Currency planning for life in France avoids being a hostage to markets

Some people feel 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.

However, this is only true for those who fail to plan.

In sailing talk, we cannot control the wind, but we can adjust the sails. That is to say, regardless of external forces, there are things we can do.

Moreover, there are common mistakes we can avoid.

Everything on black or red

I am thinking of how a roulette wheel works, with the punter gambling everything on which colour the ball will stop on.

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?”

They plan to go all-in on one, based not on planning, but a perceived super-human ability to see around corners.

Charts and data are great for telling you what has already happened and might even indicate a trend.

However, did they warn anyone of the pandemic, war in Europe or that the UK would work its way through three prime ministers in around as many months?

Sensible financial planning is about 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.

It therefore makes sense that you ensure access to this currency.

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.

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.

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. Plan your income for, say, the next three to five years.

Read more: Eight tips to get retirement in France off to a flying financial start

In the current climate, some people are determined to keep all their capital in sterling.

However, I often point out to clients that a few years of income may equate to just 10-15% of their capital, leaving 85-90% of it alone.

This enables them to watch what goes on in the world as a mere spectator to the madness, not someone caught up in it, reading the news daily, even hourly, to see what woes might 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 you need professional help with this, it could be money wisely spent. The rest is then plain sailing.

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