Financial experts agree that failing to save is not something unique in the UAE. It’s a “universal problem,” said Andrew Scanlan, sales manager at Nexus Insurance Brokers “There are, however, certain risks associated particularly with expatriates, who often come here to better paid jobs than in their home country,” he added.
“While they settle into their new environment, they live an active social life – which can be very expensive in the UAE – buy more expensive or better quality goods and clothes. More often than not, they purchase a more expensive car than they would at home. You need only look at most social media platforms to find hundreds of posting as ‘living the dream’. Slowly the spending accumulates and before they become aware of it, they are spending all their money before the end of the month.”
So, how does one start the habit of saving money? “Most people need a nudge to do the right thing, and in general, people forget that their only opportunity to save for their future,” said Scanlan.
For Tania, that “nudge” was her quickly rising personal debt levels, coupled with the fear of losing her job. “I’m hearing stories of friends getting laid off and having to go back home empty handed. That struck me and I decided to take action,” she said.
However daunting it may be, Tania faced the task of putting a lid on spending and downsizing her lifestyle.
She packed her bags and moved to a cheaper apartment outside Dubai, away from all the temptations of shopping malls, fancy restaurants and night-outs.
“The reality that things aren’t doing too well is starting to sink in me, so I have to do something” she said.
She’s now more conscious of how much money goes out of her wallet and to every little thing she spends on. She now sets aside a budget every month for food, groceries, transportation, communication and debt repayments, and she makes an effort to stick to it.
“I have an excel sheet detailing my expenses and how much is left of my monthly income,” she said. She has also employed the so-called “envelope system” to maintain her budget.
Every month, she stores cash in separate envelopes for different expenses, for example, one for loan repayments, another for housing, travel, etc. And as for her two credit cards? She ditched one of them and kept the other only for important purchases.
Outings with friends are also being kept to a minimum and buying expensive gadgets like a new iPhone has taken a break. “I used to upgrade to a new unit whenever Apple releases a new one. That has changed. I haven’t bought a new phone for two years now.”
“If there’s a sale at the mall, I don’t go anymore. If I get invited by my friends to eat outside, I keep a close watch on how much money I spend. When I go to the grocery, I’d go for the deals section. And whenever I travel back home, I don’t take out a loan anymore. I spend only what I have and can afford,” she added.
Little changes matter a lot
Bastien, an expatriate from Europe, have also trimmed down his expenses. He decided to do something about his lavish lifestyle after he recently lost his job in the financial services industry.
“Before, I used to take my car wherever I went. Now, I’m taking the Metro,” he said. Grocery trips, out-of-home meals, dinners and outings have also been drastically reduced.
“There are small things I do here and there that contribute to the overall reduction in my monthly expenditures.” For example, when he spends hours working at a café, he has learned to resist the temptation of refilling every empty cup of espresso.
“I take a tumbler with me and fill it with homemade coffee, so that I don’t have to order every time,” he said in jest. And when he gets invited to have breakfast or dinner outside, which happens very often, “I eat a little bit at home so I don’t end up ordering a huge meal.”
How to turn things around and start saving now
If you want to do the same thing and kick-start the habit of saving, here are some tips from financial experts:
1. Be more disciplined about your spending
Break down your spending into different categories. The “essentials” should be for rent, school fees and other fixed expenses, while the “must have” can include the money required for the savings pot, food and clothes, while the “nice to have” can cover expenses for entertainment, weekend trips and holidays, designer clothes or jewellery, bigger cars and other indulgences.
The money for your savings should ideally be in the “must have” category and should be prioritised over things like entertainment and designer clothes. “Significant savings can be achieved by making fewer purchases, or by choosing less expensive versions – and think about keeping to the kind of lifestyle you would have at home,” said Scanlan.
2. Save before you spend
It is important to decide on a fixed amount you want to save each month and keep it aside first before anything else. “The main reason people fail to save is that they spend first and save the surplus,” said Scanlan.
Once you’ve decided how much money you can save every month, have it deducted from your salary automatically each month. That way, you won’t be tempted to spend it.
4. Take control of your credit card
If you’re using a credit card and paying high interest payments, you’re better off ditching it. But if you must have one, ensure that all the outstanding dues, not just the minimum required payment, are fully paid.
“Never pay just the minimum payment, it is a debt trap,” said Scanlan.” Once your card debt reaches zero set up a direct debit with your bank so that you repay all spending at the end of each month. You now have credit card facilities at zero interest.”
5. Pay with cash, as much as possible
Most people just love swiping their credit cards and are unaware of how much outgoings they have racked up each month. But they should keep in mind that when using a credit card, they are actually using money they don’t have in their bank.
6. Don’t throw away your receipts.
Keep all of them, even for small stuff. This will help you keep track of your spending.
“Add them up at the end of each week. Identify the things that were not necessary (or that you regret), and use this knowledge to guide your spending in the future. Try this exercise: Write down meticulously every item you buy for one month. You will be surprised by how much money we waste on goods we never use and food we throw away. Stop those impulsive purchases. Before your next shopping trip, make a list of what you need and stick to it,” advised Scanlan.
Source: Gulf News.