Afraz <aharon[at]syntab.com> wrote:

- quote -

I have a question? Are you moving out of the US to save money or
because you would really prefer to live in that other country?

The dollar amounts you showed for various spending categories don't seem
at all out of line with a lot of areas in the US. I'm guessing that you
are on the west coast, the northeast corridor or around Chicago, because
I'm not aware of anywhere else in the US where you can't find a basic
house for under $200K I suppose if you're looking to have 4 kids and
need a 5BR home, you may have a different definition of "basic", but
even that is not crazy in most places in the US, AFAICT.

The only things on your list that looks clearly cheaper would be health
insurance.

It might be hard to do food for $500/month here at a middle-class
lifestyle for 2 adults and a kid, but it's certainly possible to feed
yourself healthily for that. My wife and I have an *extravagant* food
budget IMO, and it's less than twice that. In other areas of the
country, it would be significantly less for the same stuff.

Education costs considerably less here until college, when it costs a
lot more, but on the whole it looks about even with some standard
scholarship help and use of state schools, etc.

- quote -

I would consider investing some money in something that is not fixed
income. Fixed income at current rates of return will eat you alive if
there is a prolonged bout of even moderate inflation.

To be about as safe as possible, I'd put about 1/2 of your portfolio in
some kind of equities, mix real-estate funds and funds of dividend
paying blue-chip stocks. These are probably the lowest capital risk
investments that will serve as a good inflation hedge and give better
average return than bonds. I-bonds are a nearly no-risk pure inflation
hedge but their real return is currently tiny.

I believe that such a mix may actually be slightly *safer* in the long
haul than a pure bond portfolio. It is also very likely to earn more
although in any particular year it may go down.

You are young enough now that if you start with 450K in your early 30s,
and don't touch it for 30 years (i.e. live on whatever salary you make
in the other country and reinvest interest but don't necessarily save
any more) you could expect to end up with somewhere between 1 and 4
million in today's dollars depending on how good your returns are.
That's more than enough to support your chosen lifestyle. The one
problem is that you won't have $450 earning money if you are discounting
rent/mortgage as an expense, because you'll need $200K of that to buy
the house. So you're looking instead at between $500K and $2m. If you
stick with fixed income you will guarantee that you stay near the low
end of that range. $1m is enough to support 40K a year pretty close to
indefinitely, so if your lifetyle draws $40K a year not including house
payments, that would be about what you need. You'd have a pretty good
chance of ending up there without any further saving, but to be sure you
probably need to put a bit more in. A 10% savings rate on a 40-60K
income would probably be all that is necessary to give you something
like a 90-95% chance of meeting that goal (on average you'd do somewhat
better).

- quote -

I would agree with investing primarily in the US or Europe if the
country in question does not have a first-world stable economy. Some
percentage of your money in that country (especially stocks or
real-estate) may be a good idea if it fairly fast growing and has
reasonably good goverment and financial systems (i.e. low/no corruption,
liquid markets, etc.)

- quote -

This is an interesting statement to me. If your skills currently merit
a large pay scale, why are you so certain that they will not in 4 years?
Is this a contract that will run out and is based on 2000-boom era
salaries or something?


Michael

I agree with John's advice. You will need to decide what percentage
of your portfolio is in equities. My personal rule of thumb is only
money which you do not need for 5 years should be in equities. The
house cost is about what you currently have. You need to build up so
you have 5 years of living expenses in other-than-equities when you
move. The remainder can go into equities.

Frank

"John A. Weeks III" <john[at]johnweeks.com> wrote in message news:<250720041604240975%john[at]johnweeks.com> ...


- quote -

In article <de43c549.0407250911.1b32462d[at]posting.google.com> , Afraz
<aharon[at]syntab.com> wrote:

- quote -

I don't have too much of a problem with your current plan. Simply
maximize the money you can earn here, minimize your spending, and
save like crazy.

The one issue I do have is saving everything in goverment bonds.
That has a pretty low rate of return. You really need exposure
to the broader equity markets, such as the US stock market. I
would look at both US and foriegn funds to ensure that you balance
out the currency risk. You may want to retain a good broker or
planner to map out a strategy for this.

I don't mind having a big chuck put away in something like government
bonds since you have a relatively short date for buying a home with
cash. But you do need money above and beyond that, which would be
perfect for longer term investing in the market.

I would look for a broker or banking institution to hold your
accounts that has a strong international presence. You don't want
to be held back when you make your move by having limited access
to your funds.

-john-

--
================================================== ==================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ==================

I am attempting to devise a long term financial plan for my young
family (Me-28, wife-27, daughter ~1). This has been very difficult
because our financial situation is pretty odd. I will describe my
situation briefly and would appreciate any advice that group members
can offer.

My wife and I have a mix of mostly liquid assets, some 5 and 10-year
bonds, and a small amount of equities, that all total about $280K. We
are currently working in the US, saving about $50k/year. We expect to
be working in our current jobs for about 3 more years, at which time
we will be moving to a foreign country, where cost of living and
salaries will both be much lower than in the US.

Here are the rough costs associated with living in that country, and
the salaries we expect to make:
House - a basic family home will cost us $180-250K. We intend to pay
it in full and not take a mortgate. Especially if we pay the higher
end of our price range, it is likely that the house will have a small
attached apt. that we will rent out for about $350/month, a common
arrangement in that country.

Car - we already own a new car in that country, fully paid

Health insurance - socialized, negligible cost

Utilities - $2-300/month

Food - $500/month

Travel - $3000 / year

Education - about $2000 per kid per year (we expect to have about 4 in
all). Higher education in that country also costs this much.
I estimate that my total annual expenses will not exceed $25K.

Salaries - we expect to be able to make about $20-$30k/year there
after taxes, because salaries are low and taxes are high. Given the
state of the international economy, We also think that a year of
unemployment here or there is likely. The work-culture there is pretty
laid back, so we expect to have time to do a lot of home repairs,
childcare, etc. ourselves, rather than paying for them.

In a nutshell, we are cashing in our chips and trying to live a
modest, sustainable family lifestyle in another country. Given that we
won't have the ability to go out and earn lots of money there, my risk
tolerance is low.

Our main goal is to be able to make ends meet for the rest of our
working lives, till our 60's. We also hope to have enough money at
that time to pay for our retirement, which will be modest (we might
sell the house and move to smaller quarters, or rent out the majority
of the house and live in the annex apt.).

So, given that in three years we will have ~$450k, what is the best
way to meet our goals? My current thinking is to buy gov't or
corporate bonds incrementally, say 20k every year for 10 years, so
that I get a fairly high rate of interest and get an "allowance" of
about 15k interest/year. That will be my safety net, along with about
$3500 of rent from the annex apt, should my salary or my wife's fail.
Whatever is left at the end of the year from that allowance and our
salaries will be reinvested, and this will hopefully allow us to keep
pace with inflation. I plan to do all major investing in US dollars
for stability, as inflation in that country has spiked several times
in the last few decades.

Does this sound like a good plan, and does anyone have any ways to
improve it?

Please don't tell me to stay in the US and keep saving $50k a year; my
current arrangement is temporary and can't last more than 4 more
years.

All help appreciated.
-Aaron