30 yr old expatriate trying to think ahead

[thaidyed]

This forum looks great-happy to join the fray.

I live abroad in a developing country which presents a fabulous opportunity to save. I am 30 years old, married and about to start having kids. We own our own home outright (also abroad). We both work but I make $108,000, while DH makes $6000 annually (he's local). At this point we have about $125,000 net worth including everything but the house. Our only debt is about $5000 left on my 0% student loan.

US expat tax exemptions (nothing on the first $80,000) and a low cost of living means no stretch to put 75% or more into savings and still allows for having a nice cash buffer for the short-term.

I'm still very new to this so I haven't got the finer details worked out yet. I need to figure how to budget for having kids and educating them and keeping that money out of the early retirement calculation. Another problem is how to not make the calculator assume I pay 25% tax on all the income (I do pay 25% but only on the part above 80K). Also, we'll both be helping our parents out for the foreseeable future--him because, well, that's what you do here, and me because I'm an only child with a dad who didn't save (but did pay for most of college ).

Look forward to any and all advice--but fear it will be a while before I can repay the favor!

[W2R]

Hi, Thaidyed! Welcome to the forum. Sounds like you are making a great start on accumulating a nice retirement nestegg.

[Nords]

Quote:

Originally Posted by thaidyed I live abroad in a developing country which presents a fabulous opportunity to save.

Welcome to the board, TD.

We have a number of posters on here and on Raddr's board who are either living or exploring the expat lifestyle. Probably the most vocal are the Kaderlis but Raddr's board also has Ben, Peteyperson, and (occasionally) Kramer.

[aida2003]

Quote:

Originally Posted by thaidyed I am 30 years old, married and about to start having kids. We own our own home outright (also abroad). We both work but I make $108,000, while DH makes $6000 annually (he's local).

Well, I've got more questions that advice.

Would you be able to divulge the country's name where you live? I'm being nosy, of course .

While planning your future, you have to think where you'll raise your kids. Will you all move back to the U.S. or stay there? Will your co. continue paying you while you're on your maternity leave?
I wonder since you're an expat, is a foreign company (I assume you work for an US co. just looking at your salary) in that country obligated to follow local laws as regards to a maternity leave or does it follow its own policy? And what about retirement accounts: can you contribute to 401k + RothIRA as if you resided in the US?

But in general I think you are doing wonderful. If your in-laws will help raising your kids, you can consider yourself super lucky being able to save SO MUCH $$.

Good luck.

[thaidyed]

Quote:

Originally Posted by aida2003 Would you be able to divulge the country's name where you live? I'm being nosy, of course . ...Will you all move back to the U.S. or stay there? Will your co. continue paying you while you're on your maternity leave? ...I wonder since you're an expat, is a foreign company (I assume you work for an US co. just looking at your salary) in that country obligated to follow local laws as regards to a maternity leave or does it follow its own policy? And what about retirement accounts: can you contribute to 401k + RothIRA as if you resided in the US? But in general I think you are doing wonderful. If your in-laws will help raising your kids, you can consider yourself super lucky being able to save SO MUCH $$.

Details!
-I live in Laos now but have lived throughout Southeast Asia.
-We will probably live in the US at some point but we're in no hurry. I can see that at some point, kid's education will drive us back there (international schools are more expensive than state college's in the US--but without the financial aid!)
-No 401k but I've fully funded my Roth (though now I think my salary means I can't fully fund anymore). Its all in a Vanguard S&P 500 index, and is now around $9000 (despite me putting $12,000 in. Grrrr). I've been wondering if I should move it to one the target funds, or switch to a mid/small cap index to stop the hemorrhaging but that's a discussion for a different thread.
-Thankfully, I'll get 3 months maternity leave at full salary, plus quite a bit of flexibility on the how/when to return to work (way better than girlfriends back home!) Plus I get 20 days paid holiday so I expect that will all go to the cause as well.
-The in-laws will help but it may prove cheaper to preserve sanity and pay for a nanny (approx $125/month)
-Not to make everything perfect though, I do but my own health insurance. But for $2K/yr I can have fantastic coverage inc maternity, etc.
-Our house we bought for $15,000 and spent about that again fixing up.

We've only been married a few months and finished the house recently so we haven't quite stopped bleeding from those two adventures. Now with kids around the corner we need a budget and FAST! I've learned we are both very good at going through money when we don't pay attention. Local financial culture is to spend what you got until you ain't got any more and then go back to being happily poor til next time comes around SO... I'm the financial manager. But to be fair, I'm the one who needs imported foods and nice furniture--DH would be happy with noodles and a mat.

