Entertainment spending is out of control for some expats
Many relocation experts agree socializing is beneficial for employees on international assignment who are adjusting to a host country, but too much entertainment can be detrimental.
A new study from AES International revealed British expats in the United Arab Emirates (UAE) in particular have trouble reining in their entertainment spending. While the report focuses on a specific group in one location, it offers valuable insight for how any assignee should budget while working abroad.
The study found 34 percent of respondents spent more money on socializing in the UAE than they did back in the U.K. In an interview with Gulf News, AES Chief Executive Sam Instone said the reason behind the increased entertainment spending is some expats look at the assignment as a vacation.
“Moving abroad can sometimes create the illusion of being on holiday, especially for expats moving to low-tax jurisdiction countries such as the UAE,” Instone said. “Increased social obligations as they begin to integrate into their new surroundings and make friends can often result in increased spending.”
Higher incomes promote more spending
The AES International study pointed to the higher salaries employees on international assignment may earn. These increased earnings may contribute to more entertainment spending.
HSBC’s 2014 Expat Explorer survey supports this connection. The report revealed expats who earn more than $250,000 annually are more likely to shell out additional money for socializing. Not only did the data show more than half of these individuals put more money toward entertainment, but also it found these expats spent more compared to the prices they’d be comfortable with back home. This includes funds spent at bars and restaurants. Instone indicated this behavior impacts assignees’ savings.
“Most people tend to move away from their home country for a combination of reasons, but high on the list is usually an increased salary,” Instone told Gulf News. “However, once people find themselves in what feels like a holiday atmosphere, original aspirations to save can become clouded by the temptations of the here and now.”
The 2010 Expat Explorer survey indicated uncontrolled spending is more of an issue in emerging markets. In particular, expats spent more on luxury items. This is because of the improved salaries and low cost of living in some of these countries.
How to curb spending while working abroad
Before reaching their host countries, employees on international assignment should have a clear budget and stick to it. This financial plan should also account for changes in the cost of living and allow for entertainment but not let socializing get out of hand.
Instone suggested expats open an offshore bank account.
“We would urge people to consider at least setting up an offshore bank account,” Instone told Gulf News. “In this way, expats will be able to save in a tax-efficient manner and, with some discipline, reach the goals they originally had in mind.”
The financial expert’s advice may not be right for every assignee, so employees should research various banking options.