I do not view my profession to be a financial or political prophesier, channelling my inner Nostradamus, but to guide on sensible long-term financial planning and currency strategy, designed to stand the course, no matter what bedlam happens next. (Think Trussenomics, for example!)
Many people feel that the economics of a situation are wielded by forces well beyond their control, and for many British people living in France, currency is one of those areas. This is only true for those who fail to plan.
In sailing parlance, we cannot control the wind, but we can adjust the sails. This is to say that regardless of external forces, there are things we can do. Moreover, there are mistakes that we can avoid.
What’s Your Currency Strategy? Is everything on Black or Red?
No, I did not mean black or white, as I am thinking of how a roulette wheel works, with the punter gambling everything on which colour the ball will stop.
This is an extremely common way of thinking when it comes to currency planning. People ask me, “which currency should I go for, Euros or Pounds?” planning to go all in on one based not on planning but my superhuman ability to see around corners.
Charts and data are great for telling you what has already happened and may even indicate a trend. However, did they warn anyone of the pandemic or war in Europe or that the UK would work its way through 3 prime ministers in around as many months?
Sensible financial planning is keeping conjecture to the absolute minimum.
What Currency do You Spend Daily?
If you live in France, buy your food in France, and pay your taxes in France, chances are that you do so in Euros. Therefore, it makes sense that you ensure access to the currency in which you live. Please do not misunderstand me; there are, in some cases, good reasons to keep Sterling. For example, you might have a second home in the UK or pay school fees in Sterling etc. This is especially valid if you have no income in Pounds.
The thing is, however, that many British people living in France already have revenue in Sterling, such as pensions and other income. This means that, by keeping capital in Sterling, you are continually adding to / aggravating the problem of currency risk.
Income Planning
Living in France and keeping all your money in Sterling is not good income planning; you are sealing your own fate, especially if all of your income is already in that currency. Events will, inevitably, catch up with you.
Generally, it is better to think in terms of years and not months, so plan your income for, say, the next 3-5 years. In the current climate, there are some people who are determined to keep all their capital in Sterling. However, I have often been able to point out that even a few years of income may equate to 10-15% of their capital, leaving 85-90% of it alone. This enables the ability to watch what goes on in the world merely as a spectator of the madness, not someone caught up in it, reading the news daily, even hourly, to see what woes befall them next.
Good financial planning comes from running the numbers, knowing your tax position, understanding your income needs and being prepared for the next inevitable storm. Financial planning is not taking a punt on where the market is going but creating your own certainty. You are the captain of this boat! If you feel that you need professional help with this, it is money wisely spent. The rest is then plain sailing.
This article was first published in the Connexion, Winter 2022