Managing Debt For Expats

The issue of debt is not something from which expats are excluded.

There is a common belief that all expats are earning great money and are very secure financially, so it might surprise some people to hear that I have met many expats on a professional level over the years with quite alarming amounts of debt.

And this is debt racked up both before and after becoming an expat and debt belonging to people on all kinds of salaries and packages.

If you’re someone that is not in debt, you have permission to feel smug and go and read another post instead. Try one of these for starters. 🙂

Seven Deadly Sins of Investing

How To Choose A Financial Adviser

If you do have debts and you’re trying to dig your way out, please read on – I’m here to help!

Being in and trying to get out debt can be stressful and a real burden, both financially and mentally. It’s not a nice position to be in and one I can relate to from personal experience.

How you got to be in this position is academic right now.

It might be that you’re just not very good with money or perhaps it is due to some unfortunate and unexpected circumstances beyond your control.

Maybe you are a victim of lifestyle creep.

As I say, it doesn’t matter how you got into this situation right now. What is important is to get you back on track first.

Tackling debts can be hard and requires some commitment and discipline, but the benefit of taking care of the debts you have now, is that you can implement new budgeting habits that will hopefully prevent a recurrence in the future.

It may seem like an impossible task to clear your debts, but many people have pulled themselves out of debt successfully and I’m pretty sure you can too.

It’s a little bit like getting fit or maybe learning a new skill. Or dieting or giving up cigarettes.

It is something that will take a bit of time, patience and discipline and there will be some pain and frustration at the beginning, but it will be worth it in the end, because you’ll have removed a huge weight from your shoulders.

The best way to attack this is to have a plan. And once you have drawn up your plan, you need to stick to it.

In this post, I have put together what I believe to be the best tips and strategies around to help you get through this as quickly as possible with as little pain as possible.

And I have broken the whole process down into 5 simple steps.

Step #1 – Head In The Game

The first step is to make sure you are in the game mentally, so you need to make a conscious decision that you want to do this and that you are going to do this.

You have to acknowledge the problem. Embrace it. And then prepare to kick its arse.

You have to tell yourself that you are going to do whatever it takes to regain control of your money and get back to a life without the incessant worry of debt.

You’re not going to be beaten.

Step #2 – Know Your Enemy

To slay the beast, you’ve got to know the nature of the beast you are dealing with.

You need to know your enemy, so that you can be clear about how you’re going to attack.

It’s the same as if you are planning a route to a destination. You have to know exactly where you are now before you can plot your way there.

There are three aspects to this step.

The first one is to be clear on your income and expenditure. It never ceases to amaze me when I discuss financial planning with people how often they have no idea exactly how much money goes out every month and where exactly it goes.

Related post: How To Create A Budget For Expats

The second part is an expansion of the first and that is to identify exactly how you are spending your money each month.

You need to treat your family income and expenditure the same way as you would in a business. So, would you be surprised that businesses fail when they can’t keep track of the basics?

Lastly, you need to prioritise spending and debts.

Often we spend money without really thinking about it and an example that is cited often is the classic, daily Starbucks coffee. When you add up the total cost each month and actually look at the figure, you mind be quite shocked.

I’m not saying that you need to give up your Starbucks coffee to clear your debts, but the point of this exercise it to examine exactly how you are spending your money each month and to look for ways to cut expenditure, because the more you can cut, the more you have available to chip away at your debts.

Some examples of ways in which people can cut expenses include:

  • Restructuring credit card payments/loans 
  • Transferring balances to card(s) with a lower APR
  • Ditching credit card use altogether
  • Dropping expensive habits and hobbies
  • Cancelling subscriptions for cable, music, magazines, etc.
  • Eating in instead of eating out
  • Reducing or stopping the take-out coffee habit
  • Planning meals in advance and batch cooking

I should also add that it is important to make sure your partner is on board with this, because you’ll need the buy-in and the support to succeed. There’s no point in you tightening your budget, if your other half is busy blowing it.