If I can work out a realistic FIRE plan that accounts for kids and etc. we will be motivated to recommit to hardcore saving. With the insane salary I make its easy to get loose and lazy and still pat ourselves on the back for saving when really another $5K or more could have made it to savings without any affect on our quality of life.

Right now all my "investments" (Roth+retirement account+investment account=$60,000) are in stocks/mutual funds as I'm thinking long-term and trying to be aggressive. I've got another $40K in savings at 3.5% and another $20k+ not doing anything (urg!) in a no interest savings account (priority #1 is to fix that).

No one in my family has money to speak of and my hubby's idea of saving is buying rice fields (not entirely a bad idea really) so I'm entirely self-taught when it comes to finances. Really looking forward to gleaning advice here. Thanks in advance!

[ladelfina]

thaidyed, I would quickly get diversified into some investments that reflect your current reality (i.e., NOT US and S&P -- I can't say whether I would sell that or not, but I would not put new money there)*. From what I hear inflation is higher in Asia, so I would be looking into firms that are growing and earning over there. You are in great shape salary- & benefit-wise, but don't lose that edge to inflation and the declining dollar.

Quote:

DH would be happy with noodles and a mat.

Noodles and a mat are looking better all the time!

The rice field investment could really be an excellent idea (if you don't see political turmoil/confiscatory gov. on the horizon... sorry if that sounds extreme; I don't know what Laos is like).

*to illustrate what can happen when you are not diversified in currencies as well as asset classes:
The Dow Jones Index Priced In Euros « Malaysia Finance Information

The dollar is not going up anytime soon, esp. not with a Fannie/Freddie bailout.

I understand your difficulty in not having local friends or family to bounce investment ideas off off.. it's very similar here: few people have any great store of wealth and if they do it's in RE. When I came here, that seemed quaint to the point of backwardness; I have a slightly different view now.

[thaidyed]

Quote:

Originally Posted by ladelfina thaidyed, I would quickly get diversified into some investments that reflect your current reality (i.e., NOT US and S&P -- I can't say whether I would sell that or not, but I would not put new money there)*. From what I hear inflation is higher in Asia, so I would be looking into firms that are growing and earning over there. You are in great shape salary- & benefit-wise, but don't lose that edge to inflation and the declining dollar. The rice field investment could really be an excellent idea (if you don't see political turmoil/confiscatory gov. on the horizon... sorry if that sounds extreme; I don't know what Laos is like).

Thanks for this--you read my mind. I (and everyone I work with!) are very concerned by the dropping dollar. Though, to clarify, only my Roth is S&P 500. The remaining 50K is in a mix of stuff--heavily non-US markets.

Asian inflation is massive. Vietnam's a basket case at 25%, luckily Laos isn't that bad but its still nasty. 10% is probably not too far off. And the Lao economy relies heavily on dollars so that affects things as well.

Rice field investment went from 5K to 8K in 4 months--so no complaints there but the whole commie government without strong track record in contractual law makes me not want to bet big in land.

The DH also does very well making small business loans--access to credit is so poor and loan sharks so nasty that people are happy (grateful!) to get a 50% APR loan, putting down their home and farm as collateral.

Needless he doesn't understand how I could be happy about 3.5% APR on a savings account...!

[ladelfina]

I see your future => Laos banking!!

[aida2003]

Quote:

Originally Posted by thaidyed Now with kids around the corner we need a budget and FAST! I've learned we are both very good at going through money when we don't pay attention. Local financial culture is to spend what you got until you ain't got any more and then go back to being happily poor til next time comes around SO... I'm the financial manager. But to be fair, I'm the one who needs imported foods and nice furniture--DH would be happy with noodles and a mat. If I can work out a realistic FIRE plan that accounts for kids and etc. we will be motivated to recommit to hardcore saving. With the insane salary I make its easy to get loose and lazy and still pat ourselves on the back for saving when really another $5K or more could have made it to savings without any affect on our quality of life. Right now all my "investments" (Roth+retirement account+investment account=$60,000) are in stocks/mutual funds as I'm thinking long-term and trying to be aggressive. I've got another $40K in savings at 3.5% and another $20k+ not doing anything (urg!) in a no interest savings account (priority #1 is to fix that). No one in my family has money to speak of and my hubby's idea of saving is buying rice fields (not entirely a bad idea really) so I'm entirely self-taught when it comes to finances. Really looking forward to gleaning advice here. Thanks in advance!

Thanks for sharing about your life in Laos. Very interesting!!

