island of Bermuda in overview

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Financial Information on Island Living

for Bermuda Residents and

for the Globally Mobile Lifestyle of International Families

The Bermuda Financial Fundamentals Primer 

Southampton Bermuda






Introduction to The Bermuda Financial Fundamentals Primer:



MONEYWISE original article posted January 18, 2014



NEW YEAR'S RECKONING. It is time for your annual financial review. Yes, it is time-consuming. It may take you a day, a couple, a week, or a month to go through all your last year financial activities. Additionally, this is a good time, a traditional time for review because you will be receiving all of the year end reports that show cumulative activity: your cash and credit card accounts, investment and pension accounts, insurance if you have variable life, or cash value buildup, your expenses - “ I spent that amount on that? What was I thinking!”


It is true that the number of people who find this exercise tedious, boring and overwhelming are many, measurable by their complaining, and/or finding any excuse to put the chore off. Uh, you don't want to do this, I know you don't, however.....


There are three reasons why you must review your finances once a year (or more, if needed):


  1. No one, but no one can manage your money the way you can.
  2. If you don't manage your financial affairs, you haven't a clue where you've been, where you are, or where you are going.
  3. Neglect your finance review, when something goes badly wrong because your identity was scammed, you will never know – until it is too late. Then, you only have yourself to blame.


If you can live with those three rules, feel comfortable with where you are and how you handle your life, or just don't care. Then, move on to another article. 


For the interested readers, set up a table, a desk, cup of tea/coffee, glass of wine, beer, and start. Don't procrastinate. Just start.


Here is the list of financial items that we are going to review, along with the topics related to your finances. This is list is not necessarily, complete or inclusive.


1. Cash: checking, savings, term deposits, money market funds, currencies, cost of exchange, what banks, what countries, interest returns, titling – whose name(s) are on the account, how do you access your account(s)? And, if you are one of those unfortunate people with ties to the United States (U.S. Citizen, green card holder, or spending more time there than you are legally allowed in the United States) we'll discuss that, too. 

See Cash detail .... 


2. Credit and debit cards: interest rates, penalty costs, what banks, what countries, balances, paydown methods, withdrawal limitations, other considerations.


    3. Assets: structures (property and other assets) owned, and loaned.


    4. Investments: performance, administrative costs, benchmarks, types, funds, manager fees and commissions, security situs,  asset allocation, adherence to Bermuda Investment Business Act policies.


    5. Debts: mortgages, personal loans, what do you owe, who do you owe, are last year's records correct, do you know if your principal is being reduced monthly and accordingly? What is a guarantor, as you one even though it is not your property? How to use a simple Internet mortgage calculator to check those numbers.


    6. Employee benefits. No one ever really seems to notice this category, aside from the fact that certain items are deductible from your gross pay. But, what do they mean to you, what are you entitled to, and are you taking advantage of all benefits offered. Small business cannot provide “golden” benefit policies, but what they do offer should be understood clearly. What does your health insurance cover? Who is covered? What is your co-pay rate? Is there a wellness discount? You get the – health – picture. Do you have access to group life insurance and disability benefits?


    7. Insurance: Life: where are your policies, what do they cover, how much do they cost, who are the beneficiaries and why, are there sub-accounts invested in capital markets, is there a cash value or a dividend, how does that work? Medical: what are you paying, what is your lifestyle, what can you change, what is offered? Property: cost, coverage, riders, liability, reimbursement procedures. Business: interruption policies, slip and fall, business prevention of loss policies. Are you practicing good business cash management? That policy and procedure may matter to the insurance company if you file a lost business claim.


    8. Retirement and pension accounts: tracking your contributions, tracking your employer's contributions, rate of return, what are you invested in, tracking the costs charged by your pension administrators and investment portfolio managers. Tracking your drawdown account? What the Bermuda Investment Business Act 2003 and Amended 2012 states regarding due diligence, marketing, and client care. Tracking your Government pension. When can you collect, how much, what if you retire abroad? Annuities. What is the rate of return. Is the annuity adjusted for inflation? What is the difference between variable and ordinary? What are the fees – they can be quite high, you need to know whose is getting what and compare to the service you receive.


    9. Taxation: Bermuda tax structure. Bermuda has plenty of taxes, the most onerous of them: payroll tax and customs duty tax, a close third is conveyancing tax (stamp duty). Bermuda does not have an income tax, even so average individual tax burden is an estimated 20%. Bermuda taxes are not progressive; residents at lower income thresholds pay a far greater percentage of their annual income in tax.


    Bermudian residents are fiercely globally mobile, traveling the world. Great care and international financial planning must be undertaken in order that Bermuda residents do not cross the TAXATION border line of other countries' residency and citizenship regulations in their travels and their multi-jurisdictional asset acquisitions. Double taxation traps abound. See the Pondstraddler Life™ section.


    10. Estate, trust, and legacy. So often heard, “I don't need a will, I have no assets.” If you worked, and both you and your employer paid in, you have at least one asset. Your Bermuda National Pension. If you have children, you need a will. If you have multiple assets in various places, you my need more complex structures, i.e. a trust, holding company. Let's walk through the minimum of what is needed to protect your family, and provide for your family if you die prematurely. Statistically, I know that half of you that read this – do not have a will.


