The Diwali Festival of Lights on 1 November celebrates the victory of good over evil, light over darkness and knowledge over ignorance.

So it is a good time to take stock of things. Have you let things slide? Are you operating in a state of blissful financial ignorance?

You shouldn't be. Take stock of where you are financially and make sure that this year's Diwali celebrations usher in a better financial future.

Best course of action?

  1. Do a Financial Plan. Make sure that you have clear picture of where you stand as far as your financial status is concerned. Do a financial plan so you can see clearly what your assets are, how much you owe and where you owe it. Work this out by dividing your finances into assets, liabilities and then break these down into more specific categories. Do you own property? Stocks? Shares? How much is left to pay out on your mortgage? Do you receive rent from a property? Annual bonuses? There are numerous websites that can help you with this.
  2. Quantify it. Quantify these amounts and then determine where the differences lie. If you are living overseas you may find that you have more cash than previously. You may also have to deal with foreign exchange movements.
  3. Do a separate balance sheets for each jurisdiction. If you have assets and liabilities in different currencies it may be worthwhile to do separate balance sheets for each jurisdiction. For example, do one each country that you have assets and liabilities in and then convert to whichever currency you are most comfortable dealing with. As an example, I have balance sheets in three jurisdictions - Australia, Hong Kong and the UK and then we convert them all to Australian dollars as we am most comfortable dealing with this currency. It gives a true account of where we stand in each country as well as an overall financial picture of our financial status.
  4. Net worth. Subtract liabilities from assets to calculate your net worth.
  5. Depending on the results you should ideally have a positive net worth! If it is negative you should evaluate your lifestyle and perhaps talk to a financial planner about how best to proceed. You may also need to evaluate your lifestyle and think about ways to pay off debt.
  6. Keep it current. If your lifestyle changes then you should revisit this plan and ensure it reflects these changes in income or lifestyle. You should also consider reviewing this document each year.
  7. Loopholes? Your next step should be to look for any loopholes or areas that you have not adequately covered. Have you factored in costs for education? Retirement? Do you need to increase any insurance coverage? Or change your portfolio to give you a more varied range of assets? Your best option at this point may be to bundle everything up and talk to a financial advisor who can check what you have done, make sure that your investments offer a good range of risk and return and pinpoint any gaps.

Once you are in a position of knowledge you can use this plan to go forward and to help you make any calculated decisions including considering whether you are adequately covered as far as tax, wealth management, offshore banking and so on are concerned. Don't make any expensive financial mistakes by being blissfully ignorant!

Dr Amanda O has been a trailing expat spouse for the last eight years.

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Posted 02Nov05