You’ve made it through your first year! Now… it’s time for that first year financial “checkup,” and to move from adjusting to thriving in Israel!
The first year of Aliyah is a wonderful, overwhelming, busy, crazy time. You work hard in that first year to make your house feel like a home, to make friends, to get your children settled in school, and, most likely, have no time in the midst of it all to adjust to Israeli finances. While you prepare for your Aliyah-versary celebration, make sure to also mark your calendars to schedule a financial checkup. It is important for you to see how you are doing on an Israeli budget, and to make sure you ask yourself if the lifestyle you have set up in Israel is sustainable. Take time to examine what you are spending, how you are saving, and ultimately how to improve both.
Jessica Kupferberg of Efrat sums up her experiences at the end of Year One: “”It’s hard to believe we’ve been here a year – and what a whirlwind of a year it’s been! We planned our Aliyah for over a year, but we couldn’t foresee what financial twists and turns our Aliyah would take until we started living here. My husband met with a financial planner about three months after our Aliyah — and realized it wasn’t the right time for our long-term planning. In addition to getting our five kids settled, navigating the Israeli bureaucracy and setting up house, we still didn’t know how our Aliyah-related costs would shake out, and what our real expenses would be in our new lives. Now that we’ve been here for a year and our life has found its Israeli rhythm, we feel it’s the right time for us to look at our long-term financial goals and to start planning and saving again.”
Now is an ideal time to take that look. You have probably learned enough to know how different the banks, salaries, credit cards, pensions, kids’ savings plans, checks and more are here. During Year Two, navigate and master those differences. It is okay to lose a year on retirement savings due to Aliyah, but it is not okay to lose ten years. It is normal to have had an expensive first year, which hopefully you had saved for and used your Sal Klita to help with, but it is not ideal to go into Year Two accumulating debt or dipping into investments.
Israeli law requires compulsory deposits into a pension fund after you have been employed for 6 months. Depending on your experience and job, you might be able to negotiate having your pension plan begin earlier. If you switch into a job where you were already receiving an Israeli pension, your employer will pay in to that account as soon as you have been there for 3 months. Do you have this in place?
Everyone is obligated to pay Bituach Leumi (Israeli Social Security) . As new Olim, you were exempt from paying into Bituach Leumi during your first year as long as you were unemployed.
If you are employed, it is likely being taken care of by your Israeli employer and is deducted from your paycheck. If you have a foreign employer or no job yet, you need to figure out what you are obligated to pay. (For more information about Bituach Leumi, please click here)
2. Set an Israeli spending plan – what can you afford to spend?
It’s probably been an expensive year. Now it’s time to look forward with an eye to balancing your budget and sustaining yourselves here long term. No matter where you are living, if you are spending more than you are earning, you are headed for trouble. Just like you did before you made Aliyah, you must make sure that you are living within your means.
Do you know what you are earning after tax? Do you know what you are spending? Do the two match up? If not, this one-year mark is a good time to make any necessary adjustments to ensure that you are living within an Israeli budget. Pen and paper, Excel spreadsheet or, if you are more comfortable, an online program like Quicken or YNAB.com can help you write down and track your plan. Don’t forget to take into account annual expenses such as summer camp, back-to-school books, chagim and visits to the dentist.
3. Life events
Do you know how much you should be saving for upcoming life events? If you have kids, what will an Israeli Bar/Bat Mitzva cost you? What might a wedding cost you? It’s best to find out a price range ahead of time. In some communities, a wedding will be small and very simple at 40,000 NIS. In others it will be closer to 100,000 NIS or more, most likely split between the two sides. There are a number of ways to save for these events, with Kranot Hishtalmut, savings plans, as one of the most popular. Kranot Hishtalmut allow for 6 years of almost tax-free savings and are offered by many employers. Self-employed Israelis can also open a Keren Hishtalmut. Speak with your accountant about whether this makes sense for you and how much you should deposit to maximize the tax benefits.
4. Don’t be a frier – don’t overspend!
No one likes to feel they are overpaying, so do a little research to check what prices are reasonable by posting on the NBN Facebook group, discussing with your friends and neighbors (we are in Israel so it’s OK to ask 🙂 ), and asking on my Living Financially Smarter Facebook group. Get the information. It’s out there and people are happy to share. All you need to do is look for it or ask.
Do you know how to check your bills? (Watch out for the NBN University video on bills which will be coming out soon) I recommend calling most service providers (internet, phone etc..) once a year to see if you can get a better deal. I also recommend checking that your bills are within the “normal” range.
Year Two has its own challenges and accomplishments. Make sure to start it off right by sitting down with each other and/or a financial adviser for that annual checkup and help plan wisely for a successful financial life in Israel.
Rifka Lebowitz is a Financial Consultant specializing in personal and small business finance. After a decade in the investment and banking industry, she went out on her own to pursue her dream; helping business owners, individuals and couples to be smarter about – and with – their money. Her passion is the behavioral aspect of money, teaching practical tools and strategies to gain control over one’s finances and increase wealth and security.
An occasional blogger at Times of Israel, Rifka is the Founder of the extremely popular Facebook group Living Financially Smarter in Israel, and spoke in North America on behalf of Nefesh B’Nefesh as their Aliyah Mega-events speaker on personal finance.