Getting your dream job is a miracle and when that job takes you abroad, what more can you ask for? In the IT sector more and more employees get the opportunity to work abroad on short-term projects. Going abroad seems like a dream come true. Your salary might increase, you get exposure to international work culture, you broaden your experience and your resume receives a boost. What about the financial perspective? When you go abroad for the project, do your investments stop? Or do you plan your investments along the lines of your residential status?
Working on-site is a temporary affair. Sooner or later you return to your roots. In the meanwhile do you leave your investments stagnant? Here is a guide to manage your investments when you are working on-site:
- Invest in a long-term investment option which does not need long term payment.
Onsite is a common experience for most IT employees. With a temporary onsite exposure, your salary usually goes up substantially. Although, you spend most of it living and travelling, even a small portion of savings might seem significant in the INR perspective, thanks to the exchange rate advantage you would get!
However, please ensure that you do not commit to any investment which needs payment for the long term. Though the increased salary increases your disposable income, remember that your overseas project is for a specified period of time only. When you return back, your salary might or might not remain at par with your onsite earnings.
If your salary does return to your earlier salary, then sticking to the investment commitment of a long-term instrument might seem difficult.
So, look for investments with a short-term investment commitment. For instance, SIPs of mutual funds or ELSS are a good option. Since mutual funds have the flexibility of changing the amount or discontinuing the investment while keeping the corpus invested, it is actually a very good option!
So, if you have additional income which might not be long lasting, choose mutual funds. With a shorter commitment, you can stop your investments if your salary reduces after returning from your project as well as keep your corpus invested!
- Do not forget a life insurance coverage
A term life insurance plan is an essential requirement. If you don’t have one in your financial portfolio, buy one immediately. If you have invested in a term plan earlier, review your coverage. The amount of coverage should be sufficient enough to provide your family financial security in case of your premature death.
- A health insurance plan is mandatory too
Did you know that medical treatments and procedures are cheapest in India compared to other developed countries? When working abroad if you require medical assistance, the cost of treatments would burn a big hole in your pocket. To protect against this financial contingency ensure to have a health insurance plan. If you buy a health plan in India ensure that it covers you at your on-site work location. If not, buy a local health plan in the country you are in.
The same is true for your family back in India. Even they need to be medically covered especially when you are not around to meet their immediate needs!
- Use NRE fixed deposits
NRE Fixed Deposit rates are good as there is no tax liability and the yield spread is quite good. For simple, safe and easy investments with a maturity value and date, bank fixed deposits can be considered. Also, since it is fully repatriable, it is quite a preferred choice for many!
- Consider Indian Taxes:
Even when you are earning a salary out of India, you might have some Indian income like dividends, rent, etc. So, you need to keep paying your Indian taxes for all your NRO account for income earned in India and the repatriate the same.
- Put your house on rent:
If your family moves onsite with you and you know the specific duration for which you are moving, it makes most sense to put your own house in India on rent for multiple reasons:
- If someone lives in your house, it is better maintained
- Your housing maintenance cost, property tax, etc. can be recovered from the rental income
- Rental yield in India is not high, but it is good enough for additional investment, contingency, etc.
And if you come to India on a holiday, guest house or hotel is a better option than a closed house. Money is important after all!
- Retirement planning
The importance of starting retirement planning early in life cannot be stressed enough. If you want to create a substantial corpus with affordable savings, start young. So, even when abroad, set aside a little amount regularly towards building a sound retirement corpus. The exchange rate differential will help you boost your investment.
- Review your investments
Any existing investments which you have should be reviewed. Since you are working abroad, you might find it difficult to continue investing in instruments which require a regular financial commitment. So, review your portfolio. Make necessary changes in it according to your requirements.
Also, once you are back, do not discontinue your investments and redeem your corpus. Let it remain invested and redeem only the amount you need. That helps in building a healthy portfolio for yourself and your future.
Working on-site doesn’t mean that you have to give up managing your investments or making wrong investment choices. With a little planning and foresight, you can create and manage your financial portfolio even when working abroad. So, keep these points in mind when planning your investments.
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