When it comes to finance, the secret of moving to Spain is to:
1. Under-spend on any Spanish property.
Set a budget and make it less than you can afford and then keep to this figure. Be disciplined and remember that long term an inanimate object (even a lovely Spanish villa) will not guarantee you happiness. Financial problems, on the other hand, are absolutely certain to provide you with heartbreak and intolerable stress.
2. Avoid any borrowing - whether mortgages or otherwise.
Keep your fixed costs and overheads to a minimum. For someone relocating ‘cash is king’ – unless you are financially very sophisticated.
3. Budget for the worst possible income return on existing investments or pensions.
As 2008 showed, Sterling can crash (in 2008 almost by a third to the value of the Euro compared to a few years previously). Equally, the value of pensions and other investments can drop as radically as they can rise. Nothing is absolutely certain and you must build in a conservative factor to your anticipated long term income. Make sure that you can survive comfortably should your predicted income drop by 20% - 30%
4. Be precise about the Spanish property you buy.
Make sure that your new home will be right for you and that you will not have to move again. The costs of buying property in Spain are considerable (around 10% of the purchase price) and Capital Gains Tax is payable (with exceptions) on the sale of your Spanish property whether it is your main and primary residence or a second home. If you buy a property in Spain that is not suitable for some reason and then sell up and buy again in Spain then you will have lost:
- At least 20% of the gross value of the properties bought (2 x 10% purchase costs).
- Any money payable as a consequence of Capital Gains Tax.
- The fees due to any estate agent.
- The ancillary costs of moving (removals etc.).
This is a fine way of wasting a lot of money very quickly.
5. Allow at least three years for any work in Spain or new business to start providing a satisfactory income.
Businesses are invariably much slower (irrespective of the country!) to produce a proper income than ever first anticipated. There are exceptions, of course, but be very pessimistic on your predictions about the expenditure involved and the time it will take to receive a viable income.
6. Put aside a contingency budget for unexpected problems
Unanticipated difficulties occur when living in Spain (as if with any country) as surely as ‘night follows day’ and just as certainly they involve expense beyond that ever considered. So, always ‘ring-fence’ several thousand Euros as a contingency budget - to be used only in cases of emergency.1
1. Under-spend on any Spanish property.
Set a budget and make it less than you can afford and then keep to this figure. Be disciplined and remember that long term an inanimate object (even a lovely Spanish villa) will not guarantee you happiness. Financial problems, on the other hand, are absolutely certain to provide you with heartbreak and intolerable stress.
2. Avoid any borrowing - whether mortgages or otherwise.
Keep your fixed costs and overheads to a minimum. For someone relocating ‘cash is king’ – unless you are financially very sophisticated.
3. Budget for the worst possible income return on existing investments or pensions.
As 2008 showed, Sterling can crash (in 2008 almost by a third to the value of the Euro compared to a few years previously). Equally, the value of pensions and other investments can drop as radically as they can rise. Nothing is absolutely certain and you must build in a conservative factor to your anticipated long term income. Make sure that you can survive comfortably should your predicted income drop by 20% - 30%
4. Be precise about the Spanish property you buy.
Make sure that your new home will be right for you and that you will not have to move again. The costs of buying property in Spain are considerable (around 10% of the purchase price) and Capital Gains Tax is payable (with exceptions) on the sale of your Spanish property whether it is your main and primary residence or a second home. If you buy a property in Spain that is not suitable for some reason and then sell up and buy again in Spain then you will have lost:
- At least 20% of the gross value of the properties bought (2 x 10% purchase costs).
- Any money payable as a consequence of Capital Gains Tax.
- The fees due to any estate agent.
- The ancillary costs of moving (removals etc.).
This is a fine way of wasting a lot of money very quickly.
5. Allow at least three years for any work in Spain or new business to start providing a satisfactory income.
Businesses are invariably much slower (irrespective of the country!) to produce a proper income than ever first anticipated. There are exceptions, of course, but be very pessimistic on your predictions about the expenditure involved and the time it will take to receive a viable income.
6. Put aside a contingency budget for unexpected problems
Unanticipated difficulties occur when living in Spain (as if with any country) as surely as ‘night follows day’ and just as certainly they involve expense beyond that ever considered. So, always ‘ring-fence’ several thousand Euros as a contingency budget - to be used only in cases of emergency.1
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