Loding Loading ...
Trading in financial markets involves significant risk of loss which can exceed deposits and may not be suitable for all investors.
Before trading, please ensure that you fully understand the risks involved
Trading in financial markets involves significant risk of loss which can exceed deposits and may not be suitable for all investors. Before trading, please ensure that you fully understand the risks involved

Sunday, April 07, 2019

ShortList – How to save AED 100k in a year on AED 15,000 a month

By Century Financial in Century in News

ShortList – How to save AED 100k in a year on...

We all know the stereotype. When people hear you live in the UAE, many assume you live in a villa on Palm Jumeirah with a maid, driver and a salary to match. Despite the impression a few Instagram selfies onboard a brunch yacht party can give, the reality is that most Dubai residents don’t actually own a chrome-wrapped Bugatti.

But there’s good news – according to global consulting firm Mercer, salaries across the UAE are projected to increase on average by 4.8 percent over the next 12 months across all industries, so there couldn’t be a better time to put away the extra cash and save.

But salaries are already, on average, higher than in the West, largely due to the fact that income in the UAE remains income tax-free. In the UK, for example, to have a take-home salary of AED15,000 (£3,140) a month you would need to be on just over AED248,000 (£52,000) a year,
due to the country’s income tax system.

We took a look at the 2018 Robert Half salary report and decided to pick an income of AED15,000 a month – right in the middle of the highest and lowest salaries in Dubai – to explore how realistic it is for the average office worker to save up.

Most financial advisers will tell you should be saving between 20 and 30 percent of your salary every month to prepare adequately for the future.
But what about a more ambitious goal? With a bit of radical cost-cutting, could you save up to 60 percent of your salary? Because that’s where
you’ll need to be heading, on a salary of AED15,000 a month, to end up with AED100,000 in the bank after 12 months of intense saving.

To hit the magic 100, you’ll need to be putting away AED8,400 per month while using the remaining AED6,600 for living expenses.

Don’t want to live on a complete shoestring for a year? We’ll also be looking at how you can save AED50,000 on the same income.

“If you don’t keep a budget you won’t know where your money is going so one of the first steps is to keep a record of all your spending so that you can see where you can cut back,” says Keren Bobker, an independent financial adviser and senior partner at Holborn Assets. “Studies show that it can take from just 21 days to up to two months to learn a new habit so there is little to stop you making a few simple changes in order to potentially save thousands of dirhams a year,” she continues.

To save AED100,000 a year while on AED15,000 “you need to be saving a bare minimum of AED8,000 a month, ideally at the AED 8,400 mark,” adds Arun Leslie John, lead researcher at Century Financial. “To make a real difference, monthly rent and bills should not exceed AED3,000 to 3,500. Other lifestyle expenses including dining out, clothes and entertainment should not exceed AED2,500 while the rest of your budget should be kept as a buffer for emergencies,” he explains. It’s also important to get a good health insurance he continues, “to make sure you don’t have any unexpected cost over the year”.

Housing is an area where many people struggle to keep costs down. “I came to Dubai in 2013,” says Will, 27, a sales manager, “I expected to be able to save a significant amount, but in reality the city can be a lot more expensive than you first realise. Housing eats up most of my salary, not leaving much to put away.” According to Bobker, one of the most straightforward ways to make a big impact on your personal savings is to change your rental contract. “For many people if they are serious about saving money, downsizing is the answer to saving significant sums over the space of a year,” she explains. It’s also worth looking at the location you’re living in – do you need that uninterrupted view of the beach, or is it a luxury you’ve grown a little too accustomed to?

There are some areas in Dubai where you’ll find rent agreements starting from the AED30,000-55,000-a-year range, most of which are further out from the centre of the city, such as Al Nahda, Dubai International City, Al Qusais, Al Quoz and Discovery Gardens. “These can be a good option for people who already own a car,” says John. However if you don’t, “the best options to consider are properties close to the city’s metro and bus routes, so that you will save money in other areas”.

According to the experts at PropertyFinder UAE, the cheapest area to live in central Dubai is Deira, where you can pick up an annual rent contract for AED30,000 per year (and a studio for even less, where prices start at AED22,000 per year). Robert Poynton, a senior wealth advisor at UAE based financial consultancy firm Prosperity Insurance Brokers recommends not just paying the asking price without question – “rents in Dubai are coming down, so make sure you ask your prospective landlord for a reduction on the asking price”.

If you aim to save AED50,000 a year instead, you can take your housing budget up a little to around the AED70,000 a year mark.

This will open up central Dubai areas such as Jumeirah Lakes Towers, Jumeirah Beach Residence, The Greens, Dubai Marina and Barsha Heights. Keep an eye out for properties that offer A/C included in the rent – this is usually advertised on property pages by the phrase “chiller free”.

Air-conditioning bills, particularly in summer, can often crop up in an unexpectedly expensive manner (sometimes between AED1,000-1,400 for a one bedroom apartment). This means that you could potentially save up to AED18,000 a year just by choosing a contract that includes those costs, potentially offsetting a slightly pricier annual rental agreement.

“If you have TV, phone or internet packages review them regularly. You may be paying for something you don’t actually need or use, or the company may have newer deals that offer better value for money,” says Bobker.

Depending on what your needs are, the home starter package could be your best option. Eisalat and du both offer a package for AED359 per month, which comes with the basic OSN channels, free UAE landline calls and 20 mps wi-fi speed. Giving it the competitive edge, du currently has a deal on where you can double your mps for the same price.

Be sure to shop around for the right mobile deal too. Virgin Mobile offers some of the most cost-effective phone contracts, from just AED39.50, for 1GB a month and 50 free local minutes.

