Any expatriate who lives in one country while having assets and investments in another needs to manage their finances extremely carefully at all times. Recent events in Cyprus are testament to this fact, and while there is very little that the expats who have savings in Cyprus can now do to protect their money, it is important that expatriates throughout the world take heed of the hard lessons that can be taken from this situation. Here are three top tips for protecting your assets.
1) Reassess your financial decisions on a regular basis
If you have done your research and carefully evaluated each and every investment before you ploughed your savings into it, great. But how often do you revisit these decisions to reexamine them within the current climate? Far too many expats make investments and then leave them where they are for years to come. Expats living in Cyprus will undoubtedly have been aware of the fact that the Cypriot economy was in trouble and this should have rung alarm bells, motivated them to reconsider their options and forced them to consider moving their savings to a healthier jurisdiction. Make sure you set aside time each quarter to reconsider all your investments. Carefully examine factors such as the health of the economy in which they are based, the stability of the institution that holds them and the currency and nature of the account.
2) Limit your exposure
Initially the plans outlined by the Cypriot government indicated that all deposits would be impacted. However, more recently the authorities have announced that up to 100 thousand Euros will be protected by Cyprus Deposit Protection Scheme. This highlights the importance of investing your money in schemes that offer limited exposure. There are many investor compensation schemes available, especially within Europe, that act as a safety net and allow investors to claim compensation in the unlikely event that the life company becomes insolvent. Research your options carefully and try and take advantage of these where you can. No one can foresee what will happen in the future and there is a distinct possibility that the measures implemented in Cyprus will be observed elsewhere in struggling economies. Be prudent and try to avoid holding more than the guarantee limit in any one bank, especially if you are living in areas that are already under duress.
3) Don’t assume your money is safe
Many people mistakenly think that the money that they hold within banks is a risk free option. The events in Cyprus clearly indicate that this is not the case. Expatriates throughout the world need to learn from what has happened in Cyprus and take full responsibility for their own investment decisions. It is your responsibility to remain informed, knowledgeable and on the ball and even if you choose to use a financial advisor’s assistance, you need to ensure that your investments are diversified and that your assets are in the best possible place at all times.
For more practical advice on managing your expatriate investments see: Four Financial Mistakes All Expats Should Avoid