5 steps to financial security for NRI’s during a crisis
India is the leading country of origin for international migrants with nearly 175 lakh Indians live abroad today. Countries like USA, Germany, Russia, Gulf countries, South East Asia and Africa are favoured destinations for India’s migrating workforce. Unfortunately, the on-going pandemic has brought economies across the globe to a screeching halt affecting businesses tremendously. Loss in business brings with a curb on business expenses, which ultimately spirals down to a freeze on hiring which could further lead to salary cuts and job loss. Some countries have taken the drastic step of prohibiting expatriates by nationalizing jobs and displacing their expat population.
Globally, unemployment rates continue to skyrocket. In these unpredictable times, as expats, it is vital to take cognizance of your assets with a holistic view of wealth creation. This exercise will guarantee financial security in case of future job loss or business downturn. Planning ahead can ensure you are well-informed in advance to make decisions that affect your future. Here are a few fundamental steps you could follow to get your finances in order:
First things first, pandemic or not, the first step to securing your finances is to ensure you have an emergency fund. This is a sum equivalent to 3 to 6 months of your essential household expenses. Consider necessities like food, rent, essential bills, EMIs, fees, recurring medical expenses, etc. while calculating this amount. Your emergency fund needs to be parked in easily accessible instruments like short term Fixed Deposits, Recurring Deposits, gold or debt mutual funds. These are liquid assets that are low-risk, secured, and easily accessible in times of an emergency. In case you haven’t planned for an emergency fund yet and feel the necessity to have one immediately, you could liquidate one of your profitable investments (preferably one that is not linked to a short term goal) and park it in a liquid fund for easy accessibility.
Revisit and Reassess:
Take this time of isolation as an opportunity to revisit your portfolio, asset allocation, savings and money habits. This period of inaccessibility and ‘essentials only’ may have contributed to changes in your short-term priorities and life goals. Alphabet investment offers a free review which is a financial health checkup and an essential during these volatile markets. Considering economic volatility, avoid concentration of investments and assets in a single country. It is wise to spread your investments across geographies, this gives your portfolio the necessary diversification to hedge against geopolitical risks. Among the world’s top 10, India’s economy is the fastest-growing. Organizations like Google are investing billions in India to accelerate its digital economy. For NROs, this is an excellent opportunity to invest in a variety of freely repatriable opportunities in India for long-term future gains.
FIRE (Financial Independence Retiring Early)
A goal without a plan is a mere dream. The thirst for financial freedom can be quenched only if you act on it. Financial independence and retiring early are two different outcomes but are closely correlated. As NRIs working in a foreign land, it is essential to plan ahead to achieve financial independence as early as possible. Scenarios like the current pandemic often pose a threat to expats, their jobs, and future opportunities. A rigorous investment plan earlier on in life with the idea of achieving financial freedom allows an investor to choose to live life on their terms in the future.
Secure your future:
Make a contingency plan for what you would do in case of a worst-case scenario:
· In a jobless situation would you continue to stay put or move residence?
· Would you stay in the same country or shift to where your next opportunity takes you?
· Would your job loss now mean an early retirement? Are you prepared?
· Do you plan to retire and relocate to your home country?
· Where would you reside? Do you have a home that you own?
Answers to these questions will give you a roadmap to follow in case of dire circumstances. Based on these questions you will be able to better plan your finances to match your future goals. Your current assets held may make you feel wealthy, but if these assets are incapable of generating income in times of need then are they worth holding?
If your plans include shifting base back to India then you must get an advisor to see you through the transition. Get your financial health check-up and risk profiling done to ensure you are on track to financial freedom. Seek assistance to save you from the web of complicated regulations and taxation. With the right financial advisor, like Alphabet Investment at your side, you can be assured to sail through every financial hurdle seamlessly.
Are you financially prepared to meet the consequences of a loss of income? If your financial plans are still a bit hazy, maybe it’s time to get some expert help. Here are our tips on financial preparedness for NRIs.