Obviously, your day-to-day expenses will be in Turkish lira, but it will probably be that all or part of your income will be coming to you in another currency; and it will almost certainly be that your savings and investments will be in another currency.
How do you deal with this? Should you bring your money with you when you come to Turkey or is it better to leave all or part of it ‘back home’?
Should you bring your money with you?
The most important factor in deciding whether or not to bring your money with you is whether you are going to be remaining in Turkey on a permanent (or a very long-term) basis.
If you are making Turkey your new home, then there is a lot to be said for thinking about your finances in Turkish lira terms. This means measuring your income, expenditure and wealth in Turkish lira. This tends to be easier (and more realistic) than notionally converting your expenses back into your ‘own’ currency.
This way, your income and savings will be measured in the same currency as you are spending. But it doesn’t solve the problem that, if your income comes in a foreign currency or your wealth is stored in a foreign currency, your spending power in Turkey will vary enormously (and over a very short period) if exchange rates change. And change they do: literally, by the minute.
A quick look at the last few years highlights the problem. The Turkish lira is volatile. During the last ten years, there have been times when one British pound was worth over TRY4.8 and there have been times when it has been worth as little as TRY2.2. This means that, if you enjoyed a rock-solid income of £3,000 per month, you would sometimes have had only TRY6,600 available to spend whilst, at other times, you would have had TRY14,400 available to you. This, of course, makes a dramatic difference to your lifestyle.
Turkish lira – historical exchange rates
If you are receiving a pension or a salary from another country it may be that there is little you can do about receiving it in Turkish lira – except, of course, by exchanging the money when it arrives.
However, if you are exposed to this risk, it increases the risk further if your savings and investments are kept in British pounds: unless you think the pound is going to continue to rise in value against the Turkish lira. Predicting exchange rates is, in my experience, nearly impossible.
If you are going to be living in Turkey long-term, it seems to make sense to reinvest all or part of those savings in investments denominated and measured in Turkish lira. Choosing what those investments should be requires careful thought and, usually, some good advice.
If you are wealthy enough to have a large sum to invest, then there may well be good arguments for diversifying the currencies in which you hold those investments. For example, you might decide to keep a portion of your wealth in Turkish lira but hedge against the risk of the lira falling in value against other currencies by having parts of your investments in US dollars, Euro, British pounds, Japanese yen etc.
Again, this decision has huge implications for your financial security and you should make it after taking appropriate advice.
Many people decide to keep some money ‘back home’ even though they fully intend to make a new life in Turkey. Often, they will visit ‘home’ on a fairly regular basis and it can be very convenient to have a local bank account, credit card etc. Some seem to suffer from amnesia when it comes to declaring the money they receive in these bank accounts to the tax authorities here in Turkey! This is, of course, illegal.
If you do not intend to stay in Turkey on a long-term basis, then it is almost certainly better to keep all or a large part of your wealth denominated in the currency of the country to which you intend to return. – and if you have substantial wealth you may want to spread your investments between various currencies as part of your general investment strategy.