Related post: 6 Super Tips To Save Money Easily And Effectively

Step #3 – Allocation

This is where we get down to business.

The third step is about allocating your monthly net income to the various ‘cost centres’. Exactly how you do this should be appropriate to your circumstances. There aren’t really any hard and fast rules about how you do this, but the crucial point is that you implement something.

There are numerous examples and recommendations banded about by personal finance experts and bloggers out there, so feel free to check them out for inspiration.

However, if you’re happy to stick to a common, tried-and-tested method, you could use the 50/20/30 rule.

I know, it’s a creatively named rule. But who cares? It does the job!

Using this ‘rule’, you allocate 50% of your after-tax income to necessities or ‘Needs’, 20% to ‘Savings and/or Debt’ and 30% to  ‘Wants’, which are your personal discretionary expenses.


Needs are the absolute necessities in life and include things like:

  • Rent/mortgage payments
  • Food
  • Utilities
  • Transportation
  • Insurance
  • Child care
  • Loan/credit card minimum balances

If your necessities come in above 50%, you need to review how the money is being spent and identify where you can cut costs.


Once you have allocated your income to your ‘Needs’, you then need to dedicate 20% to paying off debt and/or saving.

Obviously, the more you can put towards this category debt cost centre, the quicker you are going to eradicate your debt, so if you can reduce spending in the ‘Wants’ category and divert it to the ‘Saving/Debt’ category, happy days.


Personal expenses or ‘Wants’ are slightly open to interpretation, but they are expenses that you could reign in if you wanted to.

Many financial advisers consider this category to be completely discretionary, but, of course, many of these items, although considered luxuries and unnecessary expenses, are considered an important part of daily lifestyle in a modern world. They include things like:

  • Shopping
  • Eating out
  • Gym membership
  • Mobile phone plans
  • Take-out coffee

How you manage this category can actually make the biggest difference to your overall budget and the lower the costs associated with this one, the more progress you will make in the saving and debt category.

Related post: How To Create A Budget For Expats

Step #4 – Bringing More In

If you have debts to clear, there are actually two ways to attack. Firstly, you can manage the income you have currently more efficiently and more effectively, i.e. reduce expenditure.

The second thing you can do is look for ways to earn more, i.e. increase income.

Here are some ideas:

  • Offer any skills/services you can offer for payment
  • Sell anything you don’t need
  • Get a part-time job

Ask your employer for a raise. Shy bairns get nowt, as they say where I used to live, in the North East of the UK.

Don’t do anything crazy, like signing up for get-rich-quick schemes or the kind of multi-level marking programmes advertised by cheesy salesmen on YouTube. The ones with the guy wandering around his mansion or sitting on the bonnet of his Lamborghini that was supposedly bought by getting rich through their special method that you, too, can learn for just $1,500.

You know the ones I mean.

Avoid like crazy.

Related post: Could You Spot An Investment Scam?

Step #5 – Cracking The Whip

You need to maintain discipline and stick with it. This is down to you, but one of the best methods to help with this is to track your spending.

Staying on top of progress and will keep you motivated to maintain the habits your are forming and putting a method of tracking your monthly budget will help.

It doesn’t really matter how you do this, as long as you do it.

You can keep it old-school and write it down in a notebook or on a ledger. You can use a spreadsheet (and if you send me a message, I’ll send you a nice one, all formatted and ready to use!) or you can check out one of the many great budgeting apps available.

Related post: How To Create A Budget For Expats

Like I say, it doesn’t matter, but the key is that you track it and stick at it.

I would also schedule a time to sit down with your partner at the end of each month to compile and review your progress.

Your get-out-of-debt plan doesn’t have to be complicated. The important thing is to plan an attack, execute it and continue executing it until you have reached your goal.

Good luck and feel free to contact me or use the comments section if you have any questions.

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