There are many easy and attractive ways to destroy your life in Thailand. Addictions such as prostitutes, alcohol, and drugs are common. Most expats know they should avoid vices even if they don’t choose to, but many are clueless when it comes to making sound financial decisions. In fact, the average person is unaware of basic investing concepts.
Here are the five most important steps you need to follow to ensure financial success while living and working in Thailand:
1. Spend less
Spending less than you make is the cornerstone of FIRE – Financially Independent / Retire Early. It is impossible to invest for the future if you don’t have any money left at the end of the month. The first thing you need to do is track every Baht you spend. I use an app on my phone that I put every expense into. I analyze my spending every month and I’m often surprised how much I spend on certain things, like Western imports and miscellaneous items. It is easier to plug the leaks and reduce your spending once you know where your money is going.
The only ways to increase your savings rate are to either spend less or make more, or a combination of both. Spending less is usually easier, especially when it comes to nightlife. Bars are poor value for money nowadays. Your hard-earned money is better spent on cheaper alternatives. Condo prices and rent in the center of Bangkok are excessive, but you don’t have to go far to spend less.
Making extra money is a bit difficult since foreigners are banned from doing most side-hustles that are easy to do back home, such as driving for Uber. Nonetheless, many expats pick up evening and weekend teaching jobs or work online for some extra cash. New work permit rules make it even easier to have a second job.
2. Invest as much as possible
Start investing as much as possible as soon as possible. Taking advantage of compounding returns over the long-term is the best way to build wealth for the future. Your goal should be to reach at least 25 times your annual spending to retire using the 4% rule, not counting any pensions.
Tax-deductible investments in Thailand are some of the best investments in the world available to the average person. Your number one investing priority should be to maximize your tax-deductible investments by investing 30% of your salary every year. Consider contributing even if you don’t plan on staying in Thailand forever. I have told myself I am leaving every year for almost 15 years. If you do move to another country, you can always leave your money invested and use it whenever you come back or wait until the minimum holding requirements are met to send it out of Thailand.
Equities never go straight up, but when combined with the tax savings, your chances of losing money long-term are greatly reduced.
You only need 2,000B (60 USD) to open an investing account with any major asset management company, so there is no excuse. FIRE followers routinely save more than 50% of their salary, and anything greater than the 30% you invest in tax-deductible investments you could send outside of Thailand to diversify your portfolio.
Stay away from unconventional investments such as shares in bars or restaurants, solar panels, hotels, etc. I like to play it safe so I only invest in Thai mutual funds. Despite what naysayers promote on internet forums, Thailand has a well-regulated and modern financial services industry.
3. Be smart with work and business
There is a secret about making money in Thailand many new expats don’t grasp – it is much harder to be successful here than in your home country. Most successful people I know in Thailand either have the same career they had back home, or have a long-term job doing something they are good at. It is rare for an expat to own a business in Thailand that is successful for decades.
If you never owned or managed a restaurant or bar before, why would you think you could do it in a country that has a completely different culture and is full of business scams and shady practices?
If you want to stay in Thailand long-term, it is best to work legally at a job you are qualified to do. Don’t base your entire stay in Thailand on a job you are unqualified for that will attract the attention of the authorities. Over the years, it seems any illegal practice that becomes popular eventually attracts a crack-down. Sending your passport out of the country to get stamped, visa runs, and education visas are just a few that come to mind.
4. Choose a financially savvy life partner
Notice I didn’t say choose a rich partner or someone who makes a lot of money. There are countless people who think they are rich but in reality are just a few paychecks away from financial disaster.
Working towards your FIRE goals will be a lot easier if your partner has the same frame of mind about spending and saving. If you want to save every Baht you can but your partner has expensive tastes, enjoys shopping and likes to eat at expensive restaurants, you are in for a difficult relationship. A couple will have difficulty accumulating wealth if one is a heavy consumer.
If your partner is always broke because he or she doesn’t understand debt and regularly spends more than they have, get ready for a life of hell. Here is an excellent article about why the poor stay poor by an expat in Asia who tried to teach his maid basic financial literacy. It reminds me of some Western-Thai relationships.
In Thailand, how your partner’s family handles money is also important. Some Thai families put enormous pressure on their kids to extract as much money as possible from foreigners. Your relationship is in for a rough ride if your partner is unable to stand up to them.
Choose a life partner, not a life opponent.
5. Avoid scams
Long-term financial success also involves not making any major mistakes along the way. Many unsuspecting expats and Thai people have lost their life savings to investment scams in Thailand. Holding onto your money is just as important as making it.
The easiest way to spot a scam is to look at the rate of return. Anything over 10% per year comes with a higher risk than putting your money in the stock market. In other words, you could lose over half of your investment or be completely wiped out just by chasing a few extra percent.
Swinging for the fences with every investment is the fastest way to lose everything. If you want to take on extra risk, view it as entertainment and only put in what are you willing to walk away from with no questions asked.
Always remember it is easier to screw-up your life in Thailand than it is in your home country. For that simple reason, you need to be extra careful with your money. The lack of pension plans here makes it even more important to have a financial plan for the future.
Don’t waste what should be the highest earning years of your life spending money foolishly. Instead, control your spending and invest regularly for the long-term. Being financially successful in Thailand is as straightforward as that.