How to relocate without shaking up your finances

When Sir David Attenborough holds us spellbound with his narration of migration and movement, we are taken in by the idea of moving as an essential component of living. However, moving in real life leaves many of us anxious. Away from friends and well-wishers, and our familiar comfort zone, we wonder if the choice to move was right. Moving is not just about money. The impact of the household’s assets, income and wealth is significant enough for us to discuss this.

Moving in the early years of work is relatively easy. Many swear by the multiple benefits of living their younger years in a new city or country, and the wealth of experiences it offers. Choosing to work wherever the first job or first posting takes them has helped many develop new interests and a wider circle of friends, while also learning to manage their personal and financial lives away from the supervision and control of parents.

With the years passing by, our backpacks become too heavy to be carried and moved about—as Ryan Bingham (played by George Clooney) in the film, Up in the Air, puts it. We have a home with mortgage, filled with furniture, fixtures and durables that we carefully chose and bought. Fixed physical assets are by far the most important impediment to moving, even when an opportunity for a better job, income and growth presents itself. Even if youngsters protest, their parents typically insist that ‘settling down’ is important and that buying a house is an essential investment.

Middle-age movement is complicated further with the need to find a new school for children and for the spouse to find a new job. Taking care of elderly parents is a moral responsibility not easily given up—unless both sides mutually agree on the move. How does one evaluate the decision to move?

Evaluate the decision to move
First, consider the changes that are expected in your income, and whether the new opportunity will last long enough to offer stability and growth. In most cases, a move is triggered by a better earning opportunity. Evaluate if the challenge and opportunity offered by the move will sustain for a period long enough to make a difference to your household. A short-to-medium-term outlook of three to five years is necessary to be able to make the move with confidence.

Second, evaluate how the expenses of the household will change, as well as its impact on saving and wealth creation. If the move offers a combination of higher earnings and lower recurring expenses, it might be a winner. Instead, if the move entails more expenditure on rent, increased cost of living, higher school and activity fees and, therefore, a lower saving rate, it might not be worthwhile. Consider the choices with respect to location, schooling. transport, and community support to realistically estimate the expenses.

Third, examine how the move would impact the wealth of the household. There may be assets that cannot be moved—physical assets like house, and financial assets, in case the move is overseas. Consider how these assets will be maintained and managed in your absence. Evaluate the expenses to maintain them, apart from fees and taxes that you would continue to incur. Do not move, liquidate or mortgage your historical assets without being clear about your ability to manage them remotely.

Fourth, have a plan for your future assets. If your saving ratio is likely to improve from the move, make sure you have a plan for building assets with that surplus. Make sure that these assets work for you, rather than being built and hoarded away from you, with limited use for financial goals. Numerous examples of mansions built back home with wealth accumulated in the Middle East by migrant workers comes to mind. These houses and the mindlessly accumulated gold jewellery was of no use when many of them returned home after years of toiling abroad.

Expenses and costs
Fifth, consider and separate the short- and long-term expenses associated with the move. Every move comes with front-loaded expenses with respect to packing and moving, paying advances and fees in the new location, administrative costs of schooling, setting up utilities, and incurring newer heads of expenses specific to the new location. Winter wear and heating equipment, private transport and recurring petrol expense, and other expenses specific to the new place may drain some of the existing assets. Without higher income and better saving ratios, building those assets back might become a challenge.

Sixth, newer costs, such as annual travel to hometown, monthly allowances for parents and dependants, travel expenses from work-related assignments, and expenses on activities, recreation and entertainment, as relevant in the new place of work, might alter the family budget and saving ratios. The targeted levels of savings may be tough to achieve if international travel costs and gifts consume most of the annual savings from a posting abroad.

Non-financial benefits
Moving can lead to both anxiety and exhilaration. What one makes of it depends significantly on the ability and willingness to utilise the opportunity to advance one’s career and profession. The household should have the resilience for change and the willingness to take unfamiliarity in its stride. Arranging one’s finances and wealth in a manner that results in a net positive outcome for both income and wealth offers a significant incentive to deal with the new experiences of the ride. The non-financial benefits of moving are too many to list.

Just knowing that the world is a large and diverse place full of experiences that can shape us to be better doesn’t even begin to say how beautiful it is to move. That story is for another time and place.

The Author is CHAIRPERSON, CENTRE FOR INVESTMENT EDUCATION AND LEARNING


(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com)