared…
That’s it for this week, next week we are going to be talking about… What type of CV is best for me?
Best of luck in your search!