You're indeed doing great financially and hopefully your success will continue in the future. However, you're right about one thing - SPENDING. If you continue like this (spending until you're 'poor' and wait for the next paycheck), in 5-10 years you'll still be considered 'rich' income wise, but NOT the net worth wise. My only advice would be automatic deductions from our paycheck or your checking account and saving or investing somewhere. That way you'll have less money to bleed for frivolous stuff.
It's really hard to advise how to invest all your extra money because I'm not a tax expert. People might throw some ideas at you, but you'll have to analyze yourself if it's tax efficient for you.

One of my ideas would be to consider buying I-Bonds. You're the U.S. citizen, though living overseas, but I think you still would qualify to buy Treasury bonds. I know the I-Bonds are NOT good these days, but IMO for you it would be better to hide some $$ there than waste on some junk. The limit is $5k per year, so it's not much for you, but better than regretting spending that same amount, right?

[LUCHO]

Hi, I'm looking into living abroad at some point in my life. I'm quite young (college student) and I'm still evaluating career paths, keeping in mind that I want to work overseas. Can I ask what position you hold that allows you to work abroad? I know you came looking for advice, but I couldn't help to ask!@!@ :confused:

[thaidyed]

Lucho-As far as how I got here--I applied for every fellowship and scholarship out there on finishing my BA and that got me abroad after graduation (my motto: anything but working!) As I was finishing my master's I started volunteering and applying for jobs that were available over here--short-term consultancies (my field is community development and women's rights). The first was $50 a day and I kept networking and taking more work, learning as I went and a few years later I was working freelance, as busy as I wanted to be, making $300 a day worked for organizations like the Red Cross, UN, CARE, World Vision, etc.

A lot of friends started in the same boat but stopped because they needed stability and couldn't handle not knowing where there next paycheck was coming from. I eventually got headhunted and last year at age 29, took my first full-time job. I really am not into working full-time (hence interest in FIRE) but the excellent salary takes the edge off.

'Working abroad' is a massive category--from teaching English to working at a mining camp. What do you know how to do that is in demand abroad? What do you 'like' to do? Are you interested in charity/humanitarian relief work or more into business?
If you've never been abroad for any length of time, its unlikely you will do well without some sort of organizational support to get you going. In my case, I didn't need the hand holding and there were work oppertunities on the ground for those that 'showed up'.

[thaidyed]

Thanks Aida-
I practice paying myself first with a little over 20% of the monthly check straight to the retirement account. One thing that makes it a little tricky to do other kinds of auto-saving is life here is so cash based. Almost no credit cards (unless we go big box shopping across the border in Thailand) and no checks. I think perhaps the budgeting system of cash in labeled envelopes might be state of the art! Just to make things a little bit trickier--things are priced in 3 currencies--the exchange rates of which are constantly changing. In fact, my local bank account is in dollars but the ATM gives out the local currency.

So much for the good ol'days back home when calculating sales tax was the trickiest part of going shopping!

What are I-Bonds really? I must confess complete ignorance of them!

[aida2003]

OK, I must agree that daily money handling is really complicated there.
Yes, I heard people using an envelope system, but I consider ourselves responsible enough (in money spending) that we use CC's and pay them off each month. ...and hopefully a thief doesn't visit and steal all those envelopes.

For I-Bonds or other bonds, you can start checking here: Individual - I Savings Bonds

I must admit I'm not a very knowledgeable person to explain you them succinctly and clearly, so either someone else will pitch in or just browse/learn on the website I provided you.

When I said they're not good today because I-Bonds have a rate comprised of two pieces: Inflation rate and Fixed rate which is ZERO now.

What is good about I-Bonds is tax deferral. You don't pay taxes on earned interest until you cash them. And in case your kids go to college (in the US) and you're below certain income bracket at the time, you might be exempt from taxes.
I suggested them to you because you sound dirt rich income wise and $5k would be a drop in a bucket and you'd have less to spend . Of course you don't want to deprive yourself of some indulgences but you don't need to follow local mentality: spend until you're poor, which is very close to the American culture if you ask me. There at least you spend cash and if you run out of it, you're OK. In the U.S., people get themselves into horrendous debts because of CC's. BTW, I came to the US from the Eastern Europe, hence my resistance against debts.

In case you cannot buy I-bonds yourself (because you're an expat), I think you still can go around this by giving $$ your dad and he'd buy in your or your kids' names (beneficiaries).

[thaidyed]

Thanks aida! Something to think about. In the states I used CCs the same way--couldn't be beat for such an excellent record of where and when you spent what. I am coming to terms with the fact that I may just have to go super low tech and start carrying around a little spiral notebook to do the same thing here.

The phrase dirt rich is gonna stick in my head all day...

