Case Study - Living in the Middle East

[TheDesertPlan]

Hi There,

I am very new to this. I have spent all my life to date trying to be as successful in my career and possible and earning as much money as I can. I have always tried to keep my liabilities low and never taken on significant debt but i realise that my spending has increased inline with my income.

We are earning good money and the goal is to return to either Ireland or Australia when we are done in the middle east to raise our kids. I would like to work as a rugby coach or something to do with Kids and Sarah would like to work as a Pilates Teacher, not very high earning professions.

I have also attached a spreadsheet which might be more useful than the the info below.

Life Situation: Living in Doha, Qatar. Getting Married in June 2017 with the intent to have kids in 2018.

Gross Salary/Wages: Current 265k USD. We plan to have kids next year which will mean we will be down to one income which will be 200k USD

Total Investments/ Savings: 180,000 USD in Cash (Waiting for Rental Property in Ireland to Settle – Bought outright – Cost EUR 167,000, Giving EUR 1,000 per month in rental income),  USD 106,250 in Gold/ Platinum/ Silver

*note - I can pull out of this property purchase as there may be an issue with the roof of the whole apartment building. I would have grossed about 12,000 EUR in rent per annum and Netted roughly 7-8,000 after tax and expenses. Would I be better off back in an index fund (where this money was previously)

Adjusted Gross Income: 265,000 USD - to reduce to 200,000 upon having kids – No Income Tax in Qatar

Taxes: Tax will be at 20% of my rental income only

Current expenses:
Bills
Rent – 43,740
Utilities - 1,626
Interent – 1,079
Car Insurance – 500
Cleaner – 3,240
Household (Groceries)  – 6,480
Self-Development – 2,702

Total Bills – 59,354
Holidays – 14,580
Spending – 18,870
Big Purchases – 6,480
Wedding - 49,546
Tax payment for previous issue – 3,000
TOTAL OUTGOINGS – 151,826

Assets:
Kia Sorrento = 15,000 USD
20x100g Bars of Gold = 85,950 USD
13x1oz Platinum Coins = 13,754
329x1 oz Coins = 6,471
Cash = 180,000 – Soon to be a rental property all going well in Ireland.

Liabilities: Nothing of Note.

Specific Question(s):

I am open to all advice.

[itchyfeet]

Hi

I am also based in the ME for now.

It's nice to be earning the tax free $, and hopefully I can survive my PiTA job right through till FIRE in 2019.

People on this forum will struggle to relate to $150K of spending in a year, or even 100K excluding the wedding.

But, as embarrassing as it in in a forum like this, we manage to spend even more than you on most categories (face punch).'We spend stupid amounts on rent, utilities and travel and might look to do something to reduce our spending by $20K+ In the coming year.

 It's not a huge concern, for us, as we only have 2 years left before expenses return to a more frugal norm, and an extra $40K is not going to mean too much to our FIRE plans. Living the fancy life for a short time in Dubai is a part of life's experiences. Still I shudder every time I write a rent cheque.

But enough about me....

I don't understand why you say your adjusted gross income is $167K. With no tax your adjusted income is simply what you earn - $265K. Very nice! :-D

Clearly you should be able to save a big chunk of this going forward. Even if you keep spending 100K a year, a very comfortable life, you will still save $165K until your SO stops working and $100K after that. Your wealth will pile up in no time. (I am impressed you keep the holiday spending to $14K living in Qatar).

So with growing wealth it is time for you to diversify from precious metals.

Start investing in stocks, through EFTs and index funds for simplicity. I do this from the ME through a Saxobank brokerage account, which is easy to use, but there are plenty of options. TD Direct is popular I believe. Investing through Dublin, or Luxembourg is tax advantageous.

I agree with your plans to buy some property. Further diversification. Just be sure to be very clear on the tax laws on ireland for property esp capital gains. You don't want any nasty surprises down the road. Also, be sure that you buy a good investment and not a good home. There can be a difference. For an investment you need a reasonable rent yield, and hopefully can buy in an area that looks likely to achieve mid term capital gains - maybe through gentrification, improved transport, local economic development etc.

[itchyfeet]

Just on the property in Ireland, you might be better off funding it with debt if the interest is tax deductible in Ireland,  as the rental income will be taxable I imagine. Then use your saving for investments that have lower or no tax on the returns. Take full advantage of your tax free residency while you can.

Also, financing a part of the transaction with a Euro loan will help hedge against FX risk, particularly if you end up moving to Oz instead of Ireland. If you invest USD to buy a euro asset, and the Euro weakens dramatically, then you could lose a lot of
Money even if the property goes up in value in Euro.

Of course, if you are a gambling man, you might consider that the USD is very high right now, and might depreciate against the Euro, in which case you could make a killing on your investment (in USD). But this is gambling, not investing. If you are certain to move to Ireland then this discussion on FX is pretty irrelevant. In fact starting to move some of your savings to Euro likely to be a good idea.

Confession: I have stopped buying USD investments, with the $ so high.

[TheDesertPlan]

Just on the property in Ireland, you might be better off funding it with debt if the interest is tax deductible in Ireland,  as the rental income will be taxable I imagine. Then use your saving for investments that have lower or no tax on the returns. Take full advantage of your tax free residency while you can.

Also, financing a part of the transaction with a Euro loan will help hedge against FX risk, particularly if you end up moving to Oz instead of Ireland. If you invest USD to buy a euro asset, and the Euro weakens dramatically, then you could lose a lot of
Money even if the property goes up in value in Euro.

Of course, if you are a gambling man, you might consider that the USD is very high right now, and might depreciate against the Euro, in which case you could make a killing on your investment (in USD). But this is gambling, not investing. If you are certain to move to Ireland then this discussion on FX is pretty irrelevant. In fact starting to move some of your savings to Euro likely to be a good idea.

Confession: I have stopped buying USD investments, with the $ so high.

Tax adjusted income was a mistake - Its corrected now.

Thanks alot of taking time to respond to my case study. Dubai is an amazing place to live IMO but its just sucks the money out of you, I have had so many friends who have been there for 5+ years and left with very little at the end of the day.....but they did have some good experiences.

I am considering pulling out of this property deal. I have had the engineering report on the damaged roof of the whole apartment building and while its not too bad it will still cost alot of money i'd rather not part with.

I had to close down my brokerage account in Australia as I was no longer a resident. I think I will open the TD Direct account in Luxembourg to keep the money outside of Ireland as they do muliti currency. I'm inclined to agree with you regarding the Dollar vs Euro.