Shifting to New Shores : An NRI's Guide to Finances

One of the biggest changes brought about by globalisation has been  the huge amount of manpower movement across national boundaries. The first wave of Industrialisation made national boundaries fluidic for manufactured goods. But next wave of progression made humanity realize the importance of Services sector in overall economic development and better standard of living. It was this phase which facilitated the movement of manpower beyond national boundaries as services needs to be delivered at the point of consumer.

Hordes of people move to foreign lands every year in hopes of better lifestyle, career progression and higher level of savings. In the process we trade off our culture, family bonds and safety of our country.

So recognising the huge level of manpower movement across boundaries, we take a holistic view of how migration can and should affect your life in general and finances in particular.

Lets start with major costs involved when we move to a new country.

Before Shifting : -

Passport 

In case you plan to move with family, do ensure that passports of everybody is in place and updated well in advance. Though cost of Passport is not much of an amount and thanks to automation and facility of Tatkal, it has become less of an headache, still rules and complication can prove to be a dampener. Like for example, for issuance of passport of a minor, both parents have to be present in person at the passport office. So don't plan to leave the country before getting the same in place, trusting your spouse to take care of it. 

Visa

We Indians are habitual of paying pittance when it comes to availing government services and assume the same about Visa fees. But Visa fee can prove to be a major dent in your pocket , based on the country that you plan to shift to. So better check about Visa costs well in advance both for yourself and for the family.

After Shifting [One Time Expenses] :-

Local Documents

Like Aadhaar in India , many countries have their biometric/non-biometric ID cards required for expats. Sometimes employer decline to reimburse the cost of it for the employee and family. So do check about the same first hand from your employer.  

Medical

We in India have comparatively cheaper medical facilities (based on purchasing power parity i.e. our earnings). But sadly case is not so in many first world countries. Even in a supposedly advanced nation like USA, medical expenses form a major part of a family's expenses. Most times, employer provide medical cover for the employee and the family. Otherwise do plan medical cover for your family ASAP so that you are better prepared for any eventuality in a foreign land.

Rentals and Accommodation

Shifting to a new place brings with it whole lot of expenses related to accommodation, some of which are -

·         Rental advance and security

·         Appliances

·         Furniture

·         Kitchenware

While rentals and security are on higher side  [as compared to earnings], fortunately appliances and furniture is cheaper as a proportion of one's salary in most of the first world countries.

After Shifting [Recurring Expenses] :-  

Travel

Thanks to high airfare travelling to and fro the native country is a big annual expense no matter in which part of the world you live. One can mitigate the same by checking the trend of airfare and planning one's travel during the off season rates.  

Education

Children's education is another struggle both because of high fee and high admission criterion. Best is to try to take advice of those parents who have been living for long and hence knows the intricacies of admission process and quality of schools.

 Before Closing, I will delve upon two very critical learning for Expats -  

·         Never compare costs of foreign land by forex rate. Rather compare them taking in view your salaries.I will elaborate with an example. 

Zoheb who was working with HDFC bank in India at a monthly take home of 85000 INR shifted to work for a bank in Dubai earning a monthly salary of 17000 Dhiram (local currency of Dubai). A Dhiram is approximately equivalent to 18 INR as per forex rates.

Now Zoheb decides to buy a sofa set. After much pondering he zeroed in one at Ikea store whose price was 5000 Dhiram. As per Zoheb similar sofa would have cost 50000 INR back home in India, while as per forex rates it was costing him 90000 (18X5000) INR in Dubai. So Zoheb concluded that furniture was expensive in Duabi in comparison to India.

But Zoheb was wrong in his conclusion because though Forex Multiplier (number of times a unit of foreign currency is, in comparison of Indian currency i.e. INR) was 18, his salary multiplier (i.e. number of times his salary in Dubai is that of his salary in India) was only 5 [85000/17000]. Hence he should multiply cost in Dubai by 5 to make a justified comparison, because expenses should be compared with earnings not forex rates.  

·         The Initial On-boarding expenses are monumental as we take care of the same from our Indian savings which are in INR and hence are generally very low because of currency rates. A corpus of 500000 INR may look high in India but if you convert it into $, its only about $ 8300 which can sustain only for 3-4 months in an USA city. But once you have 3-4 salaries in your tow, then comes the real windfall of savings, as then you are on other side of the currency rates and make huge savings in INR. Hence the initial on-boarding expenses should be treated as investment for long term savings.  

In addition to finances, our lives get affected in numerous ways when we throw our anchor at foreign shores. While many parameters like local culture, food, pollution levels etc are beyond the ambit of our control, our personal finances are something that we can take good control by a little bit of planning and meticulous execution.

Click here to learn about the pros and cons of NPS and PPF.

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