Water and electricity bills in Dubai are largely based on your rental agreement. DEWA (Dubai Electricity and Water Authority) charges you annually around five percent of your rent agreement per month, on top of your electricity and water bills. Even so, there are still ways you can bring your bills down further. “Your washing machine is energy-hungry so reduce electricity costs by avoiding running lots of small loads or using the tumble dryer,” explains Bobker. “I am told that electricity charges are higher during the day so there should be small savings to be made if you use it in the evening. The same principle goes for dishwashers. Don’t run them unless full, and use out of peak hours,” she advises.
Another tip says Poynton, is to be careful with water usage: “don’t leave taps running.” “He continues “you can save a significant amount of money per month just by washing up the dishes in a bowl, instead of running water.”

There are plenty of apps which can help make managing your bills easier, says John. “The main three I recommend are the DEWA app, which provides your monthly consumption for water, electricity, gas along with historic trends and projected future use, Wally, a handy app to track your financial expenditures and compare it with your income, and finally Spending Tracker, an app that can be used to log all incomes and expenses.”

“If I was able to take the metro to do my job, I would ditch the car,” says Poynton. “The costs easily add up through tax, insurance and running costs”, he continues. You can pick up a silver card from all Dubai Metro stations for AED25, and journeys cost between AED3 and AED7.5.

Over the past few years, Dubai has also developed a great bus system, with most areas in the city now being covered by hourly (or more frequent) routes. Check out the city’s bus timetable via the RTA app or visit dubai-buses.com for the latest bus maps. Bus prices are similar to those on the metro (a single journey from Deira to Dubai Media City costs AED7.5).

Don’t delete your Uber and Careem apps just yet though, advises John. “Make use of free or discounted rides and frequent promo offers being handled out by Uber and Careem. Ideally, these should be combined with other modes of transport to manage travelling expenses efficiently,” he says.

It’s easy to get lazy in Dubai when cheap fast food can be delivered at the click of an app. Joe, 29, a business consultant working in Dubai admits that it’s his go-to option after work: “I know I should go to the supermarket and buy fresh meat and veg, but when you get in late from work it’s so much easier to reach for Deliveroo.”

According to Bobker, planning is key to saving money in terms of food cost: “Plan meals and shop with a list to reduce impulse buys and avoid wastage, Prices can vary significantly between supermarkets too, so you can save money by shopping in other stores, buying seasonally and more locally.”

If you have the room, it can be worth buying bulk, particularly when there are good deals for non-perishable items. “If you have the storage space, there can be savings to be made in buying the boring items like loo roll, floor cleaner, washing powder and store cupboard staples when they are on offer. Supermarkets like Union Co-op and Lulu can be good for this”, explains Bobker.

“Supermarkets like Carrefour, Lulu and Union Co-op are great for saving money,” agrees John. Take a look online too. Kibsons is a UAE-based online supermarket which also offers cost benefits by operating directly between food producers and consumers, lowering the cost of goods and offering free delivery for orders over AED100.

Look at how you can cut costs through small things like your daily coffee habit too. “Have you ever thought about just how much you spend on takeaway coffee? Asks Bobker. “Anything from AED15-25 a day for just a single coffee really adds up. Instead, save money by making your own at home and use a travel mug,” she advises

Yes, but don’t be afraid to ask for discounts, advises Bobker: “If you are organising a dinner or brunch for a large group you could ask the F&B manager if you can get a discount. This works best at newer venues that are keen for customers but a polite request may work,” she says. instead of dining in the evening.”

Many high-end bars and restaurants are now holding decent men’s nights. Check out Weslodge (two free drinks and 50 percent off mains) and Brunswick  Eatery, Bar & Terrace (steak, side, dessert and a glass of grape for AED150) among others.

Being frugal doesn’t mean you can’t eat out for the next year. “Look at apps like The Entertainer for two-for-one deals,” advises Poynton. There is also an option on the app where you can share deals with friends, so if you’ve got a big occasion coming up ask a colleague or friend to ping you a deal if you don’t have the app yourself.

Ultimately, “If you don’t quite hit your target in the year, don’t beat yourself up,” says Bobker. “Congratulate yourself on what you have saved and try harder next year.”

How you could break down a AED15,000 income each month to save AED100,000 In a year:
Savings: AED8,400
Rent: AED3,500
Bills: AED649.50
Transport: AED400
Food: AED800
Socialising: AED650.50
Emergency funds: AED600
Total: AED15,000

How you could break down a AED15,000 income each month to save AED50,000 In a year:
Savings: AED4,200
Rent: AED6,666.70
Bills: AED1,199.50
Transport: AED400
Food: AED800
Socialising: AED933.80
Emergency funds: AED800
Total: AED15,000

According to a 2018 survery of UAE residents by Dubai’s National Bonds, 85 percent of respondents felt they were not saving enough for the future.

According to a survey by Insight Discovery in partnership with YouGov, only 16 percent of expatriates in the UAE have set retirement planning as a financial priority, while 49 percent of ex-pats in the country are only able to save five percent or less of their monthly income.

Only 39 percent of UAE-based respondents to a survey by Swiss insurer Zurich said they planned to save their gratuity payment, against 35 percent who plan to use it to put down a deposit to buy a property and 20 percent who said they would direct it towards a retirement fund.

According to National Bonds, which is owned by the Investment Corporation of Dubai, the total amount saved with the scheme by residents in the UAE rose 18 percent in 2018, to AED448.8m.

The content of this feature is provided for information purposes only. The views expressed in this feature are not necessarily those of the publisher or its employees.

The information is not intended to be and does not constitute financial advice, is general in nature and not specific to you. Before making an investment decision, you should seek the advice of a number of experts and undertake your own due diligence. You are responsible for your own financial research and financial decisions.

Source: ShortList.