(and I'm right with you on debt! I have had CCs for 10 years and never not paid the balance in full. I really don't get that... )

[knockoutned]

Hey, good to see some other expats on here. I'm in Asia too (Tokyo), teaching at one of those expensive international schools.

[aida2003]

Quote:

Originally Posted by knockoutned Hey, good to see some other expats on here. I'm in Asia too (Tokyo), teaching at one of those expensive international schools.

Would I be too rude to ask how much teachers make at such schools and is their salary in line with COL? I've heard that Japan is pricey.

[knockoutned]

Quote:

Originally Posted by aida2003 Would I be too rude to ask how much teachers make at such schools and is their salary in line with COL? I've heard that Japan is pricey.

Salaries and benefits vary depending on your school and country. In my current position, I can easily afford the high prices of Tokyo and save a lot of cash on the side. The nice thing is not having to pay US taxes or social security. Tax rates in Japan are low, but if I were teaching in, say, Europe, I would be forking over half of my paycheck each month.

Basically, as a teacher I'm much better off financially here than I would be anywhere in the States, but I won't have the same sweet pension that teachers get back home.

[Lancelot]

Quote:

Originally Posted by thaidyed Details! -I live in Laos now but have lived throughout Southeast Asia. -We will probably live in the US at some point but we're in no hurry. I can see that at some point, kid's education will drive us back there (international schools are more expensive than state college's in the US--but without the financial aid!) We've only been married a few months and finished the house recently so we haven't quite stopped bleeding from those two adventures. Now with kids around the corner we need a budget and FAST! I've learned we are both very good at going through money when we don't pay attention. Local financial culture is to spend what you got until you ain't got any more and then go back to being happily poor til next time comes around SO... I'm the financial manager. But to be fair, I'm the one who needs imported foods and nice furniture--DH would be happy with noodles and a mat. If I can work out a realistic FIRE plan that accounts for kids and etc. we will be motivated to recommit to hardcore saving. With the insane salary I make its easy to get loose and lazy and still pat ourselves on the back for saving when really another $5K or more could have made it to savings without any affect on our quality of life. No one in my family has money to speak of and my hubby's idea of saving is buying rice fields (not entirely a bad idea really) so I'm entirely self-taught when it comes to finances. Really looking forward to gleaning advice here. Thanks in advance!

Hi TD

I spent three weeks in Laos earlier this year and was impressed-scenic country and very calm, friendly people.

When I moved to Thailand five years ago I started tracking my expenses with Quicken and that helped me to keep a lid on spending. I usually enter my purchases daily and it only takes a few minutes of my time. (Like I'm busy anyway, LOL!)

I'm a traveler; therefore, I've resisted buying any real property abroad to avoid the hasel. Having said that had I simply bought into Thailands "SET" Index in 2003, I would have more than doubled my money. Same goes for local Thai gold. Your husband buying land may be a wise investment -comming from a guy that doesn't own any - Asian populations are growing and they love to eat rice. Your husband will get the local price and can legally own the land; something we expats can't really do

Yes, the dollar has taken a beating, but currencies rise and they fall; the old greenback will come back, rest assured. The Thais are already projecting a current account deficit for2009 due to weak exports.

Having kids can be a huge inducement to budget expenses; got to have a surplus to feed, clothe and educate those little bundles of joy

Executive summary: You are in a unique position to exploit (positive vein) the local market while also participating in your native US market as well. Go for it and may your new family prosper

Lance

[thaidyed]

Hey Lance,
Thanks for that. So you're FIRE'd and permanently in Thailand? Interesting thought about the SET--I have never even tried to get a handle on what its up to, though a recent article in the Lao papers about setting up a stock exchange was good for a long, long giggle...

[billman]

Hey Thaidyed, interesting thread.

I am a U.S. Expat in Dubai, 27 years of age and was pondering the same thing when I first moved abroad. I have been abroad now for 5 years and loving every bit of it. I do a mix of investments, U.S. Based and Foreign based. U.S. wise, I continue to max out Roth IRA. Foreign wise I have started an offshore pension which basically forces me to save on a monthly basis. My company doesn't offer expats in the region 401k etc.

The account is based in the isle of man. You will find many offices in Asia offering these, Royal Skandia, Friends Provident, etccc... Fees are not too bad either and they have a lot of different funds.

Aida, by the way here in Dubai, the gentleman get paternity leave, 2 weeks at my company.

like everyone else says, inflation is high here as well 11%, but you can manage if you know where to shop etc. Gas and other items are fixed by the gov. and there is 0% income or sale Tax.

Good Luck,

Billman