From setting up a spending account to learning how to save for the short and long-term, here are some top tips from the UAE’s money experts
Broke after the holidays? Here are 20 tips to get your finances back on track in the UAE
With the Eid breaks straddling the beginning and the end of the summer, many UAE residents took the opportunity to enjoy an extended break this year.
But the longer a holiday, the more we are likely spend; after all, being stuck in the office for hours on end can be a great way to prevent us from frittering away cash.
With September often an expensive time for many UAE families due to the start of the academic year, including the dreaded school fee bill, there has never been a better time to get smart about spending and saving.
So if you find yourself groaning at the sight of your summer credit card statements, here are some tips from the UAE’s money experts to get your finances back on the right footing:
Review your holiday expenditure
You’ve overspent, so the only solution is to review what you spent your money on so as to be smarter next time, says Sam Instone, founder and chief executive of the financial advisory AES International. He advises going through your credit cards statements in detail. “Foreign currency transactions on credit cards can incur additional fees, so beware,” he says. Mr Instone adds that if you are ever given the option of paying in your home or local currency on your travels – choose the local one. This avoids extra charges caused by "dynamic currency conversion", where the merchant converts the purchase from the local currency on your behalf, generally at a very unfavourable rate.
Pay off your credit card
While it might seem a big outlay to wipe that hefty credit card balance built up over the summer months, you will gain in the long run. “These amounts build up fast due to high interest charges, so this is the essential first step to getting back control of your finances,” says Steve Cronin, the founder of the financial community wiseuae.com. With compound interest rates on UAE credit cards hovering around the 40 per cent mark, this is not a debt you want hanging around for long, as it's only going to get bigger if you don't deal with it quickly.
Transfer your credit limit
If you cannot pay off your credit card in one go, transfer the balance to another zero per cent credit card or even a short-term loan with lower rates. Kunal Malani, head of customer value management for the UAE and Mena at HSBC Middle East, says a Balance Transfer (BT) programme will ensure you “benefit from better payment terms and repay your outstanding balance easily over a period of time”. HSBC, for example, offers BT options for tenures as short as 12 months. Just make sure you don't build up any more debt before you finish paying it off.
Start saving straightaway
“Get out of the end of summer broke cycle now,” says Rasheda Khatun Khan, a wealth and wellness planner, who advises putting away Dh200 every week for your next summer holidays. “The only reason we feel broke after a trip is because we didn't budget for it. So get a pen out and calculate how much you actually spent this summer, this is probably what you will need next summer,” she adds.
Exchange your holiday money
Whether you’ve taken several trips this summer or over the last few years, throw all your leftover currencies into a pot or a purse. Every few months, gather it together and head to your nearest exchange house to exchange each currency into dirhams. You might be surprised how much you walk away with.
Change your spending mindset
Start finding ways you can cut back so you can save more, says Ms Khatun Khan. For example, as we head into cooler climes, enjoy free outdoor entertainment, like picnics etc rather than spending she advises. “Find any way to cut your expenses and divert it straight to savings.”
Become a smart shopper
“Shop once per week instead of daily," says Ms Khatun Khan. "Grocery shopping online also saves you money as you don't have aisles to get distracted in and buy things you don't need.” Tuan Phan, a board member of the UAE Chapter of the Bogleheads, a non-profit community of personal finance and investing enthusiasts, advises swapping brand items with the store's cheaper versions and checking out the daily specials for discounts and two-for-ones. "Also, note the current holiday/festival/store promotions on offer, for example during Ramadan or back to school periods for discounts and chances to win prizes," he says. "But only buy the discount items that are on your regular shopping list otherwise you will increase your grocery costs and not save."
Say no to friends
Numerous studies show that the friends we hang out with can have a big effect on our finances, particularly if our friends are wealthier than us. Which is why you need to be strong when your friends invite you out for an expensive night out. “Say ‘we've had a fantastic summer of excess and now we need to be boringly sensible for a bit,’” advises Mr Cronin. “Peer pressure to spend is high in the UAE but you would be amazed how many people secretly know they need to tighten their belts. Find them and support each other.”