    Lately, I've met a few relatively famous (and wealthy) people. They don't have wills, either. What is it with us that we cannot face the fact that we are mortal? Or is it because it is just too much work. Time to get going!


    11. Other personal finance issues issues: Relationships and money, branding yourself for a successful career, becoming motivated to plan (overcoming inertia),


    12. OK, I will touch on cross-border planning complexities. Readers complain about too many of those “tax” articles already. See the detailed Pondstraddler Life™ section Multi-nationals on the Move.



Ready, Set, Start.


Round up everything. All your bank statements, receipts, fund year-end statements, wage statements, everything. Put them into manageable piles by the categories above.



Why do you think are we even looking at this category. Banks are paying no interest, and charging you fees for having it sit there, and like kind complaints.


Think of cash differently.


a) How much do you need for emergencies or if you lost your job? How much that is depends upon how long you think it might take you to get another job. Keep enough liquid cash (not tied up at all) in to pay for Bermuda living expenses – matching Bermuda dollar asset to Bermuda dollar liabilities. . This cash bucket is matched to your local expenses.


b) Now, seriously consider converting the remaining liquid cash into major nation currency savings accounts. If you have ties to the United States, buy US dollars. Your ties are to the UK, then consider pounds sterling, or EURO. Keep those accounts segregated for your foreign purchases and travels, education expenses, retirement, etc.


While, currently you aren't earning any interest, you have just diversified your cash assets.


Money market mutual funds.

Oh, you've got some cash invested there, too. What would you say if I told you that your bank is charging you more in management and administration fees than you are making in interest? 


Do the math. $100 dollars invested in a local money market fund at a local bank is being charged 65 (0.65%) cents for fees, administration, etc, while you are earning – exactly one cent (.01%).


This is an erosional drip on the value of your money.


Compliance Caution. Those of you with ties to the United States (US persons) should be reporting these bank accounts, including the money market fund on your FBAR report. Foreign money market mutual funds may be considered Passive Foreign Investment Company funds, adding additional complexity to individual and business tax compliance.




The Bermuda Financial Fundamentals Review: 2014


Part 2 - More Cash - MONEYwise originally posted February 01, 2014

We now have astoundingly instant access to information of all kinds. Where before we could not locate enough information to figure out where we were financially, leading to frustration and incorrect decision making, now rampant unfiltered information is so readily available, it can flood the senses into complete overload – leading again to total frustration.


Understanding your personal finances today is more important than ever. You are challenged to wade through the glittery financial vernacular, the gloss, and the gloom to figure out what you have, what you can do with it, and use your resources to make a personal financial plan that works for you.


Sensible, practical, and doable - all engineered by you, for you.


Generally, most people have a checking, savings account, possibly one or more term (fixed) deposits (it appears that at least one local bank has phased out call deposits), and if they are feeling a bit more confident, a money market account. Bermuda residents have additional complex choices due to our international finance centre innovation, than the average person in small town USA (dollars), or UK(pounds) where accounts are almost always held in native currency only.


We can now choose to hold term deposits in as many as twelve different foreign currencies, while money market funds offer almost as many choices.

Checking accounts held in Bermuda dollars do not generate interest income in Bermuda banks.

Therefore, the cash held in your checking accounts should be a sufficient balance consistent enough to cover your recent bills. All of your income earned locally in Bermuda dollars should be directed to your Bermuda dollar statement savings account. Cash can then be distributed out as needed to the checking account for expenses, credit or debit card purchases.


Set up several savings accounts for different goals if you can and have the energy, i.e. one for serious fears of redundancy, for future rent or mortgage payments, education, etc.


Apportion out cash from your BMD original statements to these "special accounts" when and if you can. Try not to hit them up for other things, particularly impulse purchases.

Check your statements for all deposits recorded in, are all expenses yours, having a hard time identifying all those ATM withdrawals, all bank fees accounted for? If you've had too many overdraft charges, up the amount you move to your checking account. Better yet, if you know your monthly expenses (this means setting up a budget), authorize a standing order transfer to cover your checking account from your statement savings.

Monitor your accounts regularly, at least once a week, preferably an every day - quick check.


Trust no bank or person's ability to manage your money the way you can.

Keeping a low checking account balance can be problematic if you forget to replenish the balance; however, a low balance inhibits large unauthorized withdrawals and also allows the savings accounts to earn a bit of interest. Yes, I know that is not the case currently with interest rates so low, but interest rates will rise (when we don't know) as will money market returns, given that capital markets still tend to run in cycles.

So very often, readers will complain about low interest rates. "My cash is doing nothing." "My broker says I should be fully invested if I want to beat inflation." "Look at all the returns those stock markets are getting, and I am losing out." Investments should and will be considered, but they always are the last item on the financial review guidelines list.

Why? The First and most serious part of your financial review is understanding and managing your financial risk.



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