Most people decide to teach English abroad because they want a bit of adventure for a year or two, or even a whole lot longer than that. But, there are others who decide to teach English in another country because they want to pay off debt (students loans!), or save up money for something like grad school, a down payment on a house, or investing. If you’re in the group of people looking to invest your money from teaching abroad wisely, you’ve come to the right place! I’m going to share my five simple steps to help you get started with investing while teaching English abroad.
Step 1: Pay off all Debt
The first thing you need to do before investing is to pay off all your debts. The exception to this would be a house mortgage. If people waited to invest in the stock market before paying this off, many people would never end up doing it at all! The debt I’m talking about are things like consumer debt, credit card debt, car loans, or student loans.
One of my favourite methods for paying off debt is Dave Ramsey’s “Snowball method.” The way it works is that you list all your debts on a single piece of paper, from smallest to largest. Make minimum payments on every single debt each month, But, throw any extra money you have at the smallest one until it’s paid off. You’ll hopefully have extra money because you’ll be learning about (and practicing) frugal living! Then, when that first debt is paid off, you’ll have even more money to put towards the next smallest debt. The snowball keeps rolling, and you gain more and more momentum until eventually all your debts are paid off. I can’t stress enough the importance of frugal living in this whole thing! It will require a bit of sacrifice, but trust me, it’ll be worth it when you’re debt free. Check out Dave Ramsey’s very useful book, “The Total Money Makeover” for even more details.
Step 2: Research your Investment Options
You need to think about your investing strategy very carefully before you ever put a single dollar into the stock market. Making mistakes when investing can have some serious consequences, namely, losing all the money that you’ve worked so hard to acquire. By doing some reading, and research, you can avoid many of the most common investing pitfalls.
Three resources to start with are: The Wealthy English Teacher, a book I wrote specially for English teachers abroad ; The Global Expatriate’s Guide to Investing by Andrew Hallam; and Investopedia, an online resource where you can view a stock basics tutorial.
The two things I personally invest in are dividend-paying stocks in blue-chip companies and ETFs. Blue-chip companies are big, stable companies, with names that you know, like Coca-Cola or Exxon. These companies pay dividends, which means that they give a portion of their earnings to shareholders. Dividends vary from year to year, but the best companies to invest in are ones that increase this payment every single year. Search for “Dividend Aristocrats,” or “Dividend Champions.” These lists are excellent places to start as you narrow down on which companies you’d like to invest in.
The second option is investing in ETFs, which are a basket of stocks, or bonds that are bought passively, according to an index, as opposed to mutual funds which are managed actively. I always recommend ETFs, as opposed to mutual funds because the fees are lower and performance is almost always very similar.
Investing in ETFs is easier than individual stocks because you might only buy two things and be good for the rest of your life! For example, if you bought VTI (Vanguard Total Stock Market) and BND (Vanguard Total Bond Market), you probably wouldn’t need anything else in your portfolio. It’s simple, but it’ll work. You just have to adjust the ratios once or twice a year by buying more of one and less of the other.For sample ETF portfolios, check out my book or Andrew Hallam’s. You can also find details about how to rebalance your portfolio, as well as when and how to buy or sell ETFs.
Step 3: Open a Brokerage Account and Make Some Trades
Once you’ve decided on your specific investment strategy, whether dividend paying stocks, ETFs (or something else), it’s time open an account. For non-Americans, Hallam recommends TD Direct, DBS Vickers, Saxo Capital Markets and Interactive Brokers. For Americans, he recommends Schwab or Vanguard. These companies allow expats to open accounts with them, and the fees are reasonable. I personally use Interactive Brokers and have been extremely happy with them.
To actually buy your stocks or ETFs, be sure to look at the company’s ‘help’ section or refer to Investopedia. As a quick guide, I use “limit orders” as opposed to “market orders.” This means that I put in a limit order for a share price slightly higher than the current one if I want to sell. If I want to buy, I put in a limit order slightly lower than the current market price. The order stays open until you cancel it, or the trade happens.
Step 4: Collect the Dividend Payments
Here is the best part of this whole thing: collecting money from your stocks or ETFs without doing anything. For most companies, it happens on a quarterly basis, while some ETFs pay monthly. Too good to be true? It’s not. The payments get sent automatically to your brokerage account, and you can withdraw them if you need the funds, such as when you retire. Or, even better, you can keep reinvesting them into more shares of stocks or ETFs. Use the dividends to build a bigger and bigger portfolio over time. You’ll collect even more dividend payments each month. Love it? I know that I do.
Step 5: Financial Freedom
It’s possible for the average person teaching English abroad to use his or her time to set themselves up for financial success for the future. It takes discipline and frugal living to pay off debts, and save up money. Then, some research and cool-headed thinking to employ an investment strategy, consistently over time. But, it most definitely can be done by just about anyone teaching English abroad. Just picture yourself sitting on a beach in Thailand, sipping your mojito without a care in the world – if you need some motivation. But, I’m sure you don’t.