Casting around for income
By David Russell
Squeezing every last drop out of your finances is not only a good discipline for expats to get into, it’s a discipline that will help you meet chunky financial commitments such as school fee payments with possibly a bit to spare.
It may even fund you through a period of reduced earnings, help you through a sabbatical, or enable you to complete that Masters degree you have been promising yourself. Whatever your reasons for maximising your income, casting your net as widely as possible will help you realise both your commitments and ambitions. Below we’ve listed five strategies to improve your income.
1) Interest-bearing investment products
There is a wide range of investment products that are designed to produce an income on a regular basis. These include savings accounts, fixed-interest bonds, as well as government and corporate bonds. Rates on basic savings accounts are pretty low at the moment and unlikely to change in the near future, so it’s worth widening your search to include fixed notice accounts that promise a higher rate of interest in return for locking your money up for longer. Bonds - both corporate and government - remain a good source of income. Bond funds, in particular, can provide a spread of good quality bonds offering different rates and maturities.
2) Bonds versus equities
Anyone looking at their income options may at first discount equities, but these investments, too, can provide a good source of income. What you need to look for here are shares in companies capable of paying a decent income through regular dividend payments. If you are not confident to invest in shares directly, you can invest in an equity-income fund that provides a broad spread of income-producing equities. One of the key considerations will be the economic backdrop. The last three years have seen some good returns on bonds, so investing in income producing equities may be a good way of hedging your bets in case the tide turns.
If you are lucky enough to have a second property, perhaps now is the time to consider how you can derive an income from it. Depending on location, you may be able to secure an income from a holiday let. This option obviously gives you the potential to use the property yourself when you wish. If you plan to be away for some time then letting the property long term could also be a viable option. In terms of rental income, compare similar properties in similar locations to give you an idea of what you can hope to achieve. Using a professional property management company may reduce the strain of dealing with enquiries, but don’t overlook property upkeep, advertising as well as any legal and tax implications.
Many expats have small pension pots often scattered around the globe. These can potentially be made to work harder towards your retirement. At the same time, pension plans put in place some years ago may need reviewing to ensure that any residency and tax status opportunities are being maximised in order to squeeze out as much income as possible. Take into account your eventual retirement location. Are there any currency exchange implications to consider?
5) Tax status
As an expat in Qatar you already enjoy a tax free income, but make sure you are making the most of any other tax efficiency strategies which capitalise on your residency status. This could be a question of reviewing your investments to make sure products used are running as tax efficiently as possible. Choose investment products that make the most of your current tax and residency status, as this can help boost returns. Also look at the location of investments and pensions to make sure they are not suffering unnecessarily tax-wise. Investments can be based in regulated financial centres that are designed to ensure your savings stay as tax neutral as possible while you are away from your normal country of residence.
David Russel is the Chief Executive Officer, Guardian Wealth Management Qatar