Find one big expense and bravely cancel it
Whether it is that old classic, the unused gym membership, or a planned purchase of an expensive handbag or gadget, Mr Cronin's advice is to stop before you buy. “You may notice an adrenalin rush usually associated with spending. Who knew saving could be so pleasurable?” he says.
Track your spending
It’s the oldest piece of financial advice in the book but if you fail to monitor your spending, you will have no idea where your money is going. Keeping tabs on what you spend on is relatively easy thanks to the variety of budgeting apps available today. Mr Cronin advises googling ‘the best budget apps 2017’.
Create a budget
Once you have an idea of where your money goes, you can then become smarter about how your money is allocated. Again there are plenty of online budget spreadsheets available to help you plan your spending, saving and debt repayments. You can then allocate your income in an organised manner and rather than being hit with late payment and overdraft fees, you can stay one step ahead of your bank account.
Learn to save for the short and long-term
Don’t just save for your next holiday but also for retirement, your children’s education and any other unforeseen expenses that life throws at you. Demos Kyprianou, a board member for the UAE Chapter of Bogleheads, says: "You can set up a standing order with your bank to transfer money to your savings account on a monthly basis. The second option is to do it manually with a reminder on your phone/ desktop/ email."
Don’t just save, invest too
While having a savings account is important, to increase your return you need to invest your money too. Mr Kyprianou advises applying the ‘pay yourself first” mentality to your investments too. “In case you don't invest monthly and you invest quarterly/ bi-yearly, you can use a combination of both. You can set up the standing order to save a [fixed] amount to your savings account, and put a reminder on your phone/ desktop/ email for the designated month in which you will invest."
Mr Cronin advocates opening an account with an offshore broker and investing in cheap, passive diversified Exchange Traded Funds (ETFs). “This will transform your life more than anything else over the long term,” he says.
Create a spending account
Forget the savings account, says Mr Cronin, turn everything around and create a spending account and allocate some money to it. "Then ensure that everything else in your current account is saved."
If you do have to spend, earn while you do so
Whether it’s a cash back credit card or a card that rewards your spending with shopping vouchers or air miles, make sure your everyday spending earns you something in return. We all have to grocery shop and buy essential items so make your credit card your friend, as long as you are paying it off every month
Have a garage sale
There is an active secondhand market in the UAE, whether through social media or via online classified sites such as Dubizzle, so sell your unwanted items. “We collect so much junk and one man's junk is another man's treasure," says Ms Khatun Khan. "You will be surprised how much money you can raise selling things we no longer use.” Michael Routledge, the founder of the debt advice site savememoney.ae advises selling on on any nearly new holiday clothing you may have. “Joining services such as myexwardrobe.com can allow you to offload some of your wardrobe which is unused, or barely used,” he says.
Give your children a generous allowance
If you spent the summer irritated by constant requests for toys and holiday souvenirs from your offspring, allocate a set monthly amount to each child and let them decide what to spend it on. Make it clear this is their money to spend as they like, however, when it runs out there is no more until the following month. This will provide early lessons in budgeting and saving for what you want. Do not let them borrow against the following month – you don’t want to encourage early debt habits - and give them extra for holidays.
Never pay full price
The UAE is awash with two-for-one vouchers and daily deals websites to help you get better rates on dining out and entertainment. “The Entertainer voucher books/apps, for example, are currently available for 50 per cent off and you get a second for free," says Mr Routledge. “Voucher books can save you a ton of money when dining out with your friends, and at half price it can take only one meal to make your money back.”
Haggle, haggle, haggle
If you don't have a voucher, don't let it stop you asking for a better price. "Ask for a discount everywhere you go even at your doctor," says John Van Zuylen, an entrepreneur, who recently gave a talk at a Bogleheads UAE meeting on financial independence. "Everything is a business here and business is open to negotiation."
Make your travel plans in advance
Now that you have an idea of how to budget and manage your spending, you need to become a savvier traveller. Mr Malani of HSBC advises booking ahead to get the best deals. “Most airlines launch “early bird” offers at this time of the year. Book your Diwali, Christmas, New Year’s Eve or even next summer’s travel tickets now,” he advises, adding that some credit cards allow you to repay your Emirates Airlines fares in three equal monthly installments at zero per